The technical academy has had a flood of applicants, but high costs have slammed its profits
Wall Street isn't always kind to outfits that try to expand in tough times. Universal Technical Institute (UTI), a Phoenix company that trains thousands of car, motorcycle, truck, and boat mechanics in nine cities, has seen such growth in applications that it has had to staff up the heightened demand. But the higher costs have slammed its results, driving the educational company into the red in the opening three months of this year. As a result, UTI's stock has suffered, slipping from nearly 20 a share in December to below 9 in March before clawing its way back above 15.
But executives at the company are standing firm that the growth they are seeing—costly as it may be in the short run—will pay off. Now, they say, is the time to expand to serve the growing needs of students. CEO Kimberly McWaters points enthusiastically to the first growth in the student population in over two years recently, even while bemoaning a net loss of $80,000 in the quarter ended in March, the company's second fiscal quarter of the year. The company brought in more money, boosting revenue to $89.1 million for the quarter, compared with $88.2 million in the same quarter last year. It had earned $1.91 million in the period a year ago. But growth in the student population, McWaters said in a prepared statement, "is the key driver for improved capacity utilization and financial results."
Even while Wall Street frets, UTI has some fans who believe its investment in higher spending on such areas as financial aid and student services will pay off. Andy A. Zoltners, a marketing professor at Northwestern University's Kellogg School of Management and co-founder of the ZS Associates sales consulting firm, leads training programs for salespeople where he hears plenty of complaining about the economy. But not from UTI staffers, who brag their programs could not be more timely. Says Zoltners, "these guys are saying: 'We're busting out!'"
Enrollment of new students surged some 19.5% in the first three months of this year, with 3,381 new students signing on, compared with 2,829 a year ago. The average number of full-time undergrads in the firm's schools rose to 15,457 in the first three months of this year from 15,092 in the same period last year, a 2.4% increase. UTI expects new enrollments to grow at or above double-digit rates and may add more campuses. Be patient, counsels Chief Financial Officer Eugene S. Putnam. Over time, he suggests, the admissions gains should deliver "positive financial results."