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Item 1. Business

2020-12-03 compared with 2019-12-06 · 435 added, 1020 removed, 115 unchanged (93% of the section changed)

We are the leading provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians as well as welders and CNC machining technicians as measured by total average full-time enrollment and graduates.

Universal Technical Institute, Inc.

(“we,” “us” or “our”) is the leading provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians as measured by total average full-time enrollment and graduates.

We also provide programs for welders and computer numeric control (“CNC”) machining technicians.

We offer certificate, diploma or degree programs at 12 campuses across the United States under the banner of several well-known brands, including Universal Technical Institute (“UTI”), Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively, “MMI”) and NASCAR Technical Institute (“NASCAR Tech”).

Additionally, we offer manufacturer specific advanced training programs, including student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

We have provided technical education for 54 years.

For the year ended September 30, 2019 , our average full-time enrollment was 10,674 .

Business Model

We work closely with leading original equipment manufacturers (OEMs) and employers to understand their needs for qualified service professionals.

Additionally, we offer manufacturer specific advanced training (“MSAT”) programs, including student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

Founded in 1965, we have provided technical education for more than 55 years and have graduated more than 220,000 technicians.

All of our campuses are nationally accredited and are eligible for federal student financial assistance funds under the Higher Education Act of 1965, as amended (“HEA”), commonly referred to as Title IV Programs, which are administered by the U.S.

Department of Education (“ED”).

Our programs are also eligible for financial aid from federal sources other than Title IV Programs, such as the programs administered by the U.S.

Department of Veterans Affairs (“VA”) and under the Workforce Investment Act.

Business Model and Industry Partnerships

Our goal is to continue to be the leading provider of postsecondary education for students seeking careers as professional technicians.

We continue to evolve our business model to provide our students with accessible, affordable training with a focus on bringing education to the students at convenient locations.

The market for qualified service technicians is large and growing.

The United States Department of Labor Bureau of Labor Statistics (“U.S.

DOL BLS”) estimates that an average of approximately 99,800 new job openings, due to growth and net replacements, will exist annually for newly trained technicians in the automotive, diesel, and collision fields through 2029.

Additionally, the U.S.

DOL BLS estimates that an average of 43,400 new job openings for welders, 11,800 new job openings for computer-controlled machine tool operators, and 4,200 new job openings for marine and motorcycle technicians will exist annually for new entrants through 2029 in these fields.

Our student recruitment efforts begin with our commitment to positive outcomes, both for our students and our industry relationships.

Our responsibility to present job-ready graduates to employers requires that we recruit, enroll and train prospective students who have the drive and potential to successfully pursue a career in their field of training.

We use a multi-touch media approach for our three primary admissions channels (high school, adult, and military) to enroll and start students, which involves national and local outreach to generate a high quality and quantity of prospective students.

To maximize the likelihood of student retention and graduation, our admissions process is intended to identify students who have the desire and ability to succeed in their chosen program.

In addition, we have established processes to identify students who may be in need of assistance to succeed in and complete their chosen program.

To assist these students in graduating, we employ student service professionals that provide tutoring, and academic, financial, personal, and employment advisement.

Additionally, as our campus locations do not offer housing for students, we have service professionals who leverage third-party relationships and assist our students in finding affordable housing near our campuses.

To ensure our programs provide students with the necessary hard and soft skills needed upon graduation, we have relationships with over 35 original equipment manufacturers and industry brand partners across the country to understand their needs for qualified service professionals.

Through our industry relationships, we are able to continuously refine and expand our programs and curricula.

We believe our industry-oriented educational philosophy and national presence have enabled us to develop valuable industry relationships, which provide us with significant competitive strength and support our market leadership.

We are a primary provider of manufacturer specific advanced training (MSAT) programs, and we have relationships with over 30 OEMs, including the following, and their associated brands:

American Honda Motor Company, Inc.

Mercedes-Benz USA, LLC

BMW of North America, LLC

Mercury Marine, a division of Brunswick Corporation

BMW Motorrad of North America, LLC

Navistar International Corporation

Cummins Rocky Mountain, LLC, a subsidiary of Cummins, Inc.

Nissan North America, Inc.

Daimler Trucks North America

Peterbilt Motors Company

Fiat Chrylser Automobiles (FCA) US LLC (fka Chrysler Group LLC)

Porsche Cars of North America, Inc.

Ford Motor Company

Suzuki Motor of America, Inc.

General Motors Company

Toyota Motor Sales, U.S.A., Inc.

Harley-Davidson Motor Company

Volvo Cars of North America, LLC

Kawasaki Motors Corporation, U.S.A.

Volvo Penta of the Americas, Inc.

KTM North America, Inc.

Yamaha Motor Corporation, USA

Participating manufacturers typically assist us in the development of course content and curricula, while providing us with vehicles, equipment, specialty tools and parts at reduced prices or at no charge.

In some instances, they offer tuition reimbursement and other hiring incentives to our graduates.

Our collaboration with OEMs enables us to provide highly specialized education to our students, resulting in enhanced employment opportunities and the potential for higher wages for our graduates.

Our industry partners and their dealers benefit from a supply of technicians who receive industry-recognized certifications and credentials from the manufacturers as graduates of the MSAT programs.

The MSAT programs offer a cost-effective alternative for sourcing and developing technicians for both OEMs and their dealers.

These relationships also support the development of incremental revenue opportunities from training the OEMs’ existing employees.

In addition to the OEMs, our industry relationships also extend to after-market retailers, fleet service providers and enthusiast organizations.

Other target groups for relationship-building, such as parts and tools suppliers, provide us with a variety of strategic and financial benefits that include equipment sponsorship, new product support, licensing and branding opportunities and financial sponsorship for our campuses and students.

We believe our industry-focused educational model and national presence have enabled us to develop valuable industry relationships, which provide us with significant competitive strengths and supports our market leadership, along with enabling us to provide highly specialized education to our students, resulting in enhanced employment opportunities and the potential for higher wages for our graduates.

Our industry relationships also extend to thousands of local employers, after-market retailers, fleet service providers and enthusiast organizations.

Other target groups for relationship-building, such as parts and tools suppliers, provide us with a

variety of strategic and financial benefits that include equipment sponsorship, new product support, licensing and branding opportunities and financial sponsorship for our campuses and students.

As a result of the COVID-19 pandemic during 2020, we have transitioned our on-campus, in-person education model to a blended training model that combines instructor-facilitated online teaching and demonstrations with hands-on labs.

On-campus labs have been redesigned to meet the health, safety and social distancing guidelines imposed by the Centers for Disease Control (“CDC”) and state and local jurisdictions, while still meeting our accreditation and curriculum requirements.

Both the ED and the Accrediting Commission of Career Schools and Colleges (“ACCSC”) granted institutions temporary approval to offer distance learning through December 31, 2020.

To afford us additional flexibility beyond the current temporary approval period(s), we have initiated the approval process with the ACCSC and the appropriate state agencies to be able to offer distance education and a blended learning format for all of our programs on a more permanent basis.

Additionally, we continue to invest in the online delivery platform and curriculum to further enhance the student experience.

Business Strategy

Our goal is to continue to be the leading provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians as well as welders and CNC machining technicians and the leading supplier of entry-level skilled technicians for the industries we serve.

We continue to evolve our business model to provide our students with accessible, affordable training with a focus on bringing education to the students at convenient locations.

We intend to pursue the following business strategies to attain these goals:

Improve educational value proposition and affordability

Educational value

Our strategy is to provide students with an excellent return on their educational investment by working with our industry partners to offer manufacturer-specific training that is tailored to industry standards and requirements, improves students’ opportunities to find employment and maximizes their earnings potential in a secure, growing industry.

We actively engage transportation industry partners in defining our core curriculum and improving and expanding MSAT courses.

We regularly evaluate program offerings, schedules and locations that are most appealing to students and aligned with employer expectations, and update and expand our core and MSAT courses to align our training programs with current industry requirements.

These unique course offerings make our students more valuable to employers by giving them training that is consistent with industry needs and rapidly changing technology and the opportunity to earn a variety of industry-recognized certifications and credentials.

In support of our goal to continue to be the leading provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians, as well as welders and CNC machining technicians, and the leading supplier of entry-level skilled technicians for the industries we serve, we are pursuing a number of business strategies.

Additionally, we are focused on growth and diversification which is achieved through the expansion of new program offerings, funding models, and business operating models.

Return on Education

We provide an excellent return on our students’ education investment by working with our industry partners to offer manufacturer-specific training that is tailored to industry standards and requirements, that improves students’ opportunities to find employment and maximizes their earnings potential.

We actively engage transportation industry partners in defining our core curriculum and improving and expanding our MSAT courses.

We regularly evaluate program offerings, schedules and locations that are most appealing to students and aligned with employer expectations.

We also update and expand our core and MSAT courses to align our training programs with current industry standards and requirements.

These unique industry-aligned course offerings make our students more valuable to employers by giving them training that is consistent with industry needs and rapidly changing technology and the opportunity to earn a variety of industry-recognized certifications and credentials.

As a result, we believe we are well positioned to better meet the industry’s demand for skilled technicians.

Our Automotive and Diesel Technology II curricula is designed around manufacturers’ needs and fulfills student demand for hands-on, instructor led training in multiple learning environments.

The blended program uses online tools to enhance UTI’s hands-on lab and instructor-led classroom.

We intend to continue integrating this curricula and methodologies at new and existing campuses that offer Automotive and Diesel Technology programs.

We continue to prioritize implementation of the Automotive and Diesel Technology II curricula at new campus locations.

We provide relevant services to assist students with possible tuition financing options, educational and career counseling, opportunities while attending school for part-time work and housing assistance and, ultimately, graduate employment.

Our national employment services team develops job opportunities and outreach, while our local employment services teams instruct active students on employment search and interviewing skills, facilitate employer visits to campuses, provide access to reference materials and assist with the composition of resumes.

Affordability

Increased price sensitivity and aversion to debt continue to negatively impact prospective students’ willingness and ability to invest in an education, especially when jobs are plentiful in an economic cycle.

We have opened more conveniently located campuses that allow students to commute, and we provide a flexible curriculum that allows students to work while attending school.

We are focused on making our training more affordable and accessible through financing options, proprietary loans, institutional grants and scholarships based on need and merit and employer sponsored training and tuition reimbursement;

we assist students in applying for any grants or scholarships available for which they meet qualifications and we engage employers in developing tuition reimbursement programs for employees in good standing.

During the year ended September 30, 2019, approximately 44.0% of active students received a UTI-funded scholarship or grant.

We also offer financing tools and guidance for students.

In response to growing demand for trained technicians, our industry partners and employers are increasingly willing to participate in the cost of education by providing our students with scholarship money and relocation assistance to attend school and by offering our graduates tuition reimbursement plans and competitive compensation and benefit packages, including signing bonuses, relocation grants and toolboxes.

These programs make our training more affordable for students and provide tangible examples of the opportunities available to our graduates.

We regularly review and revise key business processes with the goals of eliminating costs and waste, driving efficiency and allowing us to continue to improve value and affordability for our students.

Our goal is to align costs with student populations without compromising the quality of our education.

To maximize student affordability and speed to completion, we are working with high schools across the nation to increase course articulation programs.

Articulation agreements allow students who have completed course(s) related to their selected program of study to receive a corresponding tuition credit for up to six courses.

The students may opt out of the courses provided they pass an Advanced Placement Opportunities Test for each selected course.

We have approximately 4,600 curriculum specific articulation agreements in place across the country;

this represents less than 20% of the high schools covered by our admissions teams.

We continue to identify new opportunities to expand the curriculum specific articulation agreements.

Strengthen Industry Relationships

Our relationships with leading manufacturer brand partners and other strategic partners are important to our business.

We deliver value to these partners and employers by functioning as an efficient hiring source and low cost training option for new and existing technicians.

These relationships give us direct input on the latest needs and requirements of employers, which not only guides our prospective student recruitment, but also strengthens our curricula and our students’ opportunities for employment and higher earnings after graduation.

In addition, our manufacturer brand partners support our students through manufacturer-paid courses, scholarships, tuition reimbursement programs and early employment initiatives.

Recruit, Train and Identify Employment Opportunities for More Students

Our student recruitment efforts are focused on three primary markets for prospective students and are conducted through three admissions channels:

Our student recruitment efforts begin with our commitment to positive outcomes for our students and our industry relationships.

We use a multi-touch media approach that involves national and local outreach to generate the quality and quantity of prospective students necessary for our three primary admissions channels to enroll and start students.

Our marketing strategy leverages an integrated inquiry generation platform that focuses on generating awareness and engagement, both nationally and locally, where our website acts as the primary hub of our campaigns, to inform and educate potential students on the nature of our educational programs and the employment opportunities that could be available to them.

Currently, we advertise on television, internet search, social media, display, online video and other internet-based content, radio, billboards and in magazines.

Our student recruitment efforts are focused on three primary markets and are conducted through three admissions channels:

• High School:

Field-based representatives develop and maintain relationships with high school guidance counselors, teachers and administrators as well as local employers.

These representatives generate student interest in pursuing the technician career path and UTI’s training programs through career presentations and workshops at high schools, career fairs and inviting students and their influencers on field trips and tours of our campuses and local employers’ businesses.

These representatives generate student interest in pursuing a professional technician career path and our training programs through career presentations and workshops at high schools and career fairs and inviting students and their influencers on field trips and tours of our campuses and local employers’ businesses.

Campus-based representatives serve adult career-seeking or career changing students who typically inquire with our schools as a result of our advertising campaigns.

Our military representatives are strategically located throughout the country and focus on building relationships with military installations in order to serve the needs of transitioning soldiers and military veterans.

Additionally, we have a centralized team of military representatives who are dedicated to serving and assisting veterans throughout the U.S.

Macroeconomic conditions, particularly low employment rates, impact our business.

The adult admissions channel has the most sensitivity to the economic conditions, making it challenging to attract potential students within that channel.

We strategically increased our focus to the high school admissions channel to attract and retain students with the highest potential to graduate under these economic conditions.

We collaborate with employers to help prospective students and their families understand the potential career opportunities that may be available during and after completing one of our programs.

As competition for the graduates we train grows, employers are increasingly partnering with us to raise awareness of the benefits of a technician career path for prospective students.

Employer testimonials are featured in our marketing materials.

Additionally, employers host special events for our prospective students at their locations and participate in open houses at our campuses, highlighting the high-tech jobs and career opportunities available to our graduates.

In July 2019, we launched our Early Employment pilot at our Avondale, Arizona campus.

Through this pilot program, students are able to apply for paid, apprenticeship-like employment with local employers prior to starting with UTI.

This allows students to earn while they learn and increase the probability of full-time employment upon graduation.

Employers have committed to hiring newly enrolled students and paying for a portion of their student loan upon graduation.

Based on the success of the Avondale, Arizona pilot, the program will be expanded to our Exton, Pennsylvania campus, slated to launch in early 2020 and other locations in the future.

Our national multi-media marketing strategies are designed to drive new student growth by building brand awareness and differentiation, enhancing the appeal of the skilled trades, and generating inquiries from qualified prospective students.

We continue to optimize our national and local marketing initiatives, tools and systems with the goals of cost-efficiency, balancing the volume and quality of inquiries and attracting prospective students with a high propensity to succeed in our programs.

Partnering with employers and focusing on our marketing strategies is part of an effort to increase positive perception of technical careers and our programs.

We are working to build relationships on military bases, in high schools, with local and state businesses and education and policy leaders to educate them on the value we create for our students, local employers, the economy and the community.

We have implemented new processes, technology and tools to support our national network of admissions representatives in responding to new student inquiries and keeping them engaged as they apply for, enroll in and start school.

We provide graduate-based compensation for our admissions representatives, which rewards them for students who successfully complete our programs.

Strengthen industry relationships

Our relationships with leading OEMs and other strategic partners are important to our business.

We deliver value to these partners and employers by functioning as an efficient hiring source and low cost training option for new and existing technicians.

In addition, our partners and the OEM dealers support our students through manufacturer-paid courses, scholarships, tuition reimbursement programs and Early Employment initiative.

Continue to invest in strategies to achieve sustained profitable growth

We continue to pursue strategies designed to sustain profitable, long-term growth and have the capital necessary to execute these initiatives, while meeting the requirements and expectations of regulators and our accreditor.

Through organic growth and, potentially, strategic acquisition of campus locations, we are expanding our national footprint by adding smaller campuses in locations where there is strong demand from students and

employers, including those students who would not relocate to one of our existing campuses.

We are executing on our strategy to move from larger destination campuses to metro campuses as shown by the opening of our Long Beach, California and Bloomfield, New Jersey campuses.

Additionally, we are continuing to transform our existing campus footprint by reducing the size of campuses with excess capacity, or by offering new OEM courses, adding complementary skilled trade programs, such as our welding and CNC machining programs, or negotiating facility use agreements.

We have had successful right-sizing at our Houston, Texas and Rancho Cucamonga, California campuses and will reduce the size of our Exton, Pennsylvania campus by approximately 71,000 square feet in December 2020.

The right-sizing will generate more meaningful operating efficiencies without compromising our ability to serve students and industry partners.

Additionally, we may consider expanding into new geographic markets through strategic acquisitions of complementary businesses.

Industry Background

The market for qualified service technicians is large and growing.

In the most recent data available, the United States Department of Labor (U.S.

DOL) estimated that in 2018 there were approximately 770,100 employed automotive technicians in the United States, and this number was expected to decrease by 0.8% from 2018 to 2028.

Other 2018 estimates provided by the U.S.

DOL indicate that the number of technicians in the other industries we serve, including diesel, collision, marine and motorcycle are expected to increase over this 10-year period by 4.8%, 4.1%, 5.7% and 9.2%, respectively.

The need for technicians is due to a variety of factors, including technological advancement in the industries into which our graduates enter, a continued increase in the number of automobiles, trucks, motorcycles and boats in service, the increasing lifespan of late-model automobiles and light trucks and an aging workforce that has begun to retire.

As a result of these factors, the U.S.

DOL estimates that an average of approximately 123,000 new job openings will exist annually for new entrants from 2018 to 2028 in these fields, according to data we reviewed.

In addition to the increase in demand for newly qualified technicians, manufacturers, dealer networks, transportation companies and governmental entities with large fleets are outsourcing their training functions, seeking preferred education providers who can offer high quality curricula and have a national presence to meet the employment and advanced training needs of their national dealer networks.

DOL estimated that in 2018 there were approximately 424,700 employed welders, cutters, solderers and brazers in the United States, and this number was expected to increase by 3.4% from 2018 to 2028.

DOL estimates that an average of approximately 48,800 new job openings will exist annually for new entrants from 2018 to 2028 in this field, according to data we reviewed.

