Universal Technical Institute Inc. (UTI) has announced a multi-year transformation plan designed to generate approximately $30 million of incremental operating income in fiscal 2020. Developed to drive new student starts, completions and to enhance student success, the plan is expected to be implemented over 12 to 18 months, with significant benefits to UTI’s financial performance starting in fiscal 2019.
Kim McWaters, UTI’s president and CEO, said, “In November 2017, following the successful completion of our financial improvement plan that reduced costs by $40 million, we launched a comprehensive evaluation of our business, with a focus on growing new student starts and rebuilding our student population. The analysis, driven by a team of external education industry experts, validated the strong demand for our graduates, our student value proposition and the strength of our differentiated brand. The process also identified significant opportunities for growth with selective tactical investments in marketing, admissions and student service strategies.
“Our transformation plan will build upon the traction we are already seeing in core areas of our business and be incremental to current growth initiatives, including new, smaller campuses and program expansions. We believe the plan will maximize UTI’s market leadership position, differentiating us from existing and emerging sources of vocational education and better serve prospective students who are pursuing increasingly valuable technician trades.”
To help UTI realize its market opportunity, the company engaged a consulting organization with a strong track record of partnering with education sector clients to deliver short- and long-term value, as well as sustainable growth. UTI structured the engagement so that a portion of the consultant’s compensation is linked to UTI reaching its transformation targets.
“Our board has approved the transformation plan and management will leverage our consulting partner’s industry expertise, breadth of top-tier talent and history of successful business transformations to act quickly and capitalize on the opportunity in front of us,” said McWaters.
The transformation plan also will include an incremental internal net investment of approximately $4 million for additional marketing campaigns and new resources in marketing, admissions and support services in fiscal 2018. The incremental costs associated with the transformation plan are not anticipated to negatively impact UTI’s compliance with the composite score requirements imposed by the Department of Education.
Based upon the transformation plan investments during this year of transition, UTI is updating its 2018 outlook to expect the following:
- Student starts are still expected to grow in the low-single digits.
- Average student population is still expected to be down in the mid-single digits.
- Revenue is still expected to range between $310 million and $320 million.
- Operating expenses are now expected to range between $348 million and $353 million, including roughly $4 million in consulting fees and approximately $4 million for incremental marketing and internal resources. This compares to previous guidance of between $340 million and $345 million.
- An operating loss is now expected between $28 million and $33 million, versus the company’s previous expected loss of between $20 million and $25 million.
- EBITDA is still expected to be negative.
- Capital expenditures are still expected to be between $24 million and $25 million.