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Item 1A. Risk Factors

2021-12-02 compared with 2020-12-03 · 113 added, 128 removed, 285 unchanged (46% of the section changed)

We provide the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business.

We provide the following cautionary discussion of risks and uncertainties relevant to our business.

These are factors that, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results.

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Risks Related to the Extensive Regulation of Our Business

Failure of our schools to comply with the extensive regulatory requirements for school operations could result in financial requirements or penalties, restrictions on our operations and loss of external financial aid funding.

Our failure to comply with the extensive regulatory requirements for school operations could result in financial requirements or penalties, restrictions on our operations and loss of external financial aid funding.

As detailed in “Business - Regulatory Environment,” our institutions are subject to extensive regulatory requirements imposed by a wide range of federal and state agencies, as well as by our institutional accreditor.

These requirements, which are frequently being revisited, revised, and expanded, cover virtually every aspect of our schools’ operations.

These requirements, which are subject to frequent change, cover virtually every aspect of our schools’ operations.

The approvals granted by these entities permit our schools to operate and to participate in a variety of government-sponsored financial aid programs, including Title IV Programs, from which we derived approximately 68% of our revenues, on a cash basis, in fiscal year 2021.

If our institutions fail to comply with any of these regulatory requirements, our regulators could take an array of adverse actions, including, without limitation, revocation of the approval granted by the agency.

Any such adverse action could adversely affect our cash flows, results of operations and financial condition, and impose significant operating restrictions upon us.

We cannot predict with certainty how all of these regulatory requirements will be applied or whether each of our schools will be able to comply with all of the requirements in the future.

If our institutions fail to comply with any of these regulatory requirements, our regulators could take an array of actions, including, without limitation, revocation of the approval granted by the agency.

Any such adverse action could adversely affect our cash flows, results of operations and financial condition, and could include the imposition of significant operating restrictions upon us.

We cannot predict with certainty how each regulatory body will apply its requirements or whether each of our schools will be able to comply with all of the requirements in the future.

Failure to maintain eligibility to participate in Title IV Programs could materially and adversely affect our business.

We cannot predict how Title IV Program requirements described in “Business - Regulatory Environment-Title IV Programs” will change in the future or be interpreted.

Additionally, given the complex nature of the regulations and the fact that they are subject to interpretation, it is reasonable to conclude that in the conduct of our business, we may inadvertently violate such regulations.

In the event of a violation, ED could impose sanctions or limitations, or terminate an institution’s Title IV Program eligibility.

Types of sanctions or limitations ED might impose include, without limitation:

Title IV Program requirements, as described in “Business - Regulatory Environment-Title IV Programs,” are complex, at time imprecise, and subject to changing interpretations.

In the event an institution violates these requirements, ED could impose sanctions or limitations, or terminate an institution’s Title IV Program eligibility.

Forms of noncompliance that could result in sanctions or limitations, or cause the institution to lose its eligibility to participate in some or all Title IV Programs, include, without limitation, failures to:

maintain state authorizations;

maintain institutional accreditations;

satisfy ED’s administrative capability standards;

satisfy ED’s loan default rate thresholds;

correctly calculate and timely return unearned Title IV Program funds received for students who withdraw before completing their educational programs;

correctly determine whether students are making satisfactory academic progress in their programs and, as such, remain eligible to receive Title IV Program funds;

satisfy ED’s financial responsibility standards;

and comply with the 90/10 rule, the substantial misrepresentation rules or the incentive compensation rule.

Types of sanctions or limitations ED might impose upon an institution include, without limitation:

requiring the repayment of Title IV Program funds;

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or declining to renew the institution’s program participation agreement.

Such sanctions or limitations, or the loss of Title IV Program eligibility by any of our current or future institutions, could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Forms of noncompliance that could result in sanctions or limitations, or cause the institution to lose its eligibility to participate in some or all Title IV Programs, include, without limitation:

a failure to maintain the state authorizations described in “Business - Regulatory Environment-State Authorization”;

a failure to maintain the institutional accreditation described in “Business - Regulatory Environment-Accreditation”;

a failure to satisfy the administrative capability standards discussed in “Business - Regulatory Environment-Administrative Capability”;

a failure to satisfy the loan default rate thresholds discussed in “Business - Regulatory Environment-Three Year Student Loan Default Rates”;

a failure to satisfy the loan default rate thresholds discussed in “Business - Regulatory Environment-Perkins Loan Default Rates”;

a failure to correctly calculate and timely return unearned Title IV Program funds received for students who withdraw before completing their educational programs;

a failure to correctly determine whether students are making satisfactory academic progress in their programs and, as such, remain eligible to receive Title IV Program funds;

or a failure to satisfy the financial responsibility standards detailed in “Business - Regulatory Environment-Financial Responsibility.” Similarly, the following types of noncompliance could result in sanctions or limitations, or cause the institution to lose its eligibility to participate in some or all Title IV Programs:

• 90/10 Rule.