DOL estimated that in 2018 there were approximately 151,600 employed computer-controlled machine tool operators in the United States, and this number was expected to decrease by 8.4% from 2018 to 2028.

DOL estimates that an average of approximately 13,600 new job openings will exist annually for new entrants from 2018 to 2028 in this field, according to data we reviewed.

Our military representatives are strategically located throughout the country.

These representatives focus on building relationships with military installations in order to serve the needs of those transitioning from military service.

Affordability

We are focused on making our training more affordable and accessible through financing options, proprietary loans, institutional and relocation grants, scholarships based on need and merit, and employer sponsored training and tuition reimbursement.

We assist students in applying for any grants or scholarships available for which they meet qualifications and we engage employers in developing tuition reimbursement programs for employees in good standing.

During the year ended September 30, 2020, approximately 45.0% of our active students received a UTI-funded scholarship or grant and approximately 20.0% of active students received funding from our proprietary loan program.

We also offer financing tools and guidance for students.

To maximize student affordability and speed to completion, we are working with high schools across the nation to increase our Technical Education Institutional Grant (“TEIG”) agreements.

The TEIG agreements allow students who have completed course(s) related to their selected program of study to receive a corresponding tuition credit for up to six courses.

Our students may opt out of the courses provided they pass an Advanced Placement Opportunities Test for each selected course.

We have approximately 4,000 curriculum-specific TEIG agreements in place across the country;

this represents approximately 14% of the high schools covered by our admissions teams.

We continue to identify new opportunities to expand the volume of these curriculum-specific TEIG agreements.

In response to growing demand for trained technicians, our industry partners and employers are increasingly willing to participate in our students’ cost of education by providing them with scholarship money and relocation assistance to attend school and by offering our graduates tuition reimbursement plans and competitive compensation and benefit packages, including signing bonuses, relocation grants and tool incentives.

There are over 4,600 employer location incentive opportunities, which make our training programs more affordable for students and may provide them with valuable relationships or employment opportunities following graduation.

Growth and Diversification

Over the past 10 years, we have opened three new campuses and added our welding and CNC machining programs.

Our first welding program started in fiscal 2017, and we have added four additional locations at our existing campuses where the careers in the field are in demand.

We are expanding our welding program to two more campuses in the next fiscal year and are evaluating additional expansion opportunities.

We are intently focused on positive student graduation and employment outcomes, which are an indicator that drives student demand and ensures a high return on our students’ education investment.

Our organic growth and diversification strategy is predicated on adding new programs and new campuses in the transportation and skilled trades fields .

We also have the opportunity to pursue our growth and diversification strategy through acquisitions.

With a national higher-education market in transition, we are exploring potential acquisition opportunities that would allow us to enter new markets, expand our presence in existing markets, broaden our program offerings, enter into adjacent markets, or that could drive significant cost and operational synergies.

Our diversification strategy is focused on program diversification by adding new disciplines;

evolving our instructional and delivery model to leverage enabling technologies and instructional strategies that drive student outcomes and allow the business to more effectively scale;

and identifying and adding new ways for programs to be funded by and for students.

Schools and Programs

Through our campus-based school system, we offer specialized technical education programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively, MMI) and NASCAR Technical Institute (NASCAR Tech).

Through our campus-based school system, we offer specialized technical education programs under the UTI, MMI and NASCAR Tech brands.

The majority of our programs are designed to be completed in 36 to 90 weeks and culminate in a certificate, diploma or associate of occupational studies degree, depending on the program and campus.

Tuition rates vary by type and length of our programs and the program level, such as core or advanced training.

Tuition ranges from approximately $18,450 for our CNC program lasting 36 weeks to $56,600 for our Automotive and Diesel Technology II with one specialized elective program lasting 90 weeks.

During the year ended September 30, 2019, the average annual revenue per student was approximately $29,000, net of UTI-funded scholarships or grants.

Also, students may receive tuition reimbursement from our industry partners.

As part of our business strategy, we are focused on affordable training and have implemented initiatives to offer UTI-funded scholarships or grants for students to lower tuition.

During the year ended September 30, 2019, approximately 44.0% of active students received a UTI-funded scholarship or grant.

Our campuses are accredited, and our certificate, diploma and degree programs are eligible for federal student financial assistance funds under the Higher Education Act of 1965, as amended (HEA), commonly referred to as Title IV Programs, which are administered by the U.S.

Department of Education (ED).

Our programs are also eligible for financial aid from federal sources other than Title IV Programs, such as the programs administered by the U.S.

Department of Veterans Affairs (VA) and under the Workforce Investment Act.

During the year ended September 30, 2020, tuition ranged from approximately $19,000 for our CNC program (lasting 36 weeks) to $58,000 for our Automotive and Diesel program with one specialized elective program (lasting 90 weeks).

During the year ended September 30, 2020, the average annual revenue per student was approximately $28,750, net of scholarships or grants funded by us.

Our schools and programs are summarized in the following table:

Principal Programs

Arizona (Avondale)*

Arizona (Phoenix)

California (Long Beach)*

Location Brand Year Campus Opened Principal Programs

Arizona (Avondale) UTI 1965 Automotive;

Arizona (Phoenix) MMI 1973 Motorcycle

California (Long Beach) UTI 2015 Automotive;

Collision Repair and Refinishing;

California (Rancho Cucamonga)*

California (Sacramento)*

California (Rancho Cucamonga) UTI 1998 Automotive;

California (Sacramento) UTI 2005 Automotive;

Collision Repair and Refinishing (1)

Florida (Orlando)*

Illinois (Lisle)

Massachusetts (Norwood)**

New Jersey (Bloomfield)*

North Carolina (Mooresville)

Automotive with NASCAR;

Florida (Orlando) UTI/MMI 1986 Automotive;

Illinois (Lisle) UTI 1988 Automotive;

New Jersey (Bloomfield) UTI 2018 Automotive;

North Carolina (Mooresville) NASCAR Tech 2002 Automotive;

CNC Machining

Pennsylvania (Exton)

Pennsylvania (Exton) UTI 2004 Automotive;

Texas (Dallas/Ft.

Texas (Houston) 1

Worth) UTI 2010 Automotive;

Texas (Houston) UTI 1983 Automotive;

Collision Repair and Refinishing;

* Indicates a campus location that offers our Automotive Technology and Diesel Technology II curricula.

** UTI announced on February 19, 2019 that the Norwood, Massachusetts campus is no longer accepting new

student applications and its last group of students started on March 18, 2019.

1 We intend to begin teaching our Welding Technology program at our Houston, Texas campus in the third

quarter of 2020.

Universal Technical Institute (UTI)

UTI offers automotive, diesel and industrial, and collision repair and refinishing programs that are accredited by the Automotive Service Excellence Education Foundation (ASEEF).

In order to apply for ASEEF accreditation, a school must meet the ASEEF curriculum requirements and also must have graduated its first class.

We offer certificate, diploma and associate degree level programs, with degree level credentials currently offered at our Avondale, Arizona;

Worth, Texas;

Long Beach, California;

Orlando, Florida;

Rancho Cucamonga, California and Sacramento, California campuses.

We plan to expand degree level offerings to select existing and new campus locations, subject to applicable regulatory approvals.

We offer the following programs under the UTI brand:

Automotive Technology .

Established in 1965, the Automotive Technology program is designed to teach students how to diagnose, service and repair automobiles.

In 2010, we began offering this program as Automotive Technology II in a blended learning format, which combines daily instructor-led theory and hands-on lab training complimented by instructor-led web-based learning.

Automotive Technology II is currently offered at our Avondale, Arizona;

Long Beach, California;

Rancho Cucamonga, California;

Sacramento, California;

Orlando, Florida;

Bloomfield, New Jersey and Dallas/Ft.

Worth, Texas campuses.

Graduates of this program are qualified to work as entry-level service technicians in automotive dealer service departments or automotive repair facilities.

Diesel Technology .

Established in 1968, the Diesel Technology program is designed to teach students how to diagnose, service and repair diesel systems and industrial equipment.

In 2010, we began offering this program as Diesel Technology II in the blended learning format described above.

Diesel Technology II is currently offered at our Avondale, Arizona;

Long Beach, California;

Rancho Cucamonga, California;

Sacramento, California;

Orlando, Florida;

Bloomfield, New Jersey and Dallas/Ft.

Worth, Texas campuses.

Graduates of this program are qualified to work as entry-level service technicians in medium and heavy truck facilities, truck dealerships, or in service and repair facilities for equipment utilized in various industrial applications, including materials handling, construction, transport refrigeration or farming.

Automotive and Diesel Technology .

Established in 1970, the Automotive/Diesel Technology program is designed to teach students how to diagnose, service and repair automobiles and diesel systems.

Automotive and Diesel Technology is currently offered at our Lisle, Illinois;

Norwood, Massachusetts;

Exton, Pennsylvania and Houston, Texas campuses.

In 2010, we began offering this program as Automotive and Diesel Technology II in the blended learning format described above;

Automotive and Diesel Technology II is currently offered at our Avondale, Arizona;

Long Beach, California;

Rancho Cucamonga, California;

Sacramento, California;

Orlando, Florida;

Bloomfield, New Jersey and Dallas/Ft.

Worth, Texas campuses.

Graduates of this program are qualified to work as entry-level service technicians in automotive repair facilities, automotive dealer service departments, diesel engine repair facilities, medium and heavy truck facilities, truck dealerships, or in service and repair facilities for marine diesel engines and equipment utilized in various industrial applications, including materials handling, construction, transport refrigeration or farming.

Collision Repair and Refinishing Technology (CRRT) .

Established in 1999, the CRRT program is designed to teach students how to repair non-structural and structural automobile damage as well as how to prepare cost estimates on all phases of repair and refinishing.

CRRT is currently offered at our Houston, Texas;

Long Beach, California and Sacramento California campuses.

Graduates of this program are qualified to work as entry-level technicians at OEM dealerships and independent repair facilities.

Welding Technology .

Established in 2017, our Welding Technology program is designed to teach students how to weld various materials using a wide range of welding processes.

The program’s

curriculum was built in partnership with Lincoln Electric, a global leader in the welding industry.

Welding Technology is currently offered at our Avondale, Arizona;

Worth, Texas and Rancho Cucamonga, California campuses.

We intend to began teaching our Welding Technology program at our Houston, Texas campus in the third quarter of 2020 and other locations in the future.

Graduates of this program are qualified to work as entry-level welders in the construction, structural, pipe, mechanical contracting and fabrication industries.

The training prepares graduates to apply for American Welding Society certification.

Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively, MMI)

Established in 1973, the MMI motorcycle program is designed to teach students how to diagnose, service and repair motorcycles and all-terrain vehicles.

The MMI motorcycle program is currently offered at our Phoenix, Arizona and Orlando, Florida campuses .

Graduates of this program are qualified to work as entry-level service technicians in motorcycle dealerships and independent repair facilities.

We have agreements relating to specific motorcycle training and elective programs with American Honda Motor Company, Inc.;

BMW Motorrad of North America, LLC;

Harley-Davidson Motor Company;

Kawasaki Motors Corporation, U.S.A.;

Suzuki Motor of America, Inc.

and Yamaha Motor Corporation, USA, and MMI is also supported by KTM North America, Inc.

We have agreements for dealer training with American Honda Motor Company, Inc.

and Harley-Davidson Motor Company.

These motorcycle manufacturers support us through their endorsement of our curricula content, assisting with our course development, providing equipment and product donations and instructor training.

Certain of these agreements are verbal and may be terminated without cause by either party at any time.

Established in 1991, the MMI marine program is designed to teach students how to diagnose, service and repair boats.

The MMI marine program is currently offered at our Orlando, Florida campus.

Graduates of this program are qualified to work as entry-level service technicians for marine dealerships and independent repair shops, as well as for marinas, boat yards and yacht clubs.

MMI is supported by several marine manufacturers, and we have agreements relating to marine OEM courses with American Honda Motor Company, Inc.;

Mercury Marine, a division of Brunswick Corporation;

Suzuki Motor of America, Inc.;

Volvo Penta of the Americas, Inc.

and Yamaha Motor Corporation, USA.

We have agreements for dealer training with American Honda Motor Company Inc.

and Mercury Marine, a division of Brunswick Corporation.

These marine manufacturers support us through their endorsement of our curricula content, assisting with course development, equipment and product donations and instructor training.

Certain of these agreements are verbal and may be terminated without cause by either party at any time.

Students who complete the MMI marine program can also pursue provisional certification as factory-certified technicians for Mercury Marine outboard products at no additional cost.

Students must complete core Mercury University requirements, which are an embedded component of the MMI marine program, and complete online distance-learning courses in order to achieve the provisional certification.

The certification becomes active upon employment with a Mercury Marine dealership within two years of graduation.

MMI is the only career technical education school in the country with which Mercury Marine is offering this certification program.

NASCAR Technical Institute (NASCAR Tech)

Established in 2002, NASCAR Tech offers the same type of automotive training as other UTI locations, along with additional NASCAR-specific elective courses.

NASCAR Tech is the exclusive educational provider for NASCAR and our Mooresville, North Carolina campus is the only campus in the country to offer NASCAR-endorsed training.

In the NASCAR-specific elective courses, students have the opportunity to learn first-hand with NASCAR engines and equipment and

to acquire specific skills required for entry-level positions in automotive and racing-related career opportunities.

Graduates of the Automotive Technology program and the Automotive Technology with NASCAR (the NASCAR program) at NASCAR Tech are qualified to work as entry-level service technicians in automotive repair facilities or automotive dealer service departments.

Graduates from the NASCAR program have additional opportunities to work in racing-related industries.

Of the students who elected to take the NASCAR-specific elective courses and graduated during 2018, approximately 24% accepted employment opportunities in racing-related industries.

The overall employment rate for our NASCAR Tech campus was 88% for 2018 graduates.

See "Business - Graduate Employment" included elsewhere in this Report on Form 10-K for further information on our employment rates.

Computer Numeric Control (CNC) Machining and Manufacturing Technology .

Established in 2017, our CNC Machining and Manufacturing Technology program is designed to teach students how to produce precision parts used in high-performance engines and a wide variety of trucks, motorcycles, cars and boats, and also in industrial applications, aerospace components and medical and surgical equipment.

The program’s curriculum of CNC classes is aligned with standards established by the National Institute for Metalworking Skills (NIMS) and prepares graduates to take the NIMS assessments and examinations for CNC machine operators.

CNC Machining and Manufacturing Technology is currently offered at our NASCAR Tech campus in Mooresville, North Carolina.

Graduates of this program are qualified to work as entry-level CNC operators in the manufacturing and mechanical fabrication industries.

(1) This program is no longer enrolling new students.

The teach-out of currently enrolled students will be completed during the first quarter of fiscal 2022.

(2) Program is eligible for enrollment with programs starting during the second quarter of fiscal 2021.

Description of Current Programs Offered

As previously noted, due to the COVID-19 pandemic during 2020, we have transitioned our on-campus, in-person education model to a blended training model that combines instructor-facilitated online teaching and demonstrations with hands-on lab training.

On-campus labs have been redesigned to meet the health, safety and social distancing guidelines imposed by the CDC and state and local jurisdictions, while still meeting our accreditation and curriculum requirements.

The new blended learning model not only increases access for students, but will also better prepare them to be life-long learners as technicians today perform many day-to-day tasks and continuing education courses online or on a digital device.

While the majority of our training programs have historically been completed in-person, the blended learning model is not a totally new concept for the business.

In fiscal 2010, we began delivering some of our Automotive, Diesel, and Automotive/Diesel programs in blended learning format which combined daily in-person instructor-led theory, hands-on lab training, and integrated instructor-led online learning.

This foundation enabled us to quickly pivot when our campus locations were forced to temporarily close due to the COVID-19 pandemic.

Our program offerings are further described in the table below:

Program Year Established Program Focus Job Placement

Automotive 1965 Diagnose, service and repair automobiles Entry-level service technicians in automotive dealer service departments or automotive repair facilities

Diesel 1968 Diagnose, service and repair diesel systems and industrial equipment Entry-level service technicians in medium and heavy truck facilities, truck dealerships, or in service and repair facilities

Automotive/Diesel 1970 Diagnose, service and repair automobiles and diesel systems Entry-level service technicians in automotive repair facilities, automotive dealer service departments, diesel engine repair facilities, medium and heavy truck facilities, truck dealerships, or in service and repair facilities

Motorcycle 1973 Diagnose, service and repair motorcycles and all-terrain vehicles

Entry-level service technicians in motorcycle dealerships and independent repair facilities

Marine 1991 Diagnose, service and repair boats

Entry-level service technicians for marine dealerships and independent repair shops, as well as for marinas, boat yards and yacht clubs

Collision Repair and Refinishing 1999 How to repair non-structural and structural automobile damage as well as how to prepare cost estimates on all phases of repair and refinishing

Entry-level technicians at OEM dealerships and independent repair facilities

NASCAR 2002 Automotive training along with additional NASCAR-specific elective courses

Entry-level service technicians in automotive repair facilities or automotive dealer service departments, or opportunities in racing-related industries

Welding 2017 How to weld various materials using a wide range of welding processes

Entry-level welders in the construction, structural, pipe, mechanical contracting and fabrication industries.

CNC Machining 2017 How to produce precision parts used in high-performance engines and a wide variety of trucks, motorcycles, cars and boats, and also in industrial applications, aerospace components and medical and surgical equipment

Entry-level CNC operators in the manufacturing and mechanical fabrication industries

Manufacturer Specific Advanced Training (“MSAT”) Programs

We offer advanced training programs in the form of manufacturer-paid post-graduate MSAT programs and in the form of student-paid MSAT courses, which may be added as electives to a student’s core Automotive, Diesel or Motorcycle program.

For both types of programs, the manufacturer typically assists us in the development of course content and curricula while providing us with vehicles, equipment, specialty tools and parts at reduced prices or at no charge.

This specialized training enhances the student’s skills resulting in enhanced employment opportunities and potential for higher wages for our graduates.

The specialized training also provides industry recognized certifications or credentials from the manufacturer.

We consistently evaluate new and existing OEM relationships to determine those programs that have the best outcomes for our students.

This may lead to the termination of relationships that do not result in the best outcomes for our students after graduation.

In addition to the program offerings noted above, we also offer advanced training programs in the form of manufacturer-paid post-graduate MSAT programs and in the form of student-paid MSAT courses, which may be added as electives to a student’s core automotive, diesel or motorcycle program.

Manufacturer-Paid MSATs

The manufacturer-paid MSATs are paid for by the manufacturer and/or its dealers in return for a commitment by the student to work for a dealer of that manufacturer for a certain period of time upon completion of the program and offered to a selective number of students.

