bmo capital markets20fina… · bmo capital markets back to school conference september 11, 2007...
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BMO Capital MarketsBack To School Conference
September 11, 2007
UNIVERSAL TECHNICAL INSTITUTE
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Safe Harbor
This presentation may include predictions, estimates or other information that may be considered forward looking under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on UTI’s last data reported and have not been updated to reflect any changes that may have occurred since our last reporting date. Any forward looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Factors that could affect the company’s actual results include changes to federal and state educational funding, construction delays for new and expanded campuses, possible failure or inability to obtain regulatory consents and certifications for new campuses, potential increased competition, changes in demand for the programs offered by the company, increased investment in management and capital resources, the effectiveness of the company’s recruiting, advertising and promotional efforts, changes to interest rates, and low unemployment. Further information on these and other potential factors that could affect the company’s financial results may be found in the company’s filings with the Securities and Exchange Commission.
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UTI at a Glance
Founded in 1965Leading brands in technical education
Average enrollment approx. 14,600 Training programs
AutoDieselCollision Repair Motorcycle/Marine
FY2006 revenues of $347.1 million
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Trends Driving Technician Demand
Industry size & growth
1.3 million technicians
54,400 annual new openings
Evolving technologies
Increased focus on parts & service
11.9% auto dealer revenue
77.0% auto dealer operating profits
17.2% of service sales is warranty repair
Productive technicians drive profitability. UTI is the leading supplier of skilled, entry-level technicians to industry.
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What do Students Learn at UTI?
How to fix a V-ROD engine . . .
. . . and become a Harley-Davidson technician.
UTI’s Motorcycle Mechanics Institute has supplied Harley-Davidson with technicians since the early 1980’s.
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What do Students Learn at UTI?
How to build a race car chassis . . .
. . . and become a NASCAR technician.
Today, approximately, 15% of NASCAR Tech graduates accept employment on NASCAR race teams.
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What do Students Learn at UTI?
How to get under the hood of a big rig . . .
. . . and become a heavy-duty diesel technician.
Diesel and industrial technology programs are offered at UTI locations in AZ, CA, IL, MA, PA, TX.
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What do Students Learn at UTI?
How to work on hybrid vehicles . . .
. . . and become a Toyota credentialed technician.
The Toyota elective is currently offered at the Illinois Campus. Expansion of the program is planned for California and Pennsylvania in Q2 FY 08.
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What do Students Learn at UTI?
How to perform a wheel alignment . . .
. . . and become an Audi credentialed technician.
Audi is one of 7 graduate level training programs offered free, through OEM sponsorship, to UTI’s top graduates.
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HOUSTON
RANCHO CUCAMONGA
ORLANDO
GLENDALE HEIGHTS
NORWOOD
MOORESVILLE
EXTON
PHOENIXAVONDALE
SACRAMENTO
Where do They Learn?
Sacramento opens during Q1 FY 06.
We recruit and place students in all 50 states, enabling us to serve the needs of our industry customers nationwide.
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Why do Students Choose UTI?
Because of our quality reputation and unique relationships with industry leaders.
• Relationships provide students with:An enhanced educational experiencePotential tuition reimbursement / sponsorshipAccess to better career opportunitiesIncreased earning potential
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What is an Industry Relationship?
• Original equipment manufacturer provides:Proprietary curriculum & equipment Instructor training and certificationTraining vehicles
• Two typesElective – student paidGraduate – OEM paid
Based on our relationships, UTI is best prepared to serve the needs of OEM’s, employers and our students.
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UTI has Steadily Built Relationships Over Time
1990 1995 2000 2005 2007• Harley-Davidson• Kawasaki• American Honda• Honda Marine• Suzuki• Yamaha• BMW
• Harley-Davidson• Kawasaki• American Honda• Honda Marine• Suzuki• Yamaha
• Harley-Davidson• Kawasaki• American Honda• Honda Marine• Suzuki• Yamaha• BMW• Mercedes-Benz• Volvo-Penta• Jaguar• Ford• Porsche• Volkswagen• NASCAR• Mercury Marine• International• Audi• Volvo
• Harley-Davidson• Kawasaki• American Honda• Honda Marine• Suzuki• Yamaha• BMW• Mercedes-Benz• Volvo-Penta• Jaguar• Ford• Porsche• Volkswagen• NASCAR• Mercury Marine• International• Audi• Volvo• Toyota
• Harley-Davidson• Kawasaki• American Honda• Honda Marine• Suzuki• Yamaha• BMW• Mercedes-Benz• Volvo-Penta• Jaguar• Ford• Porsche• Volkswagen• NASCAR• Mercury Marine• International• Audi• Volvo• Toyota • Nissan• Cummins• Freightliner
UTI has developed industry relationships in all of the verticals it serves; yet opportunity for further development remains.
*Jaguar discontinued in 2006
MotorcycleAutomotive
DieselMarine
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How the Competition Stacks up to UTI
AudiBMWCumminsFordFreightlinerHarley-DavidsonHonda MotorcycleHonda MarineInternationalJaguar*KawasakiMercedes-BenzMercury MarineNASCARNissanPorscheSuzukiToyotaVolkswagenVolvoVolvo-PentaYamaha
CommunityCollegesUTI LINC WYO
*Jaguar discontinued in 2006
The depth and breadth of our industry relationships are unmatched.