A failure by one of our institutions to derive at least 10% of its revenues for each fiscal year from sources other than Title IV Program funds, as described in “Business - Regulatory Environment-The 90/10 Rule.” We also observe that multiple legislative proposals have been introduced in Congress that would impact the 90/10

Rule, such as reducing the 90% maximum under the rule to 85% or including military and veterans’ funding in the 90% portion of the calculation.

Such statutory revisions could negatively impact our institutions’ ability to satisfy the 90/10 Rule.

• Substantial Misrepresentations.

A determination by ED that one or more of our institutions engaged in a substantial misrepresentation, as described in “Business - Regulatory Environment - Substantial Misrepresentations.” 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.

Either ED or the person to whom the alleged misrepresentation was made also could seek to have the person’s loans discharged under the borrower defense to repayment regulations discussed below.

• Incentive Compensation.

A determination by ED that one or more of our institutions failed to comply with the “incentive compensation” prohibition, as described in “Business - Regulatory Environment - Incentive Compensation.” 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.

For this reason, we cannot guarantee that ED will not take a position that some aspect of our compensation practices is not in compliance with these regulations.

Such sanctions or limitations, including the loss of Title IV Program eligibility by any of our current or future institutions, could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

For more information, see “Business - Regulatory Environment - Title IV Programs.”

Compliance with current and future Title IV Program regulations arising out of negotiated rulemakings could materially and adversely affect our business.

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.

Current and future Title IV Program regulations arising out of negotiated rulemakings could materially and adversely affect our business.

ED is almost continuously engaged in negotiated rulemakings, which is the process by which it revisits, revises, and expands the complex and voluminous Title IV Program regulations.

These regulations also are frequently challenged through litigation, creating significant uncertainty as to when and what part of the regulations have taken effect, how they should be implemented, and how they will be interpreted and enforced.

We devote significant effort to understanding the effects of these regulations on our business and to developing compliant solutions that also are congruent with our business, culture, and mission to serve our students and industry relationships.

However, we cannot predict with certainty how these new and developing regulatory requirements will be applied or whether each of our schools will be able to comply with all of the requirements in the future.

However, we cannot predict with certainty how these new and developing regulatory requirements will be applied or whether each of our schools will be able to comply with all of the

requirements in the future.

Significant negotiated rulemakings that could materially and adversely affect our business are discussed in “Business - Regulatory Environment - Title IV Program Rulemaking.”

The 2019 BDTR Rule, which took effect July 1, 2020, requires institutions to report certain events to ED.

One such reportable event is the closure of our Norwood, Massachusetts campus in July 2020.

In May 2019, we submitted our formal notification to ED regarding the closure of the Norwood, Massachusetts campus.

ED has acknowledged receipt of our notification and has not requested any further information at this time.

We cannot predict the timing, content or impact of any future requests from ED, if any, related to the closure of our Norwood, Massachusetts campus.

The occurrence, and notification to ED, of such actions, events, or conditions could result in ED recalculating our composite score or requiring us to submit a letter of credit in an amount to be calculated by ED and agree to other conditions on our Title IV participation, which could have a material adverse effect on our business.

The loss of funds from Veterans' benefits programs could materially and adversely affect our business.

A discussed in “Business - Regulatory Environment - Other Federal and State Student Aid Programs,” to participate in veterans’ benefits programs, including the Post-9/11 GI Bill, the Montgomery GI Bill, the REAP, and VA Vocational Rehabilitation, our institutions must comply with certain requirements applicable to these programs.