Our manufacturer-paid MSATs are intended to offer in-depth instruction on specific manufacturers’ products, qualifying a graduate for employment with a dealer seeking highly specialized, entry-level technicians with brand-specific skills.

Students who are highly ranked graduates of an automotive or diesel program may apply to be selected for these programs.

A select number of students are offered manufacturer-paid MSATs, which are paid for by the manufacturer and/or its dealers in return for a commitment by the student to work for a dealer of that manufacturer for a certain period of time upon completion of the program.

Students who are high performing graduates of an automotive or diesel program may apply to be selected for these programs.

The programs range from 12 to 23 weeks in duration.

Pursuant to written agreements, we offer the following manufacturer-paid MSAT programs using vehicles, equipment, specialty tools and curricula provided by the OEMs:

BMW of North America, LLC.

We provide BMW’s Service Technician Education Program (STEP).

STEP programs are provided at our Avondale, Arizona and Orlando, Florida campuses.

Additionally, we provide BMW's Military Service Technician Education Program (MSTEP) at Marine Corps Base

Camp Pendleton in California.

Both STEP and MSTEP agreements expire on December 31, 2021 and may be terminated for cause by either party.

Mercedes-Benz USA, LLC.

We provide the Mercedes-Benz DRIVE Program at the MBUSA training centers in Grapevine, Texas;

Jacksonville, Florida;

Long Beach, California and Robbinsville, New Jersey.

This agreement expires on December 31, 2021 and may be terminated without cause by either party.

Navistar International Corporation.

We provide the International Truck Education Program at our Lisle, Illinois and Sacramento, California campuses.

This agreement expires December 31, 2020 and may be renewed annually by mutual agreement.

Nissan North America, Inc.

We provide the INFINITI Technician Training Academy at our Long Beach, California campus.

This agreement expires on March 31, 2021 and may be terminated without cause by either party.

Peterbilt Motors Company.

We provide the Peterbilt Technician Institute program at our Dallas/Ft.

Worth, Texas;

Exton, Pennsylvania and Lisle, Illinois campuses.

This agreement expires on December 31, 2020 and may be terminated without cause by either party.

Porsche Cars of North America, Inc.

We provide the Porsche Technician Apprenticeship Program at the Porsche training centers in Atlanta, Georgia;

Easton, Pennsylvania and Eastvale, California.

This agreement expires on September 30, 2020 and may be renewed by mutual agreement.

Volvo Cars of North America, LLC.

We provide Volvo’s Service Automotive Factory Education program training at our Avondale, Arizona campus.

This agreement expires on December 31, 2019 and may be renewed annually by mutual agreement.

We currently offer the following manufacturer-paid MSAT programs using vehicles, equipment, specialty tools and curricula provided by our manufacturer brand partners:

Manufacturer-Paid MSAT Programs Offered Location

BMW Service Technician Education Program (STEP) Avondale, Orlando

Mercedes-Benz DRIVE Mercedes-Benz facilities in Long Beach, California, Jacksonville, Florida, Robbinsville, New Jersey and Grapevine, Texas

Peterbilt Technician Institute Lisle, Dallas/Ft.

Porsche Technician Apprenticeship Program (PTAP) Porsche facilities in Eastvale, California, Atlanta, Georgia, and Easton, Pennsylvania

Volvo Service Automotive Factory Education (SAFE) Avondale

Student-Paid MSATs

Pursuant to written agreements, we offer the following student-paid MSAT programs for the following OEMs using vehicles, equipment, specialty tools and curricula provided by the OEMs:

Cummins, Inc.

We provide power generation training through the Cummins Technician Apprentice Program at our Avondale, Arizona campus.

Cummins Rocky Mountain, LLC, a subsidiary of Cummins, Inc.

We provide the Cummins Technician Qualification Program at our Avondale, Arizona;

Exton, Pennsylvania and Houston, Texas campuses.

Daimler Trucks North America.

We provide the Daimler Trucks Finish First Program at our Avondale, Arizona and Lisle, Illinois campuses.

Fiat Chrysler Automobiles (FCA) US LLC.

We provide the Mopar Technical Education Curriculum program at our NASCAR Tech campus in Mooresville, North Carolina.

Ford Motor Company.

We provide the Ford Accelerated Credential Training Program at all UTI campuses except our Dallas/Ft.

Worth, Texas and Long Beach, California campuses.

General Motors Company (GM) and GM, through Raytheon Professional Services LLC.

We provide the GM Technician Career Training Programs at our Avondale, Arizona campus.

Nissan North America, Inc.

We provide the Nissan Automotive Technician Training Program at our Houston, Texas;

Mooresville, North Carolina;

Long Beach, California and Orlando, Florida campuses.

Toyota Motor Sales, U.S.A., Inc.

We provide the Toyota Professional Automotive Technician Program at our Lisle, Illinois and Sacramento, California campuses.

Dealer/Industry Training

Technicians in all of the industries we serve are in regular need of training or certification on new technologies.

Manufacturers outsource a portion of this training to education providers such as UTI.

Additionally, certain manufacturers outsource instructor staffing for their own training programs.

We currently provide dealer technician training or instructor staffing services to manufacturers such as the following:

We currently offer the following student-paid MSAT programs using vehicles, equipment, specialty tools and curricula provided by and/or developed in collaboration with our manufacturer brand partners:

Student-Paid MSAT Programs Offered Location

UTI and NASCAR Tech Campuses

Cummins Engines Avondale, Exton, Houston

Cummins Power Generation Avondale

Daimler Trucks Finish First Program Avondale, Lisle

Ford Accelerated Credential Training (FACT) Avondale, Rancho Cucamonga, Sacramento, Orlando, Lisle, Mooresville, Bloomfield, Exton, Houston

General Motors Technician Career Training Avondale

Mopar TEC by Fiat Chrysler Automobiles US LLC Mooresville

Nissan Automotive Technician Training (NATT) Long Beach, Orlando, Moorseville, Houston

Toyota Professional Automotive Technician (TPAT) Sacramento, Lisle

American Honda Motor Company, Inc.

BMW Manufacturing Co., LLC;

Ford Motor Company;

General Motors Company, through Raytheon Professional Services LLC;

Harley-Davidson Motor Company and Mercury Marine, a division of Brunswick Corporation.

Industry Relationships

We have a network of industry relationships that provide a wide range of strategic and financial benefits, including product/financial support, licensing, manufacturer training and industry employer incentives.

Product/Financial Support .

Product/financial support is an integral component of our business strategy and is present throughout our schools.

In these relationships, sponsors provide their products, including equipment and supplies, at reduced or no cost to us, in return for our use of those products in the classroom.

Additionally, they may provide financial sponsorship either to us or to our students.

Product/financial support is an attractive marketing opportunity for sponsors because our classrooms provide them with early access to the future end-users of their products.

As students become familiar with a manufacturer’s products during training, they may be more likely to continue to use the same products upon graduation.

Our product support relationships allow us to minimize the equipment and supply costs in each of our classrooms and significantly reduce the capital outlay necessary for operating and equipping our campuses.

An example of a product/financial support relationship is:

Snap-on Tools .

We have a strategic agreement with Snap-on Tools, a premier tool provider to the industries we serve.

Upon graduation from certain certificate, diploma or degree programs, students receive a Career Starter Tool Set Voucher, redeemable for a choice of a Snap-on tool set having an approximate retail value of $1,300.

The Snap-on tool set can be useful as a student establishes their career.

We purchase these tool sets from Snap-on Tools at a discount from their list price pursuant to a written agreement, which expires in October 2022.

In the context of this relationship, we have granted Snap-on Tools exclusive access to our campuses to display tool related advertising, and we have agreed to use Snap-on Tools equipment to train our students.

We receive credits from Snap-on Tools for student tool kits that we purchase and any additional purchases made by our students.

We can then redeem those credits in multiple ways, which historically has been to purchase Snap-on Tools equipment and tools for our campuses at the full retail list price.

The renewal executed in October 2017 also allows us to redeem our credits for a portion of the tool sets we purchase.

Licensing agreements enable us to establish meaningful relationships with key industry brands.

We pay a licensing fee and, in return, receive the right to use a particular industry participant’s name, logo or trademark in our promotional materials and on our campuses.

We believe that our current and potential students generally identify favorably with the recognized brand names licensed to us, enhancing our reputation and the effectiveness of our marketing efforts.

An example of a licensing arrangement is:

We have a licensing arrangement with NASCAR, and we are its exclusive education provider for automotive technicians.

The agreement expires on December 31, 2026 and may be terminated for cause by either party at any time prior to its expiration.

This relationship provides us with access to the network of NASCAR sponsors, presenting us with the opportunity to enhance our product support relationships.

In July 2002, NASCAR Tech opened in Mooresville, North Carolina where students have the opportunity to take NASCAR-specific elective courses that were developed through a collaboration of NASCAR crew chiefs and motorsports industry leaders.

Students also have the opportunity to learn first-hand with NASCAR engines and equipment and to acquire specific skills required for entry-level positions in automotive and racing-related career opportunities.

See Note 13 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Report on Form 10-K for further discussion of licensing agreements.

Manufacturer Training .

Manufacturer training relationships provide benefits to us that impact each of our education programs.

These relationships support entry-level training tailored to the needs of a specific manufacturer, as well as continuing education and training of experienced technicians.

In both the entry-level and continuing education programs, students receive training on a given manufacturer’s products.

In return, the manufacturer supplies vehicles, equipment, specialty tools and parts at reduced prices or at no charge and assistance in developing curricula.

Students who receive the entry-level training may earn manufacturer certification to work on that manufacturer’s products when they complete the program.

The manufacturer certification typically leads to improved employment opportunities due to the additional specific advanced training.

The continuing education programs for experienced technicians are paid for by the manufacturer and often take place in our facilities, allowing the manufacturer to avoid the costs associated with establishing its own dedicated facility.

Manufacturer training relationships lower the capital investment necessary to equip our classrooms and provide us with a significant marketing advantage.

In addition, through these relationships, manufacturers are able to increase the pool of skilled technicians available to service and repair their products.

Industry Employer Incentives .

OEM and non-OEM large national employers of our graduates compete for newly trained technicians to fill their technician shortage.

In response to this, industry employers have worked with us to create more comprehensive recruitment and retention strategies, which benefit our students and graduates.

The strategies continue to evolve, but common techniques include tuition reimbursement programs (TRIP) for qualifying students and graduates, where employers pay back some or all of a graduate's student loan, as well as tool incentives, relocation packages, mentorship programs and part-time employment opportunities while attending school.

Tuition reimbursement amounts range from $1,000 to full student tuition reimbursement.

This industry support lowers the cost for students to attend our programs and begin their careers as technicians while also allowing industry employers to increase the pool of skilled technicians to fill their open positions.

Examples of industry employer incentives include:

Penske Automotive Group.

Penske Automotive Group offers tuition reimbursement, tool reimbursement and tenure bonuses.

Hendrick Automotive Group.

Hendrick offers tuition reimbursement and tool reimbursement.

Sunstate Equipment Co.

Sunstate offers tuition reimbursement, tool reimbursement and relocation assistance.

Crown Lift Trucks .

Crown Lift Trucks offers tuition reimbursement.

Ryder Systems, Inc.

offers tuition reimbursement, a quarterly incentive program and a new hire mentorship program.

Student Recruitment Model

Our student recruitment efforts begin with our commitment to positive outcomes, both for our students and our industry relationships.

Marketing and Advertising.

Our marketing strategies are designed to identify potential students who would benefit from our programs and pursue successful careers upon graduation.

We leverage an integrated inquiry generation platform that focuses on generating awareness and engagement, both nationally and locally, where our website acts as the primary hub of our campaigns, to inform and educate potential students on the nature of our educational programs and the employment opportunities that could be available to them.

Currently, we advertise on television, internet search, social media, display, online video and other internet-based content, radio, billboards and in magazines.

We use events, sponsorships, social media, direct mail, email, texting and telephonic response to reach prospective students.

Our recruiting policy is intended to maximize the efficiency of our admissions representatives by focusing on the students most likely to succeed in our programs and in their chosen field.

Our admissions representatives are provided with training and tools to assist any prospective student in learning more about our programs.

High School Students .

Our field-based representatives recruit prospective students primarily from

high schools across the country with assigned territories covering the United States and U.S.

Our field-based admissions representatives generate the majority of their inquiries by conducting career education pathways and readiness workshops at high schools.

Typically, the field-based admissions representatives enroll high school students during an application interview conducted at the homes of prospective students or on one of the UTI campus locations.

Our reputation in local, regional and national business communities, endorsements from high school instructors and guidance counselors and the recommendations of satisfied graduates and employers are some of our most effective recruiting tools.

We strive to build relationships with the people who influence the career decisions of prospective students, such as vocational instructors and high school guidance counselors.

We conduct seminars for high school career counselors and instructors at our training facilities and campus locations to further educate these individuals on the merits of our technical training programs.

We participate in national skills competitions as judges and offer STEM (Science, Technology, Engineering and Math) curriculum integration assistance to secondary education instructors.

Our representatives focus on expanding high school relationships and increasing our access to high schools beyond the traditional vocational programs and into academic classes.

Our programs align with STEM principles, and we actively work to increase this awareness with high school educators and prospective students.

We offer a free summer program called Ignite!

at certain campuses for high school students entering their junior or senior year.

“Ignite!” allows the student to take a specific course, or courses, before enrolling in a UTI program.

When the student

enrolls and starts in a full-time program at one campus, he or she receives credit for the courses completed.

Industry partnerships are a key and defining UTI strength.

Through national and local partnerships, admissions representatives leverage industry relationships to expose and educate prospects and influencers to the many lucrative career paths that exist within the transportation industry.

UTI admissions representatives develop and nurture collaborative relationships with local transportation businesses, automotive dealerships and state-of-the-art service facilities.

Events such as “Future Tech Nights” and “Industry Days” are hosted by a local business and attended by high school principals, teachers, counselors, parents and prospective students.

These events are an important part of the recruitment model, and a key piece to the success of the awareness component is the message delivered by a third party at the dealership or service facility.

Collaborating with name brand industry partners exemplifies one of core employment value proposition and differentiates our brand from community colleges and other competitors.

Adult Students .

Our campus-based representatives recruit adult career-seeker or career-changer students.

These representatives respond to student inquiries generated from national, regional and local advertising and promotional activities.

Since adults tend to start our programs throughout the year instead of in the fall as is most typical of traditional school calendars or for recent high school graduates, these students help balance our enrollment throughout the year.

Military Personnel .

Our military representatives are strategically located throughout the country and focus on building relationships with military installations.

Additionally, we have a centralized team of military representatives who are dedicated to serving and assisting veterans throughout the United States.

We develop relationships with military personnel and provide information about our training programs by delivering career presentations to transitioning service members who are approaching their date of separation or have recently separated from the military as a means of further educating these individuals on the merits of our technical training programs.

In addition to our campus programs, we currently offer the BMW MSTEP at Marine Corps Base Camp Pendleton in California and Penske Premier Truck Diesel Program at Fort Bliss in El Paso, Texas.

This continues to be part of our ongoing initiative to serve the needs of transitioning veterans and military personnel.

Student Admissions and Retention

We currently employ field, military and campus-based admissions representatives who work directly with prospective students to facilitate the enrollment process.

Enrollment applications are reviewed by a central enrollment office for accuracy and completion before students are enrolled into the program of study.

Different programs have varying admissions standards.

Applicants must provide proof of one of the following:

high school graduation or its equivalent;

certification of high school equivalency (G.E.D.

or approved State Equivalency Exam);

successful completion of a degree program at the postsecondary level or successful completion of officially recognized home schooling.

Certain states require official transcripts or G.E.D.

test scores instead of the certificates.

To maximize the likelihood of student retention and graduation, our admissions process is intended to identify students who have the desire and ability to succeed in their chosen program.

We have student services professionals and other resources that provide various student services, including orientation, tutoring, student housing assistance, and academic, financial, personal and employment advisement.

We have established processes to identify students who may be in need of assistance to succeed in and complete their chosen program.

Phoenix, Orlando

BMW Motorrad of North America, LLC Phoenix, Orlando

Harley-Davidson Motor Company Phoenix, Orlando

Kawasaki Motors Corporation, U.S.A Phoenix, Orlando

Mercury Marine Orlando

Suzuki Motor of America, Inc.

Phoenix, Orlando

Volvo Penta of the Americas Orlando

Yamaha Motor Corporation, USA Phoenix, Orlando

Military Base Programs

In addition to the MSATs noted above, in partnership with the military and select industry partners, we have been developing and implementing advanced training programs at select military base locations.

Military base programs differ from our traditional MSATs in that the students do not complete our traditional core programs at a UTI campus before entering these advanced training programs.

These programs range from 12 to 16 weeks and are available to all men and women transitioning out of the military.

Candidates are interviewed and selected for these programs.

Additionally, to be considered, candidates must be within six months of their separation dates from the military.

There is no tuition cost to the participating

service members.

We currently offer the following military base programs using vehicles, equipment, specialty tools and curricula provided by and/or developed in collaboration with certain manufacturer brand partners:

Military Base Programs Offered Location

BMW Military Service Technician Education Program Marine Corps Base Camp Pendleton in California

Penske Premier Truck Group Technician Skills Program Fort Bliss in El Paso, Texas

Student Enrollment

We enroll students throughout the year, and courses start every three to six weeks.

For the year ended September 30, 2019 , our average full-time enrollment was 10,674 , representing an increase of approximately 2.5% as compared to 10,418 for the year ended September 30, 2018 .

For the year ended September 30, 2020, our average full-time enrollment was 10,462, representing a decrease of approximately 2.0% as compared to 10,674 for the year ended September 30, 2019.

At September 30, 2020, our ending full-time enrollment was 12,524, an increase of 1.3% from our ending full-time enrollment of 12,363 at September 30, 2019.

Currently, our student body is geographically diverse.

While the locations of our campuses attract local students that live within 50 miles of our campus locations, we estimate that 50% of our students elect to relocate to attend our programs.

Due to the seasonality of our business and normal fluctuations in student populations, we would expect volatility in our quarterly results.

See "Seasonality" within Part II, Item 7 of this Report on Form 10-K for further discussion of seasonal fluctuations in our revenues and operating results.

While our campus locations attract local students that live within 50 miles, we estimate that 50% of our students elect to relocate to attend our programs.

Due to the seasonality of our business and normal fluctuations in student populations, we expect variability in our quarterly results.

See "Seasonality" within Part II, Item 7 of this Annual Report on Form 10-K for further discussion of seasonal fluctuations in our revenues and operating results.

Graduate Employment

As described in “Business - Schools and Programs” included elsewhere in this Report on Form 10-K, our programs prepare graduates for careers in industries using the training we provide, primarily as automotive, diesel, collision repair, motorcycle, marine and CNC machining technicians and as welders.

