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1 BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE

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Page 1: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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BMO Capital MarketsBack To School Conference

September 11, 2007

UNIVERSAL TECHNICAL INSTITUTE

Page 2: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 3: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 4: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 5: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 6: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 7: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 8: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 9: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 10: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 11: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 12: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 13: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 14: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 15: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 16: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 17: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 18: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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

Page 19: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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

Page 20: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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WHAT HAPPENED?

Page 21: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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The Perfect Storm

Increased capacityThe economic cycleTuition affordability Internal execution challenges

Page 22: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 23: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 24: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 25: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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%

Page 26: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 27: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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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.

Page 28: BMO Capital Markets20Fina… · BMO Capital Markets Back To School Conference September 11, 2007 UNIVERSAL TECHNICAL INSTITUTE. 2 Safe Harbor This presentation may include predictions,

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