If we fail to comply with these requirements, we could lose our eligibility to participate in veterans’ benefits programs, which could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Specific considerations that could negatively impact the funding we receive from veterans’ benefits programs include, without limitation:

(1) restricted access to military installations for student recruitment;

(2) the success of federal legislative proposals that would increase the requirements of the 90/10 Rule, such as reducing the 90% maximum under the rule to 85% and/or including military and veteran funding in the 90% portion of the calculation;

As discussed in “Business - Regulatory Environment - Other Federal and State Student Aid Programs,” to participate in veterans’ benefits programs, including the Post-9/11 GI Bill, the Montgomery GI Bill, the REAP, and VA Vocational Rehabilitation, our institutions must comply with certain requirements applicable to these programs.

If we fail to comply with these requirements, we could lose our eligibility to participate in veterans’ benefits programs, which could have a material adverse effect on our operations, cash flows, results of operations, or financial condition.

If we fail to secure approval from the Florida State veterans agency to classify our MMI non-degree, blended programs as resident training for purposes of VA benefits, it could impede the ability of veterans enrolling in these programs to access their VA benefits after December 21, 2021, when the current waivers are currently set to expire.

Future legislative or regulatory initiatives that could negatively impact the funding we receive from veterans’ benefits programs include, without limitation:

(1) proposals to restrict access to military installations for student recruitment;

(2) federal legislative proposals that would increase the requirements of the 90/10 Rule, such as reducing the 90% maximum under the rule to 85% and/or including military and veteran funding in the 90% portion of the calculation;

(3) a reduction in appropriations for veterans’ benefits programs, or an extended government shutdown;

and (4) an inability to secure approvals in one or more states, delays in the process for obtaining approvals, or the revocation of an approval.

(4) an inability to secure approvals in one or more states, delays in the process for obtaining approvals, or the revocation of an approval;

(5) changes in the interpretation and application of the 85/15 rule, which prohibits paying VA benefits to students enrolling in a program where more than 85% of the students enrolled in that program have any portion of their tuition, fees, or other charges paid for them by the institution or the VA;

and (6) changes in the interpretation and application of the VA rules governing the classification and treatment of blended coursework, and the eligibility of such coursework for veterans’ benefits programs.

Congress may change the law or reduce funding for or place restrictions on the use of funds received through Title IV Programs, which could reduce our student population, revenues and/or profit margin.

Congress periodically revises the HEA and other laws, and enacts new laws, governing Title IV Programs and determining the funding level for each Title IV Program, and may make changes in the laws at any time.

Congress periodically revises the HEA and other laws, and enacts new laws, governing Title IV Programs and determining the funding level for each Title IV Program.

Congress most recently reauthorized the HEA in 2008.

It is actively working on another HEA reauthorization, but it is uncertain whether and when the process will be completed.

Any action by Congress that significantly reduces funding for Title IV Programs or the ability of our schools or students to receive funding through these programs or places restrictions on the use of funds received by an institution through these programs could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Such action may occur during HEA reauthorization, or such action could also occur as part of separate technical amendments to the HEA or during Congress’ annual budget and appropriations cycle.

Any action by Congress that significantly reduces funding for Title IV Programs or the ability of our schools or students to receive funding through these programs or places restrictions on the use of funds received by an institution through these programs could have a material adverse effect on our operations, cash flows, results of operations, or financial condition.

Such action may occur during HEA reauthorization as part of separate technical amendments to the HEA or during Congress’ annual budget and appropriations cycle.

These uncertainties could reduce our student population, revenues and/or profit margin.

Continued or increased examination of the for-profit education sector could result in further legislation, appropriations, regulations, and enforcement actions that could materially or adversely affect our business.

Over the last decade, Congress has focused significantly on for-profit education institutions, specifically regarding participation in Title IV Programs and DOD oversight of tuition assistance for military service members attending for-profit colleges.

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In addition, concerns generated by this Congressional activity may adversely affect enrollment in for-profit educational institutions such as ours.

Any laws that are adopted that limit our or our students’ participation in Title IV Programs or in programs to provide funds for active duty service members and veterans or the amount of student financial aid for which our students are eligible, or any decreases in enrollment related to the Congressional activity concerning this sector, could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Any laws that are adopted that limit our or our students’ participation in Title IV Programs or in programs to provide funds for active duty service members and veterans or the amount of student financial aid for which our students are eligible, or any decreases in enrollment related to the Congressional activity concerning this sector, could have a material adverse effect on our operations, cash flows, results of operations, or financial condition.

Our business could be harmed if we experience a disruption in our ability to process student loans under the Federal Direct Loan Program.