Identifying employment opportunities and preparing our graduates for these careers is critical to our ability to help our graduates benefit from their education.

Identifying employment opportunities and preparing our graduates for their future careers is critical to our ability to deliver value to our graduates from their education.

Accordingly, we dedicate significant resources to maintaining an effective employment team.

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Finally, we place emphasis on and devote significant time to assisting students with part-time and graduate job searches.

We also have a centralized department whose focus is to build and maintain relationships with potential and existing national employers and develop graduate job opportunities and, where possible, relocation assistance, sign-on bonuses, tool packages and tuition reimbursement plans with our OEMs and other industry employers.

Together, the campuses and centralized department coordinate and host career fairs, industry awareness presentations, interview days and employer visits to our campus locations.

We believe that our graduate employment services provide our students with a compelling value proposition and enhance the employment opportunities for our graduates.

We believe that our graduate employment services provide our students with a compelling value proposition and enhance the employment opportunities for our graduates and are a competitive differentiator from other education institutions.

Our employment rate for 2019 and 2018 graduates who were employed within one year of graduation was 84% and 86%, respectively.

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We periodically review a sample of employment verifications to ensure accuracy.

For 2018 , we had 8,117 total graduates, of which 7,709 were available for employment.

Of those graduates available for employment, 6,664 were employed within one year of their graduation date, for a total of 86% .

For 2017 , we had 8,539 total graduates, of which 8,086 were available for employment.

Of those graduates available for employment, 6,818 were employed within one year of their graduation date, for a total of 84% .

Faculty and Employees

Faculty members are hired nationally in accordance with established criteria, applicable accreditation standards and applicable state regulations.

Members of our faculty are primarily industry professionals and are hired based on their prior work and educational experience.

We require a specific level of industry experience in order to enhance the quality of the programs we offer and to address current and industry-specific issues in the course content.

We provide intensive instructional training and continuing education to our faculty members to maintain the quality of instruction in all fields of study.

A majority of our existing instructors have a minimum of five years' experience in the industry and an average of eight years of experience teaching at UTI, ranging from less than 1 year to 32 years.

Our average student-to-teacher ratio is approximately 20-to-1.

Each school’s support team typically includes a campus president, an education director, a financial aid director, a student services director, an employment services director and a controller.

As of September 30, 2019 , we had approximately 1,670 full-time employees, including approximately 470 student support employees and approximately 600 full-time instructors.

Our employees are not represented by labor unions and are not subject to collective bargaining agreements.

We have encountered in the past, and may encounter in the future, employees who desire to seek union representation at new or existing campuses.

We have never experienced a work stoppage, and we believe that we have good relationships with our employees.

The table below summarizes the graduate employment rate data:

Year Ended September 30,

Graduate employment rate 84 % 86 %

Graduates 8,482 8,117

Graduates available for employment 8,065 7,709

Graduates employed 6,763 6,664

The for-profit, postsecondary education industry is highly competitive and highly fragmented, with no one provider controlling significant market share.

We compete with other institutions that are eligible to receive Title IV funding, including not-for-profit public and private schools, community colleges and all for-profit institutions which offer automotive, diesel, collision repair, motorcycle, marine, welding, CNC machining and closely related skilled trades training programs.

Our competition differs in each market depending on the curriculum that we offer and the availability of other choices, including job prospects.

We face a number of competitive factors, including the employment market, community colleges, other career-oriented and technical schools, and the military.

We compete with other institutions that are eligible to receive Title IV funding, including not-for-profit public and private schools, community colleges and for-profit institutions which offer automotive, diesel, collision repair, motorcycle, marine, welding, CNC machining and closely related skilled trades training programs.

Our competition differs in each market depending on the curriculum we offer and the availability of other choices, including job prospects.

Other competitive factors that influence our ability to attract new students include the employment market, community colleges, other career-oriented and technical schools, and the military.

Prospective students may choose to forego additional education and enter the workforce directly, especially during periods when the unemployment rate declines or remains stable as it has in recent years.

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Public institutions are generally able to charge lower tuition than our schools, due in part to government subsidies and other financial sources not available to for-profit schools.

There is no single community college that is a significant competitor;

No single community college is a significant competitor;

rather, the sector as a whole provides competition.

Within the for-profit career-oriented and technical school sector, some of our national and regional competitors are Lincoln Technical Institute, Tulsa Welding School and University of Northwestern Ohio.

We consider other single location institutions with a larger local presence near one of our campuses as competitors as well.

We also consider other single location institutions with a larger local presence near one of our campuses to be competitors.

Competition is generally based on location, tuition rates, the type of programs offered, the quality of instruction and instructional facilities, graduate employment rates, reputation and recruiting.

Additionally, the military often recruits or retains potential students when branches of the military offer enlistment or re-enlistment bonuses.

The 2017 National Defense Authorization Act increased enlistment targets for the Army, Guard and the Reserve.

According to provisional data available through the National Center for Education Statistics (NCES), for the 2017-2018 dataset, we had 7,866 graduates;

Lincoln Technical Institute had 2,931 graduates and University of Northwestern Ohio had 1,129 graduates in transportation technician training programs similar to ours.

This data also shows that no individual community college had a number of graduates commensurate with ours in similar programs.

Further, we partner with over 30 OEMs to provide MSAT programs.

We believe that we have the largest number of OEM branded training programs.

These OEMs provide vehicles, equipment, specialty tools and curricula that lead to increased training and employment opportunities for our students, including the potential for brand specific certifications.

For additional information regarding the benefits of the relationships with OEMs, see “Business - Business Model” and “Business - Business Strategy” included elsewhere in this report on Form 10-K.

We believe that our industry relationships, brand recognition and national presence provide significant benefits to our students, our graduates and their employers while differentiating us from other technical training schools.

Human Capital Management

As of September 30, 2020, we had approximately 1,575 full-time employees, including approximately 550 instructors, 300 admissions representatives, and 420 student support employees.

Each of our employees plays a key role in our mission to provide industry-leading postsecondary education for students seeking careers as professional technicians.

We believe that diversity and inclusion among our employees is essential in this process, as a truly innovative educational institution relies on a wealth of backgrounds and experiences to enhance student outcomes.

To attract a truly diverse workforce, we strive to instill a culture where employees are encouraged to draw upon their own unique skills and perspectives when engaging with our growing and diverse student population.

Faculty members are hired nationally in accordance with established criteria, applicable accreditation standards and applicable state regulations.

Members of our faculty are primarily industry professionals and are hired based on their prior work and educational experience.

We require a specific level of industry experience in order to enhance the quality of the programs we offer and to address current and industry-specific issues in our course content.

We provide intensive instructional training and continuing education to our faculty members to maintain the quality of instruction in all fields of study.

A majority of our existing instructors have a minimum of five years’ experience in the industry and an average of five years of experience teaching at UTI.

Our average student-to-teacher ratio during fiscal 2020 was approximately 18-to-1.

This ratio decreased as compared to the prior year due to lower lab densities to meet the health, safety and social distancing guidelines imposed by the CDC due to COVID-19.

We employ field, military and campus-based admissions representatives who work directly with prospective students to facilitate the enrollment process.

Additionally, each school has a support team that typically includes a campus president, an education director, a financial aid director, a student services director, an employment services director and a controller.

We believe our management team has the experience necessary to effectively implement our growth strategy and continue to drive positive educational and employment outcomes for our students.

For discussion of the risks relating to the attraction and retention of management and executive management employees, see Item 1A.

“ Risk Factors.”

Environmental Matters

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In the event we do not maintain compliance with any of these laws and regulations, or if we are responsible for a spill or release of hazardous materials, we could incur significant costs for clean-up, damages, and fines or penalties.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website at www.uti.edu under the “Investor Relations - Financial Information - SEC Filings” captions, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Reports of our executive officers, directors and any other persons required to file securities ownership reports under Section 16(a) of the Exchange Act are also available through our website.

Information contained on our website is not a part of this Report on Form 10-K and is not incorporated herein by reference.

In Part III of this Report on Form 10-K, we “incorporate by reference” certain information from parts of other documents filed with the SEC, specifically our proxy statement for the 2020 Annual Meeting of Stockholders.

The SEC allows us to disclose important information by referring to it in that manner.

Please refer to such information.

We anticipate that on or about January 14, 2020, our proxy statement for the 2020 Annual Meeting of Stockholders will be filed with the SEC and available on our website at www.uti.edu under the “Investor Relations - Financial Information - SEC Filings” captions.

Information relating to our corporate governance, including our Code of Conduct for all of our employees and our Supplemental Code of Ethics for our Chief Executive Officer and senior financial officers, and information concerning Board Committees, including Committee charters, is available on our website at www.uti.edu under the “Investor Relations - Corporate Governance” captions.

We will provide copies of any of the foregoing information without charge upon written request to Universal Technical Institute, Inc., 16220 North Scottsdale Road, Suite 500, Scottsdale, Arizona 85254, Attention:

Investor Relations.

The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information statements regarding issuers that file electronically with the SEC.

Regulatory Environment

Our institutions participate in a variety of government-sponsored financial aid programs that assist students in paying their cost of education.

The largest source of such support is the federal programs of student financial assistance under Title IV of the HEA.

This support, commonly referred to as Title IV Programs, is administered by ED.

In 2019 , we derived approximately 71% of our revenues, on a cash basis as defined by ED, from Title IV Programs, as calculated under the 90/10 rule.

To participate in Title IV Programs, an institution must be authorized to offer its programs of instruction by relevant state education agencies, be accredited by an accrediting commission recognized by ED and be certified as an eligible institution by ED.

To participate in veterans' benefits programs, including the Post-9/11 GI Bill, the Montgomery GI Bill, the Reserve Education Assistance Program (REAP) and VA Vocational Rehabilitation, an institution must comply with certain requirements applicable to the programs.

Additionally, certain states and their attorneys general have additional requirements to operate our institutions or for our students to receive state funding.

Furthermore, we are subject to oversight by other federal agencies including the Consumer Financial Protection Bureau (CFPB), the SEC, the Federal Trade Commission, the Internal Revenue Service and the Departments of Veterans Affairs, Defense, Treasury, Labor and Justice.

For these reasons, our institutions are subject to extensive regulatory requirements imposed by all of these entities.

State Authorization and Regulation

Each of our institutions must be authorized by the applicable state education agency where the institution is located to operate and offer a postsecondary education program to its students.

Our institutions are subject to extensive, ongoing regulation by each of these states.

Additionally, our institutions are required to be authorized by the applicable state education agencies of certain other states in which our institutions recruit students.

Currently, each of our institutions is authorized by the applicable state education agency or agencies.

Our institutions are subject to extensive regulatory requirements imposed by a wide range of federal and state agencies, as well as by institutional and programmatic accreditors.

These regulatory requirements cover the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, financial operations and financial condition.

These regulatory requirements also affect our ability to acquire, expand or open additional institutions or campuses, add new, or expand our existing educational programs and change our corporate structure and ownership.

The approvals granted by these entities permit our schools to operate and to participate in a variety of government-sponsored financial aid programs that assist students in paying for their education.

This includes the federal programs of student financial assistance under Title IV of the HEA, commonly referred to as Title IV Programs.

We also are subject to oversight by other federal agencies including the Consumer Financial Protection Bureau (“CFPB”), the SEC, the Federal Trade Commission, the Internal Revenue Service and the Departments of Veterans Affairs, Defense, Treasury, Labor and Justice.

Below, we discuss certain elements of this regulatory environment.

State Authorization

To operate and offer postsecondary programs, and to be certified to participate in Title IV Programs, each of our institutions must obtain and maintain authorization from the state in which it is physically located (“Home State”).

To engage in recruiting activities outside of its Home State, each institution also may be required to obtain and maintain authorization from the states in which it is recruiting students.

Each of our institutions holds the state authorizations required to operate and offer postsecondary education programs in its Home State, and to recruit in the states in which it engages in recruiting activities.

The level of regulatory oversight varies substantially from state to state and is extensive in some states.

State laws typically establish standards for instruction, qualifications of faculty, location and nature of facilities and equipment, administrative procedures, marketing, recruiting, student outcomes reporting, disclosure obligations to students, limitations on mandatory arbitration clauses in enrollment agreements, financial operations and other operational matters.

State laws and regulations may limit our ability to offer educational programs and to award certificates, diplomas or degrees.

Some states prescribe standards of financial responsibility that are not consistent with those required by ED and some mandate that institutions post surety bonds.

Currently, we have posted surety bonds on behalf of our institutions and admissions representatives with multiple states of approximately $21.1 million.

We believe that each of our institutions is in substantial compliance with state education agency requirements.

States often change their requirements in response to ED regulations or to implement requirements that may impact institutional and student success, and our institutions must respond quickly to remain in compliance.

Also, from time to time, states may transition authority between state agencies and we must comply with the new state agency’s rules, procedures and other documentation requirements.

If any one of our campuses were to lose its authorization from the education agency of the state in which the campus is located, that campus would be unable to offer its programs and we could be forced to close that campus.

If one of our campuses were to lose its authorization from a state other than the state in which the campus is located, that campus would not be able to recruit students in that state.

Moreover, some states have statutes and regulations that impose additional requirements on our schools For example, California and Massachusetts, have requirements for institutions to disclose institutional data to current and prospective students that vary substantially from the data disclosed under accreditation standards and federal rules.

California also has rules for calculating job placement rates for graduates that are based on a more complex formula, and the standard for what is considered graduate employment is more exacting and difficult to

substantiate.

As we previously reported, a series of bills were proposed in the California legislature in 2019 that would impose substantial new requirements on our schools in California.

At the conclusion of the legislative session, only three of the seven original bills became law and these three do not negatively impact our operations.

We expect that in 2020, California, and other states, will propose new laws that may impose heightened oversight and additional requirements on our schools, however, we cannot predict the timing, content or impact of any final laws that may emerge.

State laws may establish standards for instruction, qualifications of faculty, location and nature of facilities and equipment, administrative procedures, marketing, recruiting, student outcomes reporting, disclosure obligations to students, limitations on mandatory arbitration clauses in enrollment agreements, financial operations, and other operational matters.

Some states prescribe standards of financial responsibility and mandate that institutions post surety bonds.

Many states have requirements for institutions to disclose institutional data to current and prospective students, as well as to the public, and some states require that our schools meet prescribed performance standards as a condition of continued approval.

States can and often do revisit, revise, and expand their regulations governing postsecondary education and recruiting.

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Accreditation

Accreditation is a non-governmental process through which an institution voluntarily submits to ongoing qualitative reviews by an organization of peer institutions.

Accrediting commissions examine the academic quality of the institution’s instructional programs, and a grant of accreditation is generally viewed as confirmation that the institution’s programs meet generally accepted academic standards and practices.

Accrediting commissions also review the administrative and financial operations of the institutions they accredit to ensure that each institution has the resources necessary to perform its educational mission, implement continuous improvement processes and support student success.

Accreditation by an ED-recognized commission is required for an institution to be certified to participate in Title IV Programs.

In order to be recognized by ED, an accrediting agency must adopt specific standards for its review of educational institutions and must undergo a periodic process for renewal of its ED recognition.

The renewal process begins with a review and analysis by ED staff of written application materials submitted by the accrediting agency.

The application materials and ED’s staff analysis are then submitted to the National Advisory Committee on Institutional Quality and Integrity (NACIQI) for consideration.

All of our institutions are accredited by the Accrediting Commission of Career Schools and Colleges (ACCSC), a national accrediting agency recognized by ED.

In August 2016, NACIQI recommended that ED renew its recognition of ACCSC for a period of five years;

in October 2016, ED accepted this recommendation and renewed ACCSC's recognition for a period of five years.

We believe that each of our institutions is in substantial compliance with ACCSC accreditation standards.

If any one of our institutions lost its accreditation, students attending that institution would no longer be eligible to receive Title IV Program funding, we could lose our state authorization in states that require accreditation and we could be forced to close that institution.

Our campuses' grants of accreditation expire as detailed below;

a school that is faithfully engaged in the renewal of accreditation process and is meeting all of the requirements of that process continues to be accredited if the school's term of accreditation has exceeded the period of time last granted by ACCSC.

Accreditation Expiration

Renewal Status

On-Site Evaluation

Institutional accreditation by an ED-recognized accreditor is required for an institution to be certified to participate in Title IV Programs.

All of our institutions are accredited by the ACCSC, which is an accrediting agency recognized by ED.

ACCSC reviews the academic quality of each institution’s instructional programs, as well as the administrative and financial operations of the institution to ensure that it has the resources necessary to perform its educational mission, implement continuous improvement processes, and support student success.

Our institutions must submit annual reports, and at times, supplemental reports, to demonstrate ongoing compliance and improvement.

ACCSC requires institutions to disclose certain institutional information to current and prospective students, as well as to the public, and requires that our schools and programs meet various performance standards as a condition of continued accreditation.

ACCSC often revisits, revises, and expands its standards and policies.

Institutions must periodically renew their accreditation by completing a comprehensive renewal of accreditation process.

We strive to maintain the highest standards.

For 2020, of the approximately 650 schools accredited with ACCSC, 26 schools were awarded with the School of Excellence or Distinction status, of which five were UTI or MMI campuses.

Currently 11 of our campuses are classified as a School of Excellence or Distinction.

Six of our campuses have achieved this award twice in their history, and one campus has received this award three times in its history.

The table below sets out the renewal cycle for each of our schools.

Campus Accreditation Expiration Renewal Status On-Site Evaluation

Long Beach, California September 2022 Renewed March 2017

Exton, Pennsylvania (1)

October 2022 Renewed June 2016

Worth, Texas (1)

March 2023 Renewed December 2016

Sacramento, California (1)

December 2023 Renewed March 2017

Mooresville, North Carolina;

NASCAR Technical Institute (NASCAR Tech) (1)

December 2024

December 2024 Renewed July 2018

Avondale, Arizona (1)

February 2024

February 2019

February 2025 Renewed February 2019

Orlando, Florida (1)

February 2024

February 2025 Renewed August 2018

Houston, Texas (1)

February 2025

September 2018

February 2025 Renewed September 2018

Lisle, Illinois (1)

February 2025

December 2018

February 2025 Renewed December 2018

Rancho Cucamonga, California (1)

February 2024

February 2025 Renewed March 2019

Phoenix, Arizona;

Motorcycle Mechanics Institute (MMI) (1)

May 2025 Renewed April 2019

Bloomfield, New Jersey (2)

December 2019

Long Beach, California

September 2022

Exton, Pennsylvania*

Worth, Texas*

December 2016

Norwood, Massachusetts*

Sacramento, California*

December 2023

* Schools that achieved School of Excellence status during their most recent renewal of accreditation.

