As our sales data indicates, enrollments in service technician schools of automobile and other programs have decreased in the past several years while it seems the demand for service technician in those fields is large and has been growing as a result of continuingly increasing number of vehicles and technology development. The reason for declining enrollment is unclear but supposed to come from economy situation and changes in job expectation of youth or larger availability of other options.

Sector’s current, trend, causes behind trend, and future

Current and Trend

• The demand for service technician in fields such as automobile and medical operation is large and growing recently. Therefore, new job openings for technician in those fields are supposed on grow in future.
• According to our data, the student enrollments in postsecondary schools of professional technician in fields of automobile and others seems to have been decreasing in the past several years, while there is already a signal that the decline in enrollment may be slowing down in 2018.
• Decreased enrollments caused decrease in revenue and hurt companies’ profitability and companies started cutting expenses by reducing labor force and closing campus.

Causes behind the trend

• The positive estimates on the future demand for service technician has been based on factors such as improvement in technology development, increased numbers of automobile vehicles, and longer life of existing vehicles.
• There is no data indicating that the general decrease in enrollments of technician schools is derived from a single program. Therefore, we think that if the decreased enrollment has nothing to do with replacement of students after graduation and as well with some certain programs, the reasons may be economy situation, changes in job expectation of current young people, salaries increase with a certificate, or increased availability of other options/careers that do not need certificates or degrees.

Industry Future

There is a slowing down trend in declining enrollment for many companies in this sector. Demand for technician may be increasing again. However, economy’s improvement and increased employment rate may make it more difficult for schools to recruit students because it is easier to find a job without having to go to school.

General Financial Performance of Companies In the Sector

It seems that demand for training for technician, based on our data, has decreased in the past several years as indicated by decline in the new enrollment and total enrollment in companies in this sector, which presents about 9% annual decline between 2015 and 2017. While offset by the slightly increased average tuition (2-4% annually) the revenue has decreased due to the faster decline in enrollment. However, it seems that the decline in enrollment has slowed down since 2017 (4% in 2018 as compared with 9% for previous years). Increase in tuition has slowed down as well.

Pressure resulted from the decreased revenue has been quickly transferred to companies’ profitability causing companies’ margins shrinking or forcing companies to re-structure business by closing the unprofitable programs/campus. At the same time, companies also tried to low their spending on SG&A by saving and cutting expenses. The typical average gross margin and operating margin are 48% and -5% with an average SG&A as percentage of sales of about 52%.  There is a signal indicating that loss of cash flow may be being improved in 2018 as a result of  further expenses cutting and slowing down pace of declining in enrollment.

According to our analysis, the current companies’ enterprise price/sales ratio is around 0.33 with a debt/asset ratio of 15%.

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