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Who is Missing from Our List?
ChryslerGeneral MotorsHondaHyundai
Automotive Diesel / Industrial
Significant opportunity exists to develop new relationships withindustry leaders.
CaterpillarJohn DeerePACCAR (Kenworth/Peterbilt)Volvo-Mack
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Leading Supplier of Motorcycle Technicians
100% of MMI graduates have manufacturer-specific training.
18%18%
15%15%
13%13%19%19%
32%32%
3%3%
Elective Course Mix – FY 2006
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0
500
1,000
1,500
2,000
2,500
2000 2001 2002 2003 2004 2005 2006
Auto / Diesel Electives Benefit Students & UTI
*Nissan and International Truck programs were established in late FY2006 and mid-FY2007, respectively. Cummins’ accreditation is pending. Therefore, there are no graduates from these programs in the years depicted.
($ in millions)
OEM branded electives drive profitable revenue growth over time.Many elective programs have yet to mature.
$15
$0
$5
$10
Gra
duat
es
Incremental R
evenues
Revenue
Program Start Date
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Graduate Percentage by BrandFY 2006
Students who want graduate level training must eventually come through UTI. BMW is the only exception.
11%11%
15%15%
3%3%
30%30%4%4%
8%8%
15%15%
14%14%
UTI Is The Primary and Often Sole Provider of Graduate Level Training
Must qualify
Free tuition
Employment commitment
90% UTI grads
*Jaguar discontinued in 2006
19 Average auto tech working at a dealer earns 80% more than the average high school graduate.
Industry Orientation Improves Employment Quality
Dealers Other Automotive Dealerships Other
72%72%28%28%
52%52%48%48%
* Bureau of Labor Statistics reported in 2004** UTI automotive graduates FY2005
Where Auto Techs Work* Where UTI Graduates Work**
H.S.Graduate
Auto Technician
DealerCollege
Graduate
$22,367 (1)
$40,330 (2)
$32,175 (1)
(1) Mean earnings for 18-24 year old age group as reported by the U.S. Census Bureau for 2005(2) Mean annual wage for all employed automotive technicians as reported by the U.S Dept. of Labor, May 2005
Strong Student Value Proposition
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WHAT HAPPENED?
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The Perfect Storm
Increased capacityThe economic cycleTuition affordability Internal execution challenges
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(a) UTI start growth rate is for the fiscal year. Unemployment rate is for men 20-24 years old for the month of March (midpoint of UTI fiscal year). (b) Source: BLS
Impact of Economic Cycle
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2000 2001 2002 2003 2004 2005 2006 20077.00%
7.50%
8.00%
8.50%
9.00%
9.50%
10.00%
10.50%
11.00%
11.50%
12.00%
UTI Start Growth Rate Unemployment Rate
There is a strong correlation between the unemployment rate for 20-24 year old males and UTI’s annual start growth rate.
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The Affordability Challenge
• Average tuition is $23,000• “Sticker Shock” reaction
Annual increases of 5%Program length compounds problem
• Interest rates have increasedTitle IV rates doubled in 5 yearsPrivate loan rates can exceed 15%
• Funding gap has grown – up to 50% “unfunded”
Recent UTI research, suggests the cost of tuition and the inability for students to finance tuition is the #1 reason for students not starting school.
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The Execution Challenges
Marketing – Lead Generation• Evolving student customer profile• Changing media landscape • Volume at lowest cost mentality
Sales Force Practices• More efficient, less effective techniques• Structure & policies driven by internal needs
Financial Aid Processes• Transactional vs. customer service orientation• Complicated process discourages students• Finance options not always feasible
UTI continues to focus on improved execution, despite a challenging macro-environment.
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($ in millions, except for enrollment data and EPS)
Fiscal Year Ended September 30, 9 Months Ended
2004 2005 2006 6/30/06 6/30/07
Average enrollment 13,076 15,390 16,291 16,324 15,998
Net revenues $255.1 $310.8 $347.1 $258.3 $266.4Growth 29.9% 21.8% 11.7% 13.9% 3.1%
Operating income $50.1 $55.8 $40.7 $34.5 $25.7Margin 19.6% 17.9% 11.7% 13.3% 9.6%
Capacity utilization 62.7%
EPS $1.04 $1.26 $.97 $.81 $.62
Implications of The Perfect Storm
Significant operating leverage exists with improved utilization rates.
Growth
70.2% 69.9% 64.9% 66.1%
-2.0%23.7% 17.7% 5.9% 7.7%
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Short Term Business Strategies
Optimize marketing & sales
Solve the affordability challenge
Reinvent cost structure
Simplify FA processes / focus on service
Strengthen people capability
Improve utilization / rationalize facilities
Significant efforts are underway; however, the full benefit of these initiatives is yet to be realized.
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Summary
Superior business strategy
Strong value proposition
Challenging external environment
Focused on execution
Stronger, more efficient and effective organization
UTI is an enduring brand due to its compelling value proposition for both students and industry.
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