The procedures of our accrediting agency for the renewal of accreditation of a campus require a team of professionals to conduct an on-site visit at the campus and issue a Team Summary Report, which includes an assessment of the school’s compliance with accrediting standards.

In August 2019, our Lisle, Illinois;

Mooresville, North Carolina and Houston, Texas campuses received the “School of Excellence” designation by ACCSC.

All three campuses have received this recognition for two consecutive renewal cycles.

The School of Excellence Award recognizes ACCSC-accredited institutions for their commitment to the expectations and rigors of ACCSC accreditation, as well as the efforts made by the institution in maintaining high levels of achievement among their students.

In order to be eligible for the School of Excellence Award, an ACCSC-accredited institution must meet the conditions of renewing accreditation without any finding of non-compliance, satisfy all requirements necessary to be in good standing with ACCSC and demonstrate that the majority of the schools’ student graduation and graduate employment rates for all programs offered meet or exceed the average rates of graduation and employment among all ACCSC-accredited institutions.

Institutions are only eligible for the School of Excellence designation in the year in which they complete a renewal of accreditation.

Our Sacramento, California;

Norwood, Massachusetts;

Exton, Pennsylvania and Dallas/Ft.

Worth, Texas campuses have previously received the School of Excellence designation in the year in which they were eligible.

Our 2019 annual report has been completed and submitted to ACCSC.

Seven of our approximately 110 approved programs did not meet either the employment rate or graduation rate requirements.

The majority of the programs that were below benchmark did not meet the requirements as a result of a small number of students being

in the program.

Consistent with our goal of providing our students with an excellent return on their investment, we are eliminating longer programs that have minimal enrollment and higher cost to students.

We continue to utilize enhanced internal reporting to provide earlier visibility to cohort outcomes, which has allowed us to respond more effectively to early indications of risk, although we cannot guarantee that other programs might experience below benchmark outcomes in the future.

Nature of Federal and State Support for Postsecondary Education

May 2025 Renewed December 2019

(1) Indicates a school that has achieved School of Excellence status during its most recent renewal of accreditation, which recognizes ACCSC-accredited institutions for their commitment to the expectations and rigors of ACCSC accreditation, as well as the efforts made by the institution in maintaining high levels of achievement among their students.

(2) Indicates a school that has achieved School of Distinction status during its most recent renewal of accreditation, which recognizes accredited member schools that demonstrated a commitment to the expectations and rigors of ACCSC accreditation, as well as a commitment to delivering quality educational programs to students.

Title IV Programs

The federal government provides a substantial part of its support for postsecondary education through Title IV Programs in the form of grants and loans to students who can use those funds at any institution that has been certified as eligible to participate by ED.

Most aid under Title IV Programs is awarded on the basis of financial need, generally defined as the difference between the cost of attending the institution and the amount a student can reasonably contribute to that cost.

All recipients of Title IV Program funds must maintain a satisfactory grade point average and make academic progress, as defined by ED, towards the completion of their program of study as well as meet other eligibility requirements.

In addition, each institution must ensure that Title IV Program funds are properly accounted for and disbursed in the correct amounts to eligible students, as well as provide a variety of disclosures and reports on recipient data and program expenditures.

Federal Title IV Programs

Under the DL program, ED makes loans to students or their parents.

Borrowers repay these loans to ED according to the terms and conditions of the program.

Students with financial need continue to qualify for interest subsidies on subsidized loans while in school up through 150% of the published length of the student's program.

Students with subsidized loans also qualify for interest subsidies while in the 6-month grace period and during periods of deferment.

Non-need-based unsubsidized loans are also available to eligible students or their parents.

Students and parents with unsubsidized loans do not qualify for interest subsidies.

In 2019 , we derived approximately 54% of our revenues, on a cash basis, from the DL program.

Under the Pell program, ED makes grants to students who demonstrate financial need based on the federal Free Application for Federal Student Aid.

In 2019 , we derived approximately 19% of our revenues, on a cash basis, from the Pell program.

All of our institutions are certified to participate in Title IV Programs.

In fiscal 2020, we derived approximately 66% of our revenues, on a cash basis as defined by ED, from Title IV Programs.

We derived approximately 48% of our revenues, on a cash basis, from the Direct Loan program, pursuant to which ED makes loans to students or their parents.

We derived approximately 18% of our revenues, on a cash basis, from the Pell program, pursuant to which ED

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makes grants to students who demonstrate financial need.

And we derived less than 1% of our revenues, on a cash basis, from the Federal Supplemental Educational Opportunity Grant (“FSEOG”) program.

FSEOG grants are designed to supplement Pell grants for students with the greatest financial need.

Institutions must provide matching funding equal to 25% of all awards made under this program.

In 2019 , we derived less than 1% of our revenues, on a cash basis, from the FSEOG program.

Other Federal and State Programs

Some of our students receive financial aid from federal sources other than Title IV Programs, such as the programs administered by the VA, the Department of Defense (DOD) and under the Workforce Investment Act.

Additionally, some states provide financial aid to our students in the form of grants, loans or scholarships.

The eligibility requirements for federal and state financial aid vary by funding agency and program.

Since June 2012, institutions participating in the Cal Grant program funded by the state of California are required to achieve a three-year cohort default rate of less than 15.5% and a graduation rate above 30% to remain eligible for the Cal Grant program.

Our Long Beach, Rancho Cucamonga and Sacramento, California campuses are currently eligible to participate in the Cal Grant program.

Veterans' Benefits .

Since October 1, 2011, the Post-9/11 GI Bill has been effective for both degree and non-degree granting institutions of higher learning, allowing eligible veterans to use their Post-9/11 GI Bill benefits.

Additionally, veterans use benefits such as the Montgomery GI Bill, the REAP and VA Vocational Rehabilitation at our campuses.

We derived approximately 15% of our revenues, on a cash basis, from veterans' benefits programs

To participate in veterans' benefits programs, including the Post-9/11 GI Bill, the Montgomery GI Bill, the REAP, and VA Vocational Rehabilitation, an institution must comply with certain requirements established by the VA.

These criteria require, among other things, that the institution:

report on the enrollment status of eligible students;

maintain student records and make such records available for inspection;

follow rules applicable to the individual benefits programs;

comply with applicable limits on the percentage of students receiving certain veterans' benefits on a program and campus basis.

If we fail to comply with these requirements, we could lose our eligibility to participate in veterans' benefits programs.

The VA shares responsibility for VA benefit approval and oversight with designated State Approving Agencies (SAAs).

SAAs play a critical role in evaluating institutions and their programs to determine if they meet VA benefit eligibility requirements.

Processes and approval criteria, as well as interpretation of applicable requirements, can vary from state to state.

Therefore, approval in one state does not necessarily result in approval in all states.

If we are unable to secure approvals in one or more states, or if the process for obtaining an approval takes significant time, we could be required to alter the delivery methodology or structure of the program or experience delays in or the loss of a portion of VA funding.

Students receiving VA funding may not have the same flexibility in scheduling their coursework.

The VA imposes limitations on the percentage of students per program receiving benefits under certain veterans’ benefits programs, unless the program qualifies for certain exemptions.

If the VA determines that a program is out of compliance with these limitations, the VA will continue to provide benefits to current students, but new students will not be eligible to use their veterans' benefits for an affected program until we demonstrate compliance.

Additionally, the VA requires a campus be in operation for two years before it can apply to participate in VA benefit programs.

With the exception of our newest Bloomfield, New Jersey campus, which opened in August 2018, all of our campuses are eligible to participate in VA education benefit programs.

During 2012, President Obama signed an Executive Order directing the DOD, Veterans Affairs and Education to establish “Principles of Excellence” (Principles), based on certain guidelines set forth in the Executive Order, to apply to educational institutions receiving federal funding for service members, veterans and family members.

As requested, we provided written confirmation of our intent to comply with the Principles to the VA in June 2012.

We are required to comply with the Principles to continue recruitment activities on military installations.

Additionally, there is a requirement to possess a memorandum of understanding (MOU) with the U.S.

DOD as well as with certain individual installations.

Our access to bases for student recruitment has become more limited due to recent changes in the Transition Assistance Program (Transition Goals, Plans, Success) and increased enforcement of the MOU requirement.

Each of our institutions has an MOU with the U.S.

We have MOUs with certain key individual installations and are pursuing MOUs at additional locations;

however, some installations will not provide MOUs to institutions that do not teach at the installation.

We continue to strengthen and develop relationships with our existing contacts and with new contacts in order to maintain and rebuild our access to military installations.

Regulation of Federal Student Financial Aid Programs

To participate in Title IV Programs, an institution must be authorized to offer its programs by the relevant state education agencies, be accredited by an accrediting commission recognized by ED and be certified as eligible by ED.

ED will certify an institution to participate in Title IV Programs only after the institution has demonstrated compliance with the HEA and ED’s extensive regulations regarding institutional eligibility.

An institution must also demonstrate its compliance to ED on an ongoing basis.

All of our institutions are certified to participate in Title IV Programs.

ED’s Title IV program standards are applied primarily on an institutional basis, with an institution defined by ED as a main campus and its additional locations, if any.

Each institution is assigned a unique Office of Post-Secondary Education Identification Number (OPEID).

Under this definition for ED purposes we have the following three institutions:

The Title IV Program statutes and regulations are applied primarily on an institutional basis.

The HEA defines an “institution” as a main campus and its additional locations.

Pursuant to this definition, ED recognizes us as operating three institutions, organized as follows:

Universal Technical Institute of Arizona

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NASCAR Technical Institute, Mooresville, North Carolina

Universal Technical Institute, Norwood, Massachusetts

Universal Technical Institute of Phoenix

Universal Technical Institute DBA Motorcycle Mechanics Institute,

Motorcycle & Marine Mechanics Institute, Phoenix, Arizona

Universal Technical Institute DBA Motorcycle Mechanics Institute, Motorcycle & Marine Mechanics Institute, Phoenix, Arizona

Additional campuses:

Universal Technical Institute, Sacramento, California

Universal Technical Institute, Orlando, Florida

Universal Technical Institute, Orlando, Florida for the following divisions:

Motorcycle Mechanics Institute, Orlando, Florida

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Universal Technical Institute, Bloomfield, New Jersey

The substantial amount of federal funds disbursed through Title IV Programs, the large number of students and institutions participating in those programs and instances of fraud and abuse have prompted ED to exercise significant regulatory oversight over institutions participating in Title IV Programs.

Accrediting commissions and state agencies also oversee compliance with both their respective standards and certain Title IV Program requirements.

As a result, each of our institutions is subject to detailed oversight and review and must comply with a complex framework of laws and regulations.

Because ED periodically revises its regulations and changes its interpretation of existing laws and regulations, we cannot predict with certainty how the Title IV Program requirements will be applied in all circumstances.

Significant factors relating to Title IV Programs that could adversely affect us include the following:

Congressional Action .

Political and budgetary concerns significantly affect Title IV Programs.

Congress has historically reauthorized the HEA approximately every five to six years.

The HEA was reauthorized, amended and signed into law most recently on August 14, 2008.

Although there have been introductions of bills related to reauthorization during 2019 and in recent years and Congress has engaged in efforts to reauthorize the HEA during this time, Congress has failed to pass legislation that would reauthorize the HEA.

Congress may make changes in the laws at any time either during HEA reauthorization, as part of the separate technical amendments to the HEA, or during Congress’ annual budget and appropriations cycle.

Congress reviews and determines federal appropriations for Title IV Programs at least annually.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the CFPB, which became active during 2012.

The CFPB is tasked with overseeing large banks and certain other types of nonbank financial companies, including alternative loan providers, for compliance with federal consumer financial protection laws.

It is possible that our proprietary loan program will be subject to such review.

Accreditation & Academic Definitions.

On October 15, 2018, ED published a notice in the Federal Register announcing its intent to establish a negotiated rulemaking committee and three subcommittees to develop proposed regulations related to several matters, including, but not limited to, requirements for accrediting agencies in their oversight of member institutions and programs;

criteria used by ED to recognize accrediting agencies;

simplification of ED’s recognition and review of accrediting agencies;

clarification of the core oversight responsibilities amongst accrediting agencies, states and ED;

clarification of the permissible arrangements between an institution of higher education and another organization to provide a portion of an educational program;

roles and responsibilities of institutions and accrediting agencies in the teach-out process;

regulatory changes required to ensure equitable treatment of brick-and-mortar and distance education programs;

regulatory changes required to enable expansion of direct assessment programs, distance education, and competency-based education;

regulatory changes required to clarify disclosure and other requirements of state authorization;

emphasizing the importance of institutional mission in evaluating its policies, programs and outcomes;

simplification of state authorization requirements related to distance education;

defining “regular and substantive interaction” as it relates

to distance education and correspondence courses;

defining the term “credit hour;” defining the requirements related to the length of educational programs and entry level requirements for the occupation;

and other matters.

On January 7, 2019, ED released a set of draft proposed regulations for consideration and negotiation by the negotiated rulemaking committee and subcommittees.

The draft proposed regulations also cover additional topics, including, but not limited to, amendments to current regulations regarding the clock to credit hour conversion formula for measuring the lengths of certain educational programs, the return of unearned Title IV funds received for students who withdraw before completing their educational programs, and the measurement of student academic progress.

ED released additional revisions and updates to the draft proposed regulations prior to subsequent meetings of the committee and subcommittees in early 2019.

The committee and subcommittees completed their meetings in April 2019 and reached consensus on draft proposed regulations.

On June 12, 2019, ED published proposed regulations on a portion of these issues (primarily those related to accreditation) in a notice of proposed rulemaking in the Federal Register for public comment and to consider revisions to the regulations in response to the comments before publishing the final versions of the regulations.

ED stated that it intends to publish proposed regulations on the remaining issues in a separate notice of proposed rulemaking, but did not indicate when it would publish these proposed changes.

On November, 1, 2019, ED published the final regulations.

The general effective date of the final regulations is July 1, 2020.

We are in the process of reviewing the potential impact of the final regulations on us.

Incentive Compensation.

In 2010, ED issued revised regulations pertaining to incentive compensation, which became effective July 1, 2011.

Those regulations provide that an institution participating in Title IV Programs may not provide any commission, bonus or other incentive payment based in any part, directly or indirectly, on success in securing enrollments or the award of financial aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV Program funds.

When it issued the regulations, ED also stated that it does not intend to provide private guidance to individual institutions on their specific compensation practices, but that it may issue additional broadly applicable guidance to all institutions from time to time.

ED published guidance in November 2015 that eliminated certain restrictions on incentive compensation for admissions representatives.

Specifically, ED reconsidered its previous interpretation and stated that its regulations do not prohibit compensation for admissions representatives that is based upon students’ graduation from, or completion of, educational programs.

Compensation based on enrolling students continues to be prohibited.

ED also stated that in assessing the legality of a compensation structure, ED will evaluate whether compensation labeled as graduation-based or completion-based compensation is in substance enrollment-based compensation.

We have made adjustments to the compensation practices for our admissions representatives which we believe comply with ED's November 2015 guidance.

We will continue to evaluate other compensation options under these regulations and guidance.

Because the current regulations differ significantly from prior regulations, and because of the imprecise nature of many aspects of these regulations and ED's published guidance, it is not clear how ED will apply these regulations in all circumstances.

Although we cannot guarantee that ED will not take a position that some aspect of our compensation practices is not in compliance with these regulations, we believe that our compensation plans are in substantial compliance with the regulations.

ED's revisions to the regulations continue to adversely affect our ability to compensate our employees and our compensation practices for third parties.

Gainful Employment.

As described in our 2018 Annual Report on Form 10-K filed with the SEC on November 30, 2018, ED’s gainful employment regulations include debt to earning (DE) metrics and disclosure requirements for program certifications, reporting and disclosure of program information and warnings.

On July 1, 2019, ED issued final regulations that rescind the gainful employment regulations.

The final regulations have an effective date of July 1, 2020.

However, ED stated in a June 28, 2019 electronic announcement that institutions may elect to immediately implement the new regulations.

Institutions that early implement the regulations will not be required to:

report gainful employment data for the 2018-2019 award year;

comply with requirements for

including a gainful employment disclosure template in their promotional materials or for directly distributing the disclosure template to prospective students;

post gainful employment disclosures on their web pages or comply with certification requirements for gainful employment.

ED stated in the electronic announcement that institutions that do not early implement the new regulations are expected to comply with the existing gainful employment regulations by July 1, 2020.

We have early implemented the new regulations.

Defense to Repayment Regulations.

The current regulations on defense to repayment were published on November 1, 2016, with an effective date of July 1, 2017.

On October 24, 2017, ED published an interim regulation that delayed until July 1, 2018, the effective date of the majority of the regulations.

On February 14, 2018, a final rule was published in the Federal Register delaying until July 1, 2019 the effective date of the regulations.

On September 12, 2018, a U.S.

District Court judge issued an opinion concluding, among other things, that the delay in the effective date was unlawful.

On October 16, 2018, the judge issued an order declining to extend a stay preventing the regulations from taking effect.

Consequently, the November 1, 2016 regulations are now in effect.

The Department held negotiated rulemaking sessions beginning in November 2017 and ending in February 2018, with the objective of modifying the defense to repayment regulations.

However, no consensus was reached on the proposed regulations.

ED subsequently published a notice of proposed rulemaking on July 31, 2018 that included the proposed regulations for public comment.

On September 23, 2019, ED published the final regulations.

The final regulations have a general effective date of July 1, 2020.

The Department has not authorized institutions to early implement the new regulations prior to July 1, 2020 with the exception of certain financial responsibility regulations related to operational leases and long-term debt.

Consequently, we generally will remain subject to the current regulations until the new regulations take effect on July 1, 2020.

Borrower Defense and Other Discharges

The current regulations establish amended procedures and standards for borrowers, either individually or as a group, to assert through an ED-administered process a defense to the borrowers’ obligation to repay certain Title IV loans first disbursed prior to July 1, 2017 based on certain acts or omissions of the institution that relate to the making of the loan for enrollment at the school or the provision of educational services for which the loan was provided that would give rise to a cause of action against the school.

The regulations also expand the types of defenses available for borrowers, either individually or as a group, to assert through a new ED-administered process for loans first disbursed on or after July 1, 2017 and prior to the July 1, 2020 effective date of the new regulations published on September 23, 2019 based on certain acts or omissions that relate to the making of a Direct Loan for enrollment at the school or the provision of educational services for which the loan was provided and which fall into one of the following categories:

The borrower, whether as an individual or as a member of a class, or a governmental agency, has obtained against the school a nondefault, favorable contested judgment based on state or federal law in a court of administrative tribunal.

The institution failed to perform its obligations under the terms of a contract with the student.

