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Universal Technical Institute Reports Fiscal Year 2019 Q3

| August 12, 2019

New student starts, excluding Norwood, MA campus, up 11.9% for the quarter and 13.0% year-to-date

Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of transportation technician training, reported financial results for the fiscal 2019 third quarter ended June 30, 2019.

Full year 2019 guidance raised, including expected operating cash flow of $12 million or greater and expected adjusted free cash flow of $10 million or greater

“During the third quarter of 2019, we generated strong revenue growth, delivered our fourth consecutive quarter of year-on-year start growth and, for the second quarter in a row, our average student population was up compared to the prior year,” said Kim McWaters, UTI’s President and Chief Executive Officer. “We are making consistent progress toward building a profitable business, and our significant momentum is the direct result of UTI’s multi-year Transformation Plan.

“Over the past 18 months, we have redesigned core business processes, leveraged technology and analytics to efficiently attract more qualified potential students, successfully opened a new campus, expanded our welding programs, and further differentiated our industry-leading student value proposition. Even in a time of historically low unemployment, when people are far less likely to consider post-secondary education, these initiatives are producing results. We do not know when the macro trends will turn, but it is clear that we are building a business that can thrive in any market environment.

“We had 5.1% more students in school at the end of the third quarter of 2019 compared to the prior year, driving revenues 5.5% higher. Our focus on durable changes to our cost structure reduced operating expenses by 8.3%.

“Based on our top- and bottom-line performance, we are raising 2019 guidance across the board. We believe revenue will continue to increase — driven by new student starts and a higher average student population — and also expect to deliver further additional operating efficiencies. The combination should generate significant improvement to cash flow and operating results in 2020.”

Operating Results for the Three-Month Period Ended June 30 2019 Compared to 2018

  • New student starts, excluding the Norwood, MA campus, were up 11.9%; new student starts, including the Norwood, MA campus, were up 8.7%.
  • Revenues increased 5.5% to $79.0 million compared to $74.9 million, driven by higher average full-time enrollment.
  • Operating expenses decreased by 8.3% to $79.5 million compared to $86.7 million, primarily due to lower contract and professional services expense and advertising expense, which was partially offset by an increase of $0.4 million in direct costs from the Bloomfield, NJ campus.
  • Operating loss was $0.5 million, compared to $11.8 million.
  • Net loss was $0.4 million, compared to $11.7 million.
  • Adjusted operating loss was $0.3 million, compared to $8.4 million. (See “Use of Non-GAAP Financial Information” below.)
  • Adjusted EBITDA gain was $4.5 million, compared to an adjusted EBITDA loss of $4.0 million.

Operating Results for the Nine-Month Period Ended June 30 2019 Compared to 2018

  • New student starts, excluding the Norwood, MA campus, were up 13.0%; new student starts, including the Norwood, MA campus, were up 11.4%.
  • Revenues increased 3.0% to $243.8 million compared to $236.7 million, driven by higher average full-time enrollment, net of a decrease in industry training revenue.
  • Operating expenses decreased 1.5% to $257.1 million compared to $260.9 million due to cost structure changes across multiple functions and categories, offset by $3.3 million of direct costs related to the growing student population at the Bloomfield, NJ campus, and $1.4 million of one-time costs for the Norwood, MA campus closure.
  • Operating loss was $13.2 million, compared to $24.2 million.
  • Net loss was $13.3 million, compared to $21.7 million, which included a $3.0 million tax benefit.
  • Adjusted operating loss was $7.5 million, compared to $17.0 million.
  • Adjusted EBITDA gain was $6.6 million, compared to an adjusted EBITDA loss of $3.7 million.
  • Cash flow used in operating activities was $7.1 million, improving $15.3 million.

Raised 2019 Outlook

  • New student starts, excluding the Norwood, MA campus, is expected to grow in the high single digits in fiscal 2019.
  • Fiscal 2019 average student population is anticipated to increase in the low single digits as a result of the transformation and growth initiatives.
  • Full year 2019 revenue is expected to range between $327 million and $331 million, compared to $317 million in fiscal 2018, reflecting the expected increase in the average student population.
  • Operating expenses are expected to range between $336 million and $341 million, compared to $352.2 million in fiscal 2018. The decrease in operating expenses are driven across multiple expense categories.
  • Operating loss is expected to range between $8 million and $12 million. Adjusted operating loss is expected to range between $3 million and $7 million.
  • Operating cash flow is expected to be $12 million or greater, adjusted free cash flow is expected to be $10 million or greater, and the ending cash balance is expected to grow $2 million or more from year-end 2018.
  • Net loss is expected to range between $8 million and $12 million. Adjusted EBITDA is now expected to range between $14 million and $17 million, compared to between $9 million and $15 million as detailed in the company’s prior guidance.
  • Capital expenditures are expected to range between $6 million and $7 million.

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