Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Universal Technical Institute Inc (UTI, Financial) achieved nearly 16% growth in revenue to $177.5 million, with a 13% increase in average undergraduate full-time active students year over year.
- Net income grew to $5 million with diluted earnings per share of $0.09, and adjusted EBITDA increased by 61% to $18.4 million.
- The Concorde division experienced nearly 35% year-over-year growth in starts, benefiting from favorable start timing and clinical program expansions.
- UTI's partnerships, such as the new initiative with Heartland Dental, are expected to add significant revenue and be accretive to EBITDA margins.
- The company is on track to achieve the higher end of its revenue and new student start guidance for fiscal 2024, reaffirming its growth trajectory.
Negative Points
- The UTI division experienced a year-over-year decline in starts due to a shift in student start timing from June to July.
- There are ongoing challenges with FAFSA processing, which have caused complications and delays in student enrollments.
- Growth restrictions on Concorde due to Department of Education regulations limit the ability to open new campuses or add new programs until mid to late 2026.
- The macroeconomic environment shows signs of a weaker economy, with fewer jobs being added and a rising unemployment rate, which could impact future enrollments.
- The transition to new FAFSA processes has been complicated, affecting the ability to move students into earlier start dates.
Q & A Highlights
Q: Can you elaborate on the North Star strategy and the 20% target for 2029, particularly regarding the segment margin potential for UTI and Concorde?
A: Troy Anderson, CFO & EVP, explained that they are not yet providing segment-level details but are setting a long-term growth marker. Initially, growth initiatives will focus more on UTI due to Concorde's growth restrictions. However, by 2027, they expect a more balanced distribution between UTI and Concorde in terms of campuses and programs.
Q: How are you addressing capacity as part of the North Star plan, and is there a shift towards online coursework?
A: Troy Anderson noted that capacity is not a finite variable, and they are refining educational delivery and space utilization. They plan to increase capacity by adding shifts at campuses and incorporating technology like virtual reality, which is less space-intensive. The focus is on organic growth, new programs, and new campuses.
Q: What has been your experience with FAFSA issues, and did they contribute to the timing shift in new enrollments?
A: Troy Anderson acknowledged that FAFSA issues created backlogs, but they did not directly cause the timing shift from June to July. The shift was more about focusing resources on resolving FAFSA backlogs rather than enrolling students in June. The situation is nearing normal, although the new FAFSA process is more complicated for students and parents.
Q: Can you provide an update on your marketing channels and their performance?
A: Jerome Grant, CEO & Executive Director, highlighted strong results in both divisions. For healthcare, they focus on the 25-35 age group, seeing favorable media spend rates. In the UTI division, high school presentations and increased field reps have led to strong lead generation. Overall, media spend has been efficient, contributing to growth.
Q: Regarding the Heartland partnership, how do the economics differ when Heartland provides capital, and will this change when moving to Title IV funding?
A: Troy Anderson explained that Heartland will provide financial assistance to students, and UTI will manage the campus and keep the economics. Initially, the program will be cash pay with discounted pricing, but once Title IV eligible, pricing will align with standard rates, enhancing profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