The school or any of its representatives or any institution, organization, or person with whom the school has an agreement to provide educational programs, or to provide marketing, advertising, recruiting or admissions services, made a substantial misrepresentation (as defined by ED regulations) that the borrower reasonably relied on to the borrower’s detriment when the borrower decided to attend, or to continue attending, the school or decided to take out a Direct Loan.

The rules also expand the existing regulatory definition of a misrepresentation.

The regulations establish separate procedures for claims initiated for individual borrowers and claims initiated for groups of borrowers as well as separate procedures in the event that the institution is open or closed.

The rules establish varying, borrower-favorable statutes of limitations for the initiation of claims and, in some cases, impose an unlimited statute of limitations.

The procedures provide for evaluation of the claims either by an ED official or hearing official and provide for school participation in the process.

The procedures in some cases enable ED to consolidate borrower claims with common facts and to present the borrowers’ claims during the process.

If the ED official or hearing official approves the borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans, may return to the borrower amounts already paid by the borrower toward the discharged portion of the loan, and may initiate a separate proceeding to collect the discharged and returned amounts from the institution.

The regulations that were published on September 23, 2019 take effect on July 1, 2020.

Among other things, the new regulations modify the procedures and standards for borrowers to assert through an ED-administered process a defense to the borrowers’ obligation to repay certain Title IV loans first disbursed on or after July 1, 2020, based on certain acts or omissions by the institution or a covered party.

The procedures establish a process for students to obtain a loan discharge by establishing by a preponderance of the evidence that the institution made a misrepresentation of material fact, upon which the borrower reasonably relied in deciding to obtain a covered loan, where such misrepresentation directly and clearly relates to enrollment or continuing enrollment at the institution or to the provision of educational services for which the loan was made, and where the borrower was financially harmed by the misrepresentation.

The regulations establish revised definitions for misrepresentation and financial harm, identify a nonexclusive list of items that may be evidence that a misrepresentation occurred, identify a list of items that do not constitute a basis for a defense to repayment.

The regulations also set forth rules on a limitations period for submitting claims and circumstances for extending this period, on the requirements for submitting an application for a discharge, on the consideration of the application by ED, on the opportunities for the institution to respond and submit evidence, and on the process for discharging the borrower’s loan and for ED to seek recovery of the discharged amounts from the institution.

Financial Protection Requirements

The current regulations, which are scheduled to remain in effect until July 1, 2020, revise the financial responsibility regulations to expand the list of actions or events that would require an institution to provide ED with a letter of credit or another form of acceptable financial protection and potentially be subject to other conditions and requirements.

The specified list of events is extensive and includes events that ED contends might result in actual or potential debts, liabilities or losses and other events that ED contends might result in the institution being unable to meet all of its financial obligations and otherwise provide the administrative resources necessary to comply with the Title IV programs.

The current regulations require institutions to notify ED and current and prospective students within specified timeframes of the occurrence of one or more of these events.

With respect to events that might result in actual or potential debts, liabilities or losses, the current regulations identify the following events that could result in ED deeming the institution to fail ED’s financial responsibility standards and requiring a letter of credit or other form of acceptable financial protection and the acceptance of other conditions or requirements:

the institution is required to pay any debt or incur any liability arising from a final judgment in a judicial proceeding or from an administrative proceeding or determination, or from a settlement;

the institution is being sued in an action that has been pending for 120 days and that was brought by a federal or state authority for financial relief on claims related to making a Direct Loan for enrollment at the institution or the provision of educational services;

the institution is being sued in other litigation and the institution’s motion for summary judgment has been denied or was not filed with the court;

the institution is closing any or all of its locations and is required by its accrediting agency to submit a teach-out plan;

the institution has one or more gainful employment programs with gainful employment rates that could result in the programs becoming ineligible based on their rates for the next award year;

if the institution’s composite score is less than 1.5, any withdrawal of owner’s equity from the institution occurs by any means, including by declaring a dividend, unless the transfer is to an entity included in the affiliated entity group on whose basis the institution’s composite score was calculated.

If one or more of these events occur, ED recalculates the institution’s composite score by estimating the amount of actual and potential losses resulting from the events and determining whether the recalculated composite score is less than 1.0 and the institution fails the financial responsibility standards as a result.

The regulations establish severe rules for calculating and presuming the recognition of the potential losses that might arise from the above-referenced events.

For example, with certain exceptions, the regulations estimate the potential losses from pending lawsuits to equal the amount of relief claimed in the complaint or in any final written demand letter from the claimant.

With respect to closing locations and to programs that could lose eligibility based on gainful employment rates, the regulations estimate potential losses to equal the amount of Title IV funds received by the institution for the location and programs during the most recently completed award year.

For a withdrawal of owner’s equity, the regulations estimate potential losses to equal the amount transferred to an entity other than the institution.

The current regulations could require us to submit a letter of credit or other form of acceptable financial protection and accept other conditions or requirements if we pay dividends to shareholders if our composite score is less than 1.5 and the dividend amounts in combination with estimated losses associated with other events covered by the rules would reduce our composite score below 1.0 as recalculated by ED.

On June 24, 2016, we entered into a Securities Purchase Agreement with Coliseum Holdings I, LLC, pursuant to which Coliseum purchased shares of our Series A Preferred Stock.

Under the related Certificate of Designations, dividends on the Series A Preferred Stock accrue from the date of original issuance at a rate of 7.5% per annum on the liquidation preference then in effect (Cash Dividend).

If we do not declare and pay the dividend, the liquidation preference will be increased to an amount equal to the liquidation preference in effect at the start of the applicable dividend period plus an amount equal to such then applicable liquidation preference multiplied by 9.5% per annum (Accrued Dividend).

Cash Dividends, if declared, are payable semi-annually in arrears on September 30 and March 31, of each year.

If applicable, the Accrued Dividend will begin to accrue and be cumulative on the same schedule as set forth above for Cash Dividends and will also be compounded on each applicable subsequent dividend date.

Consequently, our inability to pay dividends on a timely basis could increase the cost of paying those dividends when they are paid in the future.

The current regulations also identify the following events that ED contends might result in the institution being unable to meet all of its financial obligations and otherwise provide the administrative resources necessary to comply with the Title IV programs, and that could result in ED deeming the institution to fail ED’s financial responsibility standards, thus requiring a letter of credit or other form of acceptable financial protection and the acceptance of other conditions or requirements:

failure to comply with the 90/10 Rule for the most recently completed fiscal year;

SEC warning that it may suspend trading on the institution’s stock;

failure to file certain reports with the SEC;

the exchange on which the institution’s stock is traded notifying the institution that it is not in compliance with exchange requirements or that its stock is delisted;

cohort default rates of at least 30 percent for its two most recent rates;

certain significant fluctuations in Title IV funding;

certain citations for failure to comply with state agency requirements;

failure to comply with yet to be developed ED financial stress tests;

annual dropout rates;

placement of the institution on probation or issuance of a show-cause or similar action by its accrediting agency;

certain violations of loan agreements;

expected or pending claims for borrower relief discharges and certain other events that ED might identify as reasonably likely to have a material adverse effect on the financial condition, business or results of operations of the institutions.

If ED deems the institution to fail the financial responsibility standards based on one or more of the aforementioned events listed in the regulations or based on the institution’s failure to comply with other requirements in the financial responsibility regulations, ED may permit the institution to continue participating in the Title IV programs under a provisional certification and would require the institution to submit a letter of credit or other form of financial protection, comply with the zone requirements and potentially accept other conditions or restrictions.

The regulations state that the letter of credit must equal 10% of the total amount of Title IV funds received by the institution during its most recently completed fiscal year plus any additional amount that ED determines is necessary to fully cover any estimated losses unless the institution demonstrates that the additional amount is unnecessary to protect, or is contrary to, the Federal interest.

The regulations state that ED maintains the full amount of financial protection until ED determines that the institution has a composite score of 1.0 or greater based on a review of the institution’s audited financial statements for the fiscal year in which all losses from the aforementioned events have been fully recognized or if the recalculated composite score is 1.0 or greater and the aforementioned events have ceased to exist.

On March 15, 2019, ED issued an electronic announcement with guidance regarding the implementation of some of the provisions of the current regulations.

With respect to the financial reporting requirements, ED acknowledged in the electronic announcement that some institutions may have been uncertain about how to comply with these requirements in light of prior delays in implementation of the regulations and court orders regarding the effective date of the regulations.

In general, ED gave institutions within 60 days of the electronic announcement to send notifications of actions, events, and conditions that occurred between the July 1, 2017 effective date of the regulations and the date of the electronic announcement.

However, there were exceptions.

For example, institutions were not required to submit a notification for certain debts, liabilities and losses that occurred between July 1, 2017 and the last day of the fiscal year-end for the most recent annual audit submission submitted to ED.

The electronic announcement indicates that institutions have an ongoing responsibility to notify ED of subsequent actions, events, or conditions.

The regulations published on September 23, 2019 with an effective date of July 1, 2020 shorten and reduce the scope of the list of events that could result in ED determining the institution to fail ED’s financial responsibility standards and requiring a letter of credit or other form of acceptable financial protection and the acceptance of other conditions or requirements.

Specifically, the regulations establish revised lists of mandatory triggering events and discretionary triggering events.

An institution is not able to meet its financial or administrative obligations if one of the following mandatory triggering events occurs:

The institution incurs a liability from a settlement, final judgment or final determination arising from an administrative or judicial action or proceeding initiated by a Federal or State entity and, as a result of that liability, the institution’s recalculated composite score is less than 1.0 as determined by ED under procedures described in the regulations;

For a proprietary institution whose composite score is less than 1.5, there is a withdrawal of owner’s equity from the institution by any means (as defined by the regulations) and, as a result of that withdrawal, the institution’s recalculated composite score is less than 1.0 as determined by ED under procedures described in the regulations;

The SEC issues an order suspending or revoking the registration of the institution’s securities or suspends trading of the institution’s securities on any national securities exchange;

The national securities exchange on which the institution’s securities are traded notifies the institution that it is not in compliance with the exchange’s listing requirements and, as a result, the institution’s securities are delisted;

The SEC is not in timely receipt of a required report and did not issue an extension to file the report;

If two or more discretionary triggering events (as described below) take place within a certain time period unless a triggering event is resolved before any subsequent event(s) occurs.

The regulation also establishes discretionary triggering events for which ED may determine that an institution is not able to meet its financial or administrative obligations if the events are likely to have a material adverse effect on the financial condition of the institution:

The accrediting agency for the institution issued an order, such as a show cause order or similar action, that, if not satisfied, could result in the withdrawal, revocation or suspension of institutional accreditation;

The institution violated a provision or requirement in a security or loan agreement and a default, delinquency or other event occurs that triggers or enables the creditor to require or impose on the institution an increase in collateral, a change in contractual obligations, an increase in interest rates or payments, or other sanctions, penalties, or fees;

The institution’s State licensing agency notifies the institution of an intent to withdraw or terminate the institution’s state licensure if the institution does not take the steps necessary to come into compliance with a State licensing agency requirement;

The institution did not receive at least 10 percent of its revenue from non-Title IV sources for its most recently completed fiscal year as calculated by ED;

The institution has high annual drop out rates as calculated by ED;

The institution’s two most recent official cohort default rates are 30 percent or greater, as determined under the regulations and unless the institution has a pending or successful appeal that sufficiently reduces at least one of the rates.

The regulations require the institution to notify ED of the occurrence of a mandatory or discretionary event in accordance with procedures established by ED, typically within 10 days of the occurrence of the event with certain exceptions.

ED may make a determination that an institution fails to meet the financial responsibility standards based on the occurrence of one or more mandatory or discretionary triggers and impose a letter of credit and/or other conditions upon the institution.

See “Financial Responsibility Standards” below.

ED regulations give the institution an opportunity to provide information in response to such a determination and describe the type of information an institution may provide to ED to consider before determining whether to issue a final determination that the institution is not financially responsible.

ED also may take an administrative action against an institution, or determine that the institution is not financially responsible, if it fails to provide timely notice to ED or fails to respond timely to requests from ED for information.

Student Loan Repayment Rates

The current regulations require proprietary institutions with student loan repayment rates, as defined in the regulations, below prescribed thresholds to provide an ED-prepared warning to prospective and enrolled students, as well as placement of the warning on its website and in all promotional materials and advertisements.

ED’s March 15, 2019, electronic announcement indicated that institutions would be notified at a later date about when and how they must provide repayment rate warnings to students in the future and of any changes to the content of the warning.

ED also stated that institutions do not need to provide disclosures to enrolled and prospective students regarding the occurrence of financial actions, events or conditions until further notice from ED.

We cannot predict if and when ED will provide further guidance on when institutions must implement this regulation.

However, the final regulations published by ED on September 23, 2019 will eliminate the current regulations on this topic effective July 1, 2020.

Prohibition on Pre-Dispute Contractual Provisions

The current regulations prohibit the use and reliance upon certain contractual provisions regarding dispute resolution processes, such as pre-dispute arbitration agreements or class action waivers, and require certain notifications, contract provisions and disclosures by institutions regarding students’ ability to participate in certain class action lawsuits or to initiate certain lawsuits instead of through arbitration.

The rules require institutions to submit to ED copies of certain records in connection with any claim filed in arbitration by or against the school concerning a borrower defense claim and any claim filed in a lawsuit by the school against the student or by any party against the school concerning a borrower defense claim.

ED’s March 15, 2019 electronic announcement included guidance regarding the regulations on class action bans and pre-dispute arbitration agreements, including implementation of the prohibitions, the types of claims to which the prohibitions do not apply, and the deadlines for submitting to ED copies of certain arbitral and judicial records in connection with certain proceedings concerning borrower defense claims.

The final regulations published by ED on September 23, 2019 will take effect on July 1, 2020 and generally will permit the use of arbitration clauses and class action waivers while requiring certain disclosures to students.

Under these regulations, for loans first disbursed on or after July 1, 2020, if an institution requires borrowers to enter into a pre-dispute arbitration agreement or to sign a class action waiver (as defined in the regulations) as a condition of enrollment, the institution must provide a written description of the institution’s dispute resolution process that the borrower has agreed to pursue.

For pre-dispute arbitration agreements, the institution also must provide a written description of how and when the agreement applies, how the borrower enters into the arbitration process and who to contact with questions.

For class action waivers, the school also must explain how and when the waiver applies, alternative processes the borrower may pursue to seek redress and who to contact with questions.

An institution of higher education that requires students receiving Title IV Federal student aid to accept or agree to a pre-dispute arbitration agreement and/or a class action waiver as a condition of enrollment must make available to enrolled students, prospective students and the public a written (electronic) plain language disclosure of those conditions of enrollment.

The regulations prescribe specific requirements for the content and format of the plain language disclosure.

Closed School Loan Discharges.

ED regulations state that ED may discharge a borrower’s obligation to repay certain Title IV loans if the borrower (or the student on whose behalf a parent borrowed) did not complete the program of study for which the loan was made because the campus at which the borrower (or student) was enrolled closed.

The borrower may qualify for a discharge by submitting a request to ED and meeting specific requirements in the regulations.

Borrowers generally may qualify for a discharge if they were enrolled at the campus at the time it closed, or if they were enrolled not more than 120 days before the campus closed, and if they did not complete their educational program through a teach-out at another school or by transferring academic credits earned at the closed school to another school.

ED has the authority to extend the 120-day period for extenuating circumstances.

If ED discharges the loans, ED may seek to recover from the school or other related parties the amount of loans discharged and to impose other liabilities and penalties.

Consequently, if we close a campus, ED could discharge borrower obligations to repay certain Title IV loans - either on its own initiative or upon application by the borrower - in connection with loans received by all students enrolled in the campus at the time of its closure and by all students who withdrew from the campus 120 days (or a longer period established by ED) prior to the closure and seek to recover the amount of the discharged loans and other liabilities and penalties.

We may be able to mitigate these losses by conducting or arranging for an orderly teach-out of students at a closed campus, but these efforts could be unsuccessful if students decline to participate in the teach-out or transfer their credits to another school or if they fail to complete their programs.

ED published new regulations on September 23, 2019 that included proposed regulations on a variety of topics, including amendments to regulations related to the discharge of student loans based on the school’s closure or a false claim of high school completion under certain circumstances.

The new regulations take effect on July 1, 2020, and apply to loans first disbursed on or after July 1, 2020.

Among other things, the new regulations allows students to obtain a discharge if, among other requirements, they were enrolled not more than 180 days before the campus closed.

ED has the authority to extend the 180-day

period for extenuating circumstances.

The borrower also must certify that the student has not accepted the opportunity to complete, or is not continuing in, the program of study or comparable program through either an institutional teach-out plan performed by the school or a teach-out agreement at another school, approved by the school’s accrediting agency and, if applicable, state licensing agency.

ED also has the authority to discharge on its own initiative the loans of qualified borrowers without a borrower application if the borrower did not subsequently re-enroll in any Title IV eligible institution within three years from the date the school closed.

The September 23, 2019 regulations limit this authority to schools that close between November 1, 2013 and July 1, 2020.

On February 18, 2019, we announced that our campus in Norwood, Massachusetts is no longer accepting new student applications, and its last class group of students started on March 18, 2019.

The campus is expected to close before the end of fiscal year 2020, after the July 1, 2020 effective date of the regulations.

We intend to teach out all of the students currently enrolled at the campus, although certain students may elect to withdraw before graduation, and we cannot predict the number of any students who might withdraw prior to the closure of the campus and potentially qualify for a loan discharge.

The “90/10 Rule.” A for-profit institution loses its eligibility to participate in Title IV Programs if it derives more than 90% of its revenue from Title IV Programs for two consecutive fiscal years as calculated under a cash basis formula mandated by ED.

The HEA and ED regulations set forth specific requirements for the calculation of the Title IV Program revenue percentage, mandate expanded disclosure requirements in how an institution presents the calculation and impose negative consequences if an institution exceeds the 90% limit in a single fiscal year.

The HEA provides that an institution will lose its Title IV Program eligibility for a period of at least two institutional fiscal years if it exceeds the 90% threshold for two consecutive institutional fiscal years.

To participate in Title IV Programs, an institution must be authorized by the relevant state, accredited by an ED-recognized accreditor, and certified by ED.

To obtain and maintain certification, institutions also must demonstrate ongoing compliance with the HEA and its extensive and complex implementing regulations;

regulations that ED frequently revisits, revises, and expands.

Because all of our institutions are certified to participate in Title IV Programs, they all must comply with this complex framework of statutes, regulations, and guidance, and undergo detailed oversight and review.

Below, we discuss the core components of the Title IV Programs’ regulatory framework.

Eligibility and Recertification

All institutions participating in the Title IV Programs must first establish their eligibility to do so.

The Program Participation Agreement (“PPA”) document serves as ED’s formal recognition that an institution and its associated additional locations have satisfied this requirement, and are authorized to participate in Title IV Programs for a specified period of time.

