Universal Technical Institute (NYSE:UTI) Surprises With Q1 Sales, Full-Year Sales Guidance Is Optimistic

Anthony Lee /
2024/05/08 5:31 pm EDT

Vocational education Universal Technical Institute (NYSE:UTI) reported Q1 CY2024 results topping analysts' expectations, with revenue up 12.4% year on year to $184.2 million. The company's full-year revenue guidance of $725 million at the midpoint also came in 1.3% above analysts' estimates. It made a GAAP profit of $0.14 per share, improving from its profit of $0.04 per share in the same quarter last year.

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Universal Technical Institute (UTI) Q1 CY2024 Highlights:

  • Revenue: $184.2 million vs analyst estimates of $177.2 million (4% beat)
  • EPS: $0.14 vs analyst expectations of $0.15 (4.1% miss)
  • The company lifted its revenue guidance for the full year from $715 million to $725 million at the midpoint, a 1.4% increase
  • Gross Margin (GAAP): 47.1%, down from 55.2% in the same quarter last year
  • Free Cash Flow was -$8.40 million, down from $6.99 million in the previous quarter
  • New Students: 5,480
  • Market Capitalization: $893.6 million

"We maintained our momentum in the second quarter, demonstrating strong market demand across our growing program footprint," said Jerome Grant, CEO of Universal Technical Institute.

Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.

Education Services

A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.

Sales Growth

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Universal Technical Institute's annualized revenue growth rate of 16.6% over the last five years was decent for a consumer discretionary business. Universal Technical Institute Total Revenue

Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. That's why we also follow short-term performance. Universal Technical Institute's annualized revenue growth of 32.6% over the last two years is above its five-year trend, suggesting its demand has recently accelerated.

We can better understand the company's revenue dynamics by analyzing its number of new students, which reached 5,480 in the latest quarter. Over the last two years, Universal Technical Institute's new students averaged 48.9% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen. Universal Technical Institute New Students

This quarter, Universal Technical Institute reported robust year-on-year revenue growth of 12.4%, and its $184.2 million of revenue exceeded Wall Street's estimates by 4%. Looking ahead, Wall Street expects sales to grow 7.7% over the next 12 months, a deceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Universal Technical Institute broke even from a free cash flow perspective over the last two years, subpar for a consumer discretionary business.

Universal Technical Institute Free Cash Flow Margin

Universal Technical Institute burned through $8.40 million of cash in Q1, equivalent to a negative 4.6% margin. The company's cash burn increased by 78.4% year on year while its free cash flow margin climbed 19.2 percentage points. This dynamic shows that while Universal Technical Institute's management team spent more cash this quarter, it was more efficient at generating sales with that cash. Over the next year, analysts predict Universal Technical Institute's cash profitability will improve. Their consensus estimates imply its free cash flow margin of 5% for the last 12 months will increase to 7.7%, giving it more money to invest.

Key Takeaways from Universal Technical Institute's Q1 Results

It was good to see Universal Technical Institute beat analysts' revenue estimates this quarter as it added more new students than expected. We were also glad it lifted its full-year revenue guidance, which came in higher than Wall Street's projections. On the other hand, this quarter's EPS and operating margin fell short. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. Investors were likely expecting more, and the stock is down 4.1% after reporting, trading at $16 per share.

So should you invest in Universal Technical Institute right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.