An institution seeking to expand its activities in certain ways, such as opening an additional location or raising the highest academic credential it offers, must obtain approval from ED.

Every institution also is required to periodically renew its certification by applying for continued certification before its current term of certification expires.

Terms of certification are typically six years, but can be three years or shorter.

We received a fully recertified PPA for Universal Technical Institute of Texas in April 2018, which will expire March 31, 2022.

In November 2018, we received a fully recertified PPA for Universal Technical Institute of Arizona and a fully recertified PPA for Universal Technical Institute of Phoenix.

Both of the PPA’s will expire on March 31, 2022.

Table of C o ntents

The 90/10 Rule

As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to derive at least 10% of their revenues for each fiscal year from sources other than Title IV Program funds.

A proprietary institution loses its eligibility to participate in Title IV Programs if it derives more than 90% of its revenue from Title IV Programs for two consecutive fiscal years as calculated under a complex, cash basis formula mandated by ED.

The loss of such eligibility would begin on the first day following the conclusion of the second consecutive year in which the institution exceeded the 90% limit and, as such, any Title IV Program funds already received by the institution and its students during a period of ineligibility would have to be returned to ED or a lender, if applicable.

Additionally, if an institution exceeds the 90% level for a single year, ED will place the institution on provisional certification for a period of at least two years, could impose other restrictions or conditions on the institution’s Title IV eligibility, and, under ED’s current financial responsibility regulations, could conclude that the institution lacks financial responsibility and is required to submit a letter of credit or other form of financial protection.

The HEA sets specific standards for certain elements in the calculation of an institution’s percentage under the 90/10 Rule, including, among other things, the treatment of institutional loans and revenue received from students who are enrolled in educational programs that are not eligible for Title IV Program funding.

As of September 30, 2020, our institutions’ annual Title IV percentages as calculated under the 90/10 rule ranged from approximately 65% to 68%.

We regularly monitor compliance with this requirement to minimize the risk that any of our institutions would derive more than the allowable maximum percentage of its revenue from Title IV Programs for any fiscal year.

Federal Student Loan Defaults .

To remain eligible to participate in Title IV Programs, institutions must maintain federal student loan cohort default rates below specified levels.

Administrative Capability

To continue its participation in Title IV Programs, an institution must demonstrate that it remains administratively capable of providing the education it promises and of properly managing the Title IV Programs.

ED assesses the administrative capability of each institution that participates in Title IV Programs under a series of standards listed in the regulations, which cover a wide range of operational and administrative topics, including the designation of capable and qualified individuals, the quality and scope of written procedures, the adequacy of institutional communication and processes, the timely resolution of issues, the sufficiency of recordkeeping, and the frequency of findings of noncompliance, to name a few.

ED’s administrative capability standards also include thresholds and expectations for federal student loan cohort default rates (discussed below), satisfactory academic progress, and loan counseling.

Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV Programs, require the institution to repay Title IV Program funds, change the method of payment of Title IV Program funds, or place the institution on provisional certification as a condition of its continued participation or take other actions against the institution.

Three-Year Student Loan Default Rates

To remain eligible to participate in Title IV Programs, institutions also must maintain federal student loan cohort default rates below specified levels.

ED calculates an institution’s cohort default rate on an annual basis.

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This represents a three-year measuring period.

An institution whose cohort default rate is 30% or more for three consecutive FFYs or greater than 40% for any given FFY loses eligibility to participate in some or all Title IV Programs.

This sanction is effective for the remainder of the FFY in which the institution lost its eligibility and for the two subsequent FFYs.

None of our institutions had a three-year cohort default rate of 30% or greater for 2016, 2015 or 2014, the three most recent FFYs with published rates.

The following tables set forth the FFEL/DL cohort default rates for our institutions:

The following tables set forth the most recent three-year cohort default rates for our institutions:

Three-Year Cohort Default Rates for

Cohort Years Ended September 30, (1)

2017 2016 2015

Universal Technical Institute of Arizona 13.8% 14.8% 14.9%

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All proprietary postsecondary institutions (2)

14.7% 15.2% 15.6%

(1) Based on information published by ED.

(2) Includes other proprietary institutions beyond Universal Technical Institute.

Table of C o ntents

An institution whose cohort default rate exceeds 30% in consecutive fiscal years may be subject to conditions and restrictions, and will lose eligibility if the rate remains above 30% three years in a row.

An institution also will lose eligibility if its rate exceeds 40% for any fiscal year.

As demonstrated in the table above, none of our institutions had a three-year cohort default rate of 30% or greater for 2017, 2016 or 2015, for the three most recent FFYs with published rates.

An institution whose three-year cohort default rate is 15% or greater for any one of the three preceding years is subject to a 30-day delay in receiving the first disbursement on federal student loans for first-time borrowers.

As of September 30, 2019, Universal Technical Institute of Phoenix and Universal Technical Institute of Texas were subject to delayed disbursements.

An institution whose cohort default rate is 30% or greater, but less than or equal to 40%, for two of the three most recent federal fiscal years may be placed on provisional certification status by ED for up to three years.

Under ED’s current financial responsibility regulations, an institution whose two most recent official cohort default rates are 30 percent or greater may fail ED’s financial responsibility regulations and be required to submit a letter of credit or other financial protection and be subject to other conditions and restrictions.

Perkins Loan Defaults.

An institution with a Perkins program cohort default rate that is greater than 15.0% for any federal award year, which is the twelve month period from July 1 through June 30, may be placed on provisional certification.

The most recent Perkins cohort default rates reported by our institutions are based on Perkins borrowers who entered repayment during the federal award year ended June 30, 2017, who then defaulted on their Perkins loans prior to July 1, 2018.

The resulting 2017-2018 Perkins cohort default rate for Universal Technical Institute of Arizona was 2.9%.

The Perkins cohort default rates for Universal Technical Institute of Texas and Universal Technical Institute of Phoenix for the same period were 12.5% and 22.2%, respectively.

However, because there were fewer than 30 Perkins loan borrowers for these two institutions who entered repayment during the 2016-2017 year, ED required a consolidation of the three most recently reported Perkins data years to calculate an official Perkins cohort default rate.

The resulting three year consolidated rates for Universal Technical Institute of Texas and Universal Technical Institute of Phoenix were 11.1% and 22.9%, respectively.

Although the Perkins three year consolidated cohort default rate is greater than 15% for Universal Technical Institute of Phoenix, we have not been advised of any provisional certification status.

If we are placed on provisional certification status for any reason, ED will require us to obtain prior approval for changes to our programs and locations and may more closely view any application we file for recertification, new locations, new or revised educational programs, acquisitions of other institutions, increases in degree level or other significant changes.

Further, for an institution that is provisionally certified, ED may revoke the institution’s certification without advance notice or advance opportunity to challenge the action.

An institution with a Perkins cohort default rate of 50% or greater for three consecutive federal award years loses eligibility to participate in the Perkins program and must liquidate its loan portfolio.

None of our institutions had a Perkins cohort default rate of 50% or greater for any of the last three federal award years.

The Perkins program was ended by Congress effective September 30, 2017;

thus no new Perkins loans will be made.

Financial Responsibility Standards.

All institutions participating in Title IV Programs must satisfy specific ED standards of financial responsibility.

ED evaluates institutions for compliance with these standards each year, based on the institution’s annual audited financial statements, as well as following a change of control of the institution.

Under current regulations and under regulations to take effect on July 1, 2020, ED may reevaluate the financial responsibility of an institution following the occurrence of certain triggering events.

See “Defense to Repayment Regulations - Financial Protection Requirements.”

The institution’s financial responsibility is measured in part by its composite score that is calculated by ED based on three ratios:

As of September 30, 2020, only Universal Technical Institute of Texas was subject to a 30-day delay in receiving the first disbursement on federal student loans for first-time borrowers due to a three-year cohort default rate that was 15% or greater for one of the three most recent years.

The 30-day delay was lifted as of September 30, 2020 for Universal Technical Institute of Phoenix due to the three-year cohort default rate falling below 15%.

Financial Responsibility

All institutions participating in Title IV Programs also must satisfy specific ED standards of financial responsibility.

Among other things, an institution must meet all of its financial obligations, including required refunds to students and any Title IV Program liabilities and debts, be current in its debt payments, comply with certain past performance requirements, not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited financial statements.

Each year, ED also evaluates institutions’ financial responsibility by calculating a “composite score,” which utilizes information provided in the institutions’ annual audited financial statements.

The composite score is based on three ratios:

(1) the equity ratio which measures the institution’s capital resources, ability to borrow and financial viability;

(2) the primary reserve ratio which measures the institution’s ability to support current operations from expendable resources;

the net income ratio which measures the institution’s ability to operate at a profit.

and (3) the net income ratio which measures the institution’s ability to operate at a profit.

ED assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength.

ED then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the institution.

The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further oversight.

In addition to having an acceptable composite score, an institution must, among other things, meet all of its financial obligations including required refunds to students and any Title IV Program liabilities and debts, be current in its debt payments, comply with certain past performance requirements, not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited financial statements, and not be subject to financial triggering events.

See “Defense to Repayment Regulations - Financial Protection Requirements.” If ED determines that an institution does not satisfy its financial responsibility standards, depending on the resulting composite score and other factors, that institution may establish its financial responsibility on an alternative basis.

If an institution's composite score is below 1.5, but is at least 1.0, the institution is in a category classified by ED as the zone.

Under ED regulations, institutions in the zone solely because their composite score is less than 1.5 are still considered to be financially responsible, but require additional oversight by ED in the form of cash monitoring and other participation requirements.

Institutions in the zone typically are permitted by ED to continue to participate in the Title IV programs under one of two alternatives:

1) the “Zone Alternative” under which an institution is required to make disbursements to students under a payment method other than ED’s standard repayment, typically the Heightened Cash Monitoring 1 (HCM1) payment method;

to notify ED within 10 days after the occurrence of certain oversight and financial events and to comply with other operating conditions imposed by ED or 2) submit a letter of credit to ED equal to at least 50 percent of the Title IV funds received by the institutions during the most recent fiscal year.

ED permits an institution to participate under the “Zone Alternative” for a period of up to three consecutive fiscal years.

Under the current regulations that are in effect until July 1, 2020, the list of information that an institution must provide timely to ED under the “Zone Alternative” includes, in addition to the events described under the financial protection measures and any other events that ED might require, any event that causes the institution, or a related entity, to realize any liability that was noted as a contingent liability in the institution’s or related entity’s most recent audited financial statements or any losses that are unusual in nature and infrequently occur or both as defined in accordance with certain specified accounting standards.

The institution also would be required to notify ED of certain other events described in the current Defense to Repayment regulations.

See “Regulation of Federal Student Financial Aid Programs - Defense To Repayment Regulations.” ED could impose a letter of credit or other conditions or requirements upon us in response to the reporting of any oversight or financial events.

Under the HCM1 payment method, the institution is required to make Title IV disbursements to eligible students and parents before it requests or receives funds for the amount of those disbursements from ED.

As long as the student accounts are credited before the funding requests are initiated, an institution is permitted to draw down funds through ED’s electronic system for grants management and payments for the amount of disbursements made to eligible students.

Unlike the Heightened Cash Monitoring 2 (HCM2) or reimbursement payment methods, the HCM1 payment method typically does not require institutions to submit documentation to ED and wait for ED approval before drawing down Title IV funds.

ED may place an institution that is in the zone on the HCM2 or reimbursement methods of payment.

An institution on the HCM1, HCM2 or reimbursement payment methods must pay any credit balances due to a student or parent before drawing down funds from ED for the amount of disbursements made to the student or parent.

If an institution's composite score or recalculated composite score is below 1.0, the institution is considered by ED to lack financial responsibility.

If ED determines that an institution does not satisfy ED's financial responsibility standards, depending on its composite score and other factors, that institution may establish its financial responsibility on an alternative basis by, among other things:

posting a letter of credit in an amount equal to at least 50% of the total Title IV Program funds received by the institution during its most recently completed fiscal year, or

posting a letter of credit in an amount equal to at least 10% of such prior year's Title IV Program funds, accepting provisional certification for a period of no more than three years, complying with additional ED notification and operating requirements and conditions and agreeing to receive Title IV Program funds under an arrangement other than ED's standard advance funding arrangement.

If an institution’s composite score is above 1.5, and it meets all other requirements, it is deemed financially responsible.

If its composite score is below 1.5, but at least 1.0, the institution is still considered to be financially responsible, but must agree to additional oversight by ED in the form of cash monitoring and other participation requirements.

If an institution’s composite score is below 1.0, the institution is considered by ED to lack financial responsibility.

ED may permit the institution to continue to participate in the Title IV Programs if it agrees to, among other things:

(1) post a letter of credit in an amount equal to at least 50% of the total Title IV Program funds received by the institution during its most recently completed fiscal year;

or (2) post a letter of credit in an amount equal to at least 10% of such prior year’s Title IV Program funds, accept provisional certification for a period of no more than three years, comply with additional ED notification and operating requirements and conditions, and agree to receive Title IV Program funds under an arrangement other than ED’s standard advance funding arrangement.

If an institution is unable to establish financial responsibility on an alternative basis, the institution may be subject to financial penalties, restrictions on operations and loss of external financial aid funding.

See "Risk Factors" included elsewhere in this Report on Form 10-K for additional information.

If an institution does not establish its financial responsibility by the end of the period for which ED provisionally certified the institution, ED may continue to provisionally certify the institution, but may require one or more persons or entities that exercise substantial control over the institution, as defined by ED regulations, to provide ED with financial protection for an amount determined by ED and to be jointly and severally liable for any liabilities that may arise from the institution’s participation in the Title IV programs.

The current regulations that are in effect until July 1, 2020, expanded the list of actions or events that require an institution to provide ED with a letter of credit or other form of acceptable financial protection.

See “Defense To Repayment - Financial Protection Requirements.” The regulations also, among other things, may increase the amount of the letter of credit or other form of financial protection that an institution must provide to ED if the institution has a composite score below 1.0, no longer qualifies for the Zone Alternative, or does not comply with other applicable requirements of the financial responsibility regulations.

The current regulations also would permit ED to recalculate an institution’s composite score to account for its estimate of actual or potential losses resulting from certain events identified in the new Defense to Repayment Regulations.

See “Regulation of Federal Student Financial Aid Programs - Defense To Repayment Regulations.”

See “Defense To Repayment - Financial Protection Requirements.”

ED has historically evaluated the financial condition of our institutions on a consolidated basis based on the financial statements of Universal Technical Institute, Inc.

1 unchanged sentence

ED’s regulations permit ED to examine the financial statements of Universal Technical Institute, Inc., the financial statements of each institution and the financial statements of any related party.

For our 2019 fiscal year, we calculated our composite score to be 1.8 .

ED has not required us currently to post a letter of credit on behalf of any of our schools.

ED has required us to provide certain information on a regular basis following our issuance of preferred stock on July 15, 2016, and we continue to provide monthly reports to ED pursuant to such direction.

For our year ended September 30, 2020, we calculated our composite score to be 2.3.

However, the composite score calculations and resulting requirements imposed on our institutions are subject to determination by ED once it receives and reviews our audited financial statements.

Return of Title IV Funds.

An institution participating in Title IV Programs must calculate the amount of unearned Title IV Program funds that have been disbursed to students who withdraw from their educational programs before completing them.

The institution must return those unearned funds to ED or the appropriate lending institution in a timely manner, which is generally within 45 days from the date the institution determines that the student has withdrawn.

If an institution is cited in an audit or program review for returning Title IV Program funds late for 5% or more of the students in the audit or program review sample, the institution must post a letter of credit in favor of ED in an amount equal to 25% of the total Title IV Program funds that should have been returned in the previous fiscal year.

Our 2019 Title IV compliance audits did not cite any of our institutions for exceeding the 5% late payment threshold.

Between composite score calculations, ED also will reevaluate the financial responsibility of an institution following the occurrence of certain “triggering events,” which must be timely reported to the agency.

Specifically, ED may determine that an institution is not able to meet its financial or administrative obligations if one of the following events occurs:

• The institution incurs a liability from a settlement, final judgment or final determination arising from an administrative or judicial action or proceeding initiated by a federal or state entity and, as a result of that liability, the institution’s recalculated composite score is less than 1.0 as determined by ED under procedures described in the regulations;

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• For a proprietary institution whose composite score is less than 1.5, there is a withdrawal of owner’s equity from the institution by any means (as defined by the regulations) and, as a result of that withdrawal, the institution’s recalculated composite score is less than 1.0 as determined by ED under procedures described in the regulations;

• The SEC issues an order suspending or revoking the registration of the institution’s securities or suspends trading of the institution’s securities on any national securities exchange;

• The national securities exchange on which the institution’s securities are traded notifies the institution that it is not in compliance with the exchange’s listing requirements and, as a result, the institution’s securities are delisted;

• The SEC is not in timely receipt of a required report and did not issue an extension to file the report;

• If two or more “discretionary” triggering events (as described below) take place within a certain time period unless a triggering event is resolved before any subsequent event(s) occurs.

ED also may determine that an institution is not able to meet its financial or administrative obligations if one of the following discretionary triggering events occurs and is likely to have a material adverse effect on the financial condition of the institution:

• The accrediting agency for the institution issued an order, such as a show cause order or similar action, that, if not satisfied, could result in the withdrawal, revocation or suspension of institutional accreditation;

• The institution violated a provision or requirement in a security or loan agreement and a default, delinquency or other event occurs that triggers or enables the creditor to require or impose on the institution an increase in collateral, a change in contractual obligations, an increase in interest rates or payments, or other sanctions, penalties, or fees;

• The institution’s state licensing agency notifies the institution of an intent to withdraw or terminate the institution’s state licensure if the institution does not take the steps necessary to come into compliance with a state licensing agency requirement;

• The institution did not receive at least 10 percent of its revenue from non-Title IV sources for its most recently completed fiscal year as calculated by ED;

• The institution has high annual drop-out rates as calculated by ED;

• The institution’s two most recent official cohort default rates are 30 percent or greater, as determined under the regulations and unless the institution has a pending or successful appeal that sufficiently reduces at least one of the rates.

ED regulations give the institution an opportunity to provide information to the agency demonstrating that the triggering event is not material to the institution’s financial position in advance of any final determination regarding the institution’s financially responsibility.

Substantial Misrepresentation

Under ED regulations, an institution participating in the Title IV Programs is prohibited from engaging in substantial misrepresentation of the nature of its educational programs, financial charges, graduate employability or its relationship with ED.

A “misrepresentation” includes any false, erroneous, or misleading statement (whether made in writing, visually, orally, or through other means) that is made by an eligible institution, by one of its representatives, or by a third party that provides to the institution educational programs, marketing, advertising, recruiting, or admissions services and that is made to a student, prospective student, any member of the public, an accrediting or state agency, or to ED.

ED regulations define a “substantial misrepresentation” to include any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment.

The definition of “substantial misrepresentation” is broad and, therefore, it is possible that a statement made by the institution or one of its service providers or representatives could be construed by ED to constitute a substantial misrepresentation.

If ED determines that one of our institutions has engaged in substantial misrepresentation, ED may impose sanctions or other conditions upon the institution including, but not limited to, initiating an action to fine the institution or limit, suspend, or terminate its eligibility to participate in the Title IV Programs and may seek to discharge loans under the defense to repayment regulations and impose liabilities upon the institution.

Institution Acquisitions .

When a company acquires an institution that is eligible to participate in Title IV Programs, that institution undergoes a change of ownership resulting in a change of control as defined by ED.

Upon such a change of control, an institution’s eligibility to participate in Title IV Programs is generally suspended until it has applied for recertification by ED as an eligible institution under its new ownership, which requires that the institution also re-establish its state authorization and accreditation.

ED may temporarily and provisionally certify an institution seeking approval of a change of control under certain circumstances while ED reviews the institution’s application.

The time required for ED to act on such an application may vary substantially.

ED’s recertification of an institution following a change of control is typically on a provisional basis.

Our expansion plans are based, in part, on our ability to acquire additional institutions and have them certified by ED to participate in Title IV Programs following affirmation of state licensure and accreditation.

Although we believe we will be able to obtain all necessary approvals from ED, ACCSC and the applicable state and federal agencies for our expansion plans, we cannot ensure that such approvals will be obtained at all or in a timely manner that will not delay or reduce the availability of Title IV Program funds for our students.

Change of Control .

In addition to institution acquisitions, other types of transactions can also cause a change of control.

ED and most state education agencies and ACCSC have standards pertaining to the change of control of institutions, but these standards are not uniform.

ED’s regulations describe some transactions that constitute a change of control, including the transfer of a controlling interest in the voting stock of an institution or the institution’s parent corporation.

With respect to a publicly-traded corporation, ED regulations provide that a change of control occurs in one of two ways:

(i) if there is an event that would obligate the corporation to file a Current Report on Form 8-K with the SEC disclosing a change of control or (ii) if the corporation has a “Controlling Stockholder”, as defined in ED regulations, that owns or controls through agreement at least 25% of the total outstanding voting stock of the corporation and is the largest stockholder of the corporation, and that stockholder

ceases to own at least 25% of such stock or ceases to be the largest stockholder.

These change of control standards are subject to interpretation by ED.

Most of the states and our accrediting commission include the sale of a controlling interest of common stock in the definition of a change of control.

A change of control under the definition of these agencies would require any affected institution to have its state authorization and accreditation reaffirmed by that agency.

The requirements to obtain such reaffirmation from the states and our accrediting commission vary widely.

A change of control could occur as a result of future transactions in which our company or our institutions are involved.

Some corporate re-organizations and some changes in the board of directors are examples of such transactions.

Additionally, the potential adverse effects of a change of control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our stock.

If a future transaction would result in a change of control of our company or our institutions, we would pursue all necessary approvals from ED, ACCSC and the applicable federal and state agencies.

However, we cannot ensure that all such approvals can be obtained at all or in a timely manner that will not delay or reduce the availability of Title IV Program funds for our students.

Opening Additional Institutions and Adding Educational Programs .

For-profit educational institutions must be authorized by their state education agencies, accredited by an accrediting commission recognized by ED and be fully operational for two years before applying to ED to participate in Title IV Programs.

However, an institution that is certified to participate in Title IV Programs may establish an additional location and apply to participate in Title IV Programs at that location without regard to the two-year requirement, if such additional location satisfies all other applicable ED eligibility requirements.

Our expansion plans are based, in part, on our ability to open new campuses as additional locations of our existing institutions and take into account ED’s approval requirements.

Currently, all of our institutions are eligible to offer Title IV Program funding.

A student may use Title IV Program funds only to pay the costs associated with enrollment in an eligible educational program offered by an institution participating in Title IV Programs.

Our expansion plans are based, in part, on our ability to add new educational programs at our existing institutions.

Generally, an institution that is eligible to participate in Title IV Programs, and is not provisionally certified, may add a new educational program without ED approval if the new program is licensed by the applicable state agency, accredited by an agency recognized by ED, prepare students for gainful employment in the same or related occupation as an educational program that ED has already approved, and meets certain other requirements.

For programs required to lead to gainful employment in a recognized occupation, which includes all of our programs, the current regulations require an institution to provide certain certifications regarding the new program.

However, ED issued new gainful employment regulations with an effective date of July 1, 2020 that eliminate this requirement, and stated in a June 28, 2019 electronic announcement that institutions may elect to implement immediately the new regulations, and institutions that early implement the regulations will not be required, among other things, to comply with certification requirements for gainful employment.

ED stated in the electronic announcement that institutions that do not early implement the new regulations are expected to comply with the existing gainful employment regulations by July 1, 2020.

We have taken steps to early implement the new regulations.

Some of the state education agencies and ACCSC also have requirements that may affect our institutions’ ability to open a new location, establish an additional location of an existing institution or begin offering a new or revised educational program.

We do not believe that these standards will create significant obstacles to our expansion plans.

Administrative Capability .

ED assesses the administrative capability of each institution that participates in Title IV Programs under a series of separate standards listed in the regulations.

Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV Programs, require the institution to repay Title IV Program funds, change the method of payment of Title IV Program funds or place the institution on provisional certification as a condition of its continued participation or take other actions against the institution.

Eligibility and Certification Procedures .

The HEA specifies the manner in which ED reviews institutions for eligibility and certification to participate in Title IV Programs.

Every educational institution seeking Title IV Program funding for its students must be certified to participate and is required to periodically renew this certification.

Each institution must apply to ED for continued certification to participate in Title IV Programs before its current term of certification expires, or if it undergoes a change of control.

Terms of certification are typically six years, but can be three years or shorter.

Furthermore, an institution may come under ED review if it expands its activities in certain ways such as opening an additional location or raising the highest academic credential it offers.

The Program Participation Agreement (PPA) document serves as ED’s formal authorization of an institution and its associated additional locations to participate in Title IV Programs for a specified period of time.

We received a fully recertified PPA for Universal Technical Institute of Texas in April 2018, which will expire March 31, 2022.

In November 2018, we received a fully recertified PPA for Universal Technical Institute of Arizona and a fully recertified PPA for Universal Technical Institute of Phoenix.

Both of the PPA's will expire on March 31, 2022.

Compliance with Regulatory Standards and Effect of Regulatory Violations .

Our institutions are subject to audits and program compliance reviews by various external agencies, including ED, ED’s Office of Inspector General, state education agencies, student loan guaranty agencies, the VA and ACCSC, as well as other federal and state agencies.

Each of our institutions’ administration of Title IV Program funds must also be audited annually by independent accountants and the resulting audit report submitted to ED for review.

If ED or another regulatory agency determined that one of our institutions improperly disbursed Title IV Program funds or violated a provision of the HEA or ED’s regulations, that institution could be required to repay such funds and could be assessed an administrative fine.

ED could also transfer the institution from the advance method of receiving Title IV Program funds to a cash monitoring or reimbursement system, which could negatively impact cash flow at an institution.

Significant violations of Title IV Program requirements by us or any of our institutions could be the basis for a proceeding by ED to fine the affected institution or to limit, suspend or terminate the participation of the affected institution in Title IV Programs.

Generally, such a termination extends for 18 months before the institution may apply for reinstatement of its participation.

In connection with the issuance of our Series A Convertible Preferred Stock (Series A Preferred Stock) in June 2016, we received a request from ED to provide a monthly student roster and a biweekly cash flow projection.

We began complying with these reporting requirements in July 2016.

On February 28, 2018, ED notified us that the cash flow projection reports would be required on a monthly basis instead of the previously requested bi-weekly basis.

This special reporting will continue until we are otherwise notified by ED.

There is no ED proceeding pending to fine any of our institutions or to limit, suspend or terminate any of our institutions' participation in Title IV Programs, and we have no written notice that any such proceeding is currently contemplated.

Violations of Title IV Program requirements could also subject us or our institutions to other civil and criminal penalties.

EXECUTIVE OFFICERS OF UNIVERSAL TECHNICAL INSTITUTE, INC.

The executive officers of UTI are set forth in this table.

All executive officers serve at the direction of the Board of Directors.

Chief Executive Officer

Executive Vice President and Chief Financial Officer

Executive Vice President and Chief Marketing Officer

Senior Vice President, Admissions

Executive Vice President of Campus Operations & Services

Grant has served as our Chief Executive Officer since November 2019.

Grant served as our Executive Vice President and Chief Operating Officer from November 2017 to October 2019.

Prior to joining UTI, Mr.

Grant served as Senior Vice President, Chief Services Officer with McGraw-Hill Education, Inc.

from June 2015 to April 2017.

Prior to joining McGraw Hill, Mr.

Grant served in several senior leadership roles with Pearson Education, including SVP of Technology Strategy from 2014 to 2015;

SVP of Digital Products from 2012 to 2014;

President of Higher Education Business, Technology and the New York Institute of Finance from late 2000 through 2011;

and VP of Sales from 1999 through 2000.

Grant received a Bachelor of Business Administration degree in labor relations and marketing from the University of Wisconsin-Milwaukee.

Anderson has served as our Chief Financial Officer since September 2019.

Prior to joining UTI, Mr.

Anderson served as Vice President and Corporate Controller of Conduent, Inc.

from November 2016 to September 2019.

From April 2007 to November 2016, Mr.

Anderson served in several roles with Xerox, Inc.

and Affiliated Computer Services, Inc.

prior to its acquisition by Xerox, including Senior Vice President and Chief Financial Officer, Public Sector Industry Group, Director - Investor Relations, Senior Vice President and Group CFO, Acting Chief Administrative Officer, and Vice President of Finance.

Anderson served in several roles at Sprint Nextel Corporation and Nextel Communications, Inc.

prior to its merger with Sprint, including Director of Finance/Corporate FP&A from 2006 to 2007 and Director of Finance/Information Technology and Product Development from 2002 to 2006.

Prior to joining Sprint Nextel, Mr.

Anderson served in several roles with MCI Communications Corp.

and Worldcom, Inc., including Manager/Senior Manager - Business Planning and Analysis from 1996 to 2002 and served in various accounting roles at Bell Atlantic Corporation, Coopers & Lybrand and C.W.

Amos & Company from 1990 to 1996.

Anderson received a Master of Business Administration in Finance from the University of Maryland and Bachelor of Science degrees in Business Administration, Finance and Accounting from Salisbury University.

Jameson has served as our Executive Vice President and Chief Marketing Officer since February 2017.

During her previous tenure with UTI from 1994 to 2005, she held several operational and executive positions including Senior Vice President, Marketing.

Prior to her return to UTI, Ms.

Jameson served as Chief Marketing Officer at Northern Arizona University - Extended Campuses from March 2015 to February 2017 and as the Executive Vice President and Chief Marketing Officer at Lincoln Educational Services from August 2006 to February 2015.

Jameson received a Masters of Arts degree in Strategic Communication and Leadership from Seton Hall University, and dual Bachelor of Science degrees in Marketing and Business Management from the University of Phoenix.

Severson has served as our Senior Vice President of Admissions since July 2018.

Prior to joining UTI from 1989 to 2017, Mr.

Severson was with Pearson, the market leader in developing tools, content, technology products and services for the education industry, most recently as Executive Vice President, Higher Education Sales.

He held a number of other senior leadership roles with Pearson and, prior to that, led sales teams with educational publisher, Prentice Hall.

Severson received a BA in English from St.

Olaf College.

Smith has served as our Executive Vice President of Campus Operations & Services since April 2018.

Smith served as Executive Vice President of Admissions and Operations from June 2015 to April 2018, and as Senior Vice President, Operations from August 2012 to June 2015.

During his previous tenure with UTI from 1986 to 2009, Mr.

Smith held several positions with UTI including Campus President, Regional Vice President of Operations, Senior Vice President of Operations and Education and Executive Vice President of Operations.

Prior to his return to UTI, Mr.

Smith advised a private equity firm on acquisition opportunities in the education field and served as the Chief Executive Officer of the American Institute of Technology.

Smith received a BS in Management from Arizona State University.

The regulatory definitions of “misrepresentation” and “substantial misrepresentation” enforced by ED are exceptionally broad and do not require intent by the institution to misrepresent, or actual reliance by the person to whom the alleged misrepresentation was made.

Therefore, it is possible that a statement made by the institution or one of its service providers or representatives could be construed by ED to constitute a substantial misrepresentation, even if the statement was made in error, without intent to misrepresent, and the person to whom it was made did not actually rely upon it.

Incentive Compensation

The “incentive compensation” prohibition forbids institutions from providing any commission, bonus, or other incentive payment based in any part, directly or indirectly, on success in securing enrollments or the award of financial aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV Program funds.

We have made adjustments to the compensation practices for our admissions representatives which we believe comply with the current regulations and ED’s guidance.

We will continue to evaluate other compensation options under these regulations and guidance.

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Title IV Program Rulemaking

ED is almost continuously engaged in one or more negotiated rulemakings, which is the process pursuant to which it revisits, revises, and expands the complex and voluminous Title IV Program regulations.

Recent and significant negotiated rulemakings are discussed below.

Borrower Defense to Repayment Rulemaking

The Obama administration carried out a negotiated rulemaking in 2016 to significantly revise and enhance the borrower defense to repayment (“BDTR”) framework, which specifies in regulation which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of Title IV Program loans.

Dissatisfied with the results of the 2016 effort (the “2016 BDTR Rule”), the Trump administration held a second negotiated rulemaking in 2018 to revise the BDTR rule yet again, and published its own final rule on September 23, 2019 (the “2019 BDTR Rule”), which became effective on July 1, 2020.

Litigation and regulatory actions caused considerable confusion regarding the effective date for each version of the BDTR rule, and how and when each will be interpreted and applied.

Institutions of higher education are required to comply (and to have complied) with the 2016 BDTR Rule from July 1, 2017 to June 30, 2020, and to comply with the 2019 BDTR Rule from July 1, 2020 forward.

Because the 2016 BDTR Rule was not deemed “good law” until October 2018, institutions also are required to follow nuanced guidance from ED regarding compliance during the period prior to the Court’s decisions, but subsequent to July 1, 2017.

Finally, when promulgating the 2019 BDTR Rule, ED determined that some elements of the 2016 BDTR Rule would continue to be applied on a go-forward basis, if the underlying events that gave rise to the issue occurred prior to the implementation of the 2019 BDTR Rule.

As such, elements of the 2016 BDTR Rule will remain in place, coexisting with the 2019 BDTR Rule and being applied by ED in specified circumstances.

While the borrower defense claim process was (and is) at the heart of the BDTR rulemaking, the regulatory reforms carried out by the rule are far more extensive.

In 2016, and then again in 2018, the BDTR rule included material changes to the regulations governing financial responsibility, closed school discharge, false certification discharge, misrepresentation, student grievance processes, the reporting of litigation and arbitration proceedings, the use of pre-dispute arbitration agreements and class action waivers in agreements with students, and the publication of repayment rates.

Additional details regarding certain of these reforms are as follows:

• The Borrower Defense Claim Process.

The BDTR rules establish amended procedures and standards for borrowers, either individually or as a group, to assert through an ED-administered process a defense to the borrowers’ obligation to repay certain Title IV Program loans based on certain acts or omissions of the institution.

The 2016 BDTR Rule details the types of defenses available for loans first disbursed between July 1, 2017 and June 30, 2020.

The 2019 BDTR Rule details the types of defenses available for loans first disbursed on or after July 1, 2020.

If ED approves a borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans and may initiate a separate proceeding to collect from the institution the discharged and returned amounts.

• Financial Responsibility.

The 2016 BDTR Rule significantly revised ED’s financial responsibility framework to specify certain triggering events, and to require that they be timely reported to ED.

It was believed that these new requirements would permit ED to identify, as early as possible, events that might impact an institution’s financial health.

The 2019 BDTR Rule does not abandon the revised financial responsibility framework established by the 2016 BDTR Rule, both triggering events and reporting timeframes remain.

However, the 2019 BDTR Rule meaningfully simplifies the reporting requirements, and affords institutions additional opportunity to dialogue with ED regarding the materiality of a reported event.

• Pre-Dispute Contractual Provisions.

The 2016 BDTR Rule prohibited the use and reliance upon certain contractual provisions regarding dispute resolution processes, such as pre-dispute arbitration agreements or class action waivers, and required certain notifications, contract provisions, and disclosures by institutions regarding students’ ability to participate in class action lawsuits or to initiate certain lawsuits instead of through arbitration.

The rules also required institutions to submit to ED copies of certain records in connection with any claim filed in arbitration by or against the school concerning a borrower defense claim and any claim filed in a lawsuit by the school against the student or by any party against the school concerning a borrower defense claim.

The 2019 BDTR Rule, which took

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effect on July 1, 2020, generally permits the use of arbitration clauses and class action waivers provided institutions make certain disclosures to students.

The litigation and regulatory actions that impacted the effective date for each version of the BDTR rule have made it extremely difficult to predict when and how the ban on these pre-dispute contractual provisions will be interpreted and applied by courts, particularly to litigation that precedes or spans the effective dates of the BDTR rules.

• Closed School Loan Discharge.

ED regulations have long provided that ED may discharge a borrower’s obligation to repay certain Title IV Program loans if the borrower (or the student on whose behalf a parent borrowed) did not complete the program of study for which the loan was made because the campus at which the borrower (or student) was enrolled closed.

If ED discharges the loans, the agency may seek to recover from the school or other related parties the amount of loans discharged and to impose other liabilities and penalties.

Consequently, if we close a campus, ED could discharge borrower obligations to repay certain Title IV Program loans.

The 2019 BDTR Rule revised the closed school loan discharge regulations to allows students to obtain a discharge if, among other requirements, they were enrolled not more than 180 days before the campus closed.

ED has the authority to extend the 180-day period for extenuating circumstances.

The 2019 BDTR Rule limits this authority to schools that closed between November 1, 2013 and July 1, 2020.

If we were to close a campus, we would intend to teach-out all of the currently enrolled students at the campus.

However, certain students may elect to withdraw before graduation.

We cannot predict the number of students who might withdraw prior to the closure of a campus and potentially qualify for a loan discharge.

Accreditation and Innovation Rulemaking

On October 15, 2018, ED announced its intent to establish a negotiated rulemaking to develop regulations related to several matters, including, but not limited to, requirements for accrediting agencies in their oversight of member institutions and programs;