Because all Title IV Program student loans (other than Perkins loans) are now processed under the DL program, any processing disruptions by ED may impact our students’ ability to obtain student loans on a timely basis.

A disruption in our ability to process student loans through the DL program, either because of administrative challenges on our part or the inability of ED to process the increased volume of loans through the DL program on a timely basis, could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Because all Title IV Program student loans (other than Perkins loans) are now processed under the DL program, any disruption in our ability to process student loans through the DL program, either because of administrative challenges on our part or the inability of ED to process the increased volume of loans through the DL program on a timely basis, could impact our students’ ability to timely obtain their student loans and have a material adverse effect on our operations, cash flows, results of operations, or financial condition.

Government and regulatory agencies and third parties may conduct compliance reviews, bring claims or initiate litigation against us.

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We are also subject to various lawsuits, investigations and claims, covering a wide range of matters, including, but not limited to, alleged violations of federal and state laws, false claims made to the federal government and routine employment matters.

While we are committed to strict compliance with all applicable laws, regulations, and accrediting standards, if the results of government, regulatory or third party reviews or proceedings are unfavorable to us, or if we are unable to successfully defend against lawsuits or claims, we may be required to pay monetary damages or be subject to fines, limitations, loss of regulatory approvals or Title IV Program funding or other

federal and state funding, injunctions or other penalties.

We could also incur substantial legal costs that are not covered or are in excess of our insurance coverage.

Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or defend those lawsuits or claims.

Additionally, given the significant public scrutiny being placed on the sector we operate in, numerous state attorneys general have initiated investigations either of the operation of the for-profit schools in their state or of particular institutions operating in that state.

Additionally, given the significant public scrutiny being placed on the sector we operate in, numerous state attorneys general have initiated investigations of for-profit schools operating in their state.

Changes occurring at the federal or state level, as well as our financial performance in recent years, may spur further action or additional reporting requirements by state attorneys general, Congressional leadership or state licensing bodies.

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An adverse outcome in any of these matters could also materially and adversely affect our licenses, accreditation and eligibility to participate in Title IV Programs.

For more information, see “Risk Factors - Risks Related to the Extensive Regulation of Our Business - Failure to maintain eligibility to participate in Title IV Programs could materially and adversely affect our business” and “Business - Regulatory Environment - Title IV Programs.”

Our business and stock price could be adversely affected as a result of regulatory investigations of, or actions commenced against, us or other companies in our industry.

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Changes in the state regulatory environment, state and agency budget constraints and increased regulatory requirements, may affect our ability to obtain and maintain necessary authorizations or approvals from those states to conduct or change our operations.

Due to state budget constraints and changes in the regulatory environment in some of the states in which we operate, it is possible that some states may reduce the number of employees in, or curtail the operations of, the state education agencies that authorize our schools.

that authorize our schools.

A delay or refusal by any state education agency in approving any changes in our operations that require state approval, such as the opening of a new campus, the introduction of new programs or the revision of existing programs, a change of control or the hiring or placement of new admissions representatives, could prevent us from making such changes or delay our ability to make such changes, or could require substantial additional costs to accommodate such delay.

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Some states are facing budget constraints that are causing them to reduce state appropriations in a number of areas including financial aid provided to students that may attend one of our programs.

These states may decide to reduce or redirect the amount of state financial aid that they provide to students, but we cannot predict how significant any of these reductions will be or how long they will last.

If the level of state funding available to our students decreases and our students are not able to secure alternative sources of funding, it could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition, negatively impact our cohort default rates, or impact our performance under the federal 90/10 Rule calculation, as this state funding is counted in the non-Title IV Program funds portion of the ratio.

If we acquire an institution that participates in Title IV Programs or open an additional location, one or more of our regulators could decline to approve the acquired institution or additional location, or could impose material conditions or restrictions, which could prevent or limit the ability of the acquired institution and/or additional location to participate in Title IV Programs and, in turn, impair our ability to operate the acquired institution and/or the additional location as planned or to realize the anticipated benefits from the acquisition of that institution and/or opening of the additional location.

We cannot predict how significant any of these reductions will be or how long they will last.

If the level of state funding available to our students decreases and our students are not able to secure alternative sources of funding, it could have a material adverse effect on our operations, cash flows, results of operations, or financial condition, negatively impact our cohort default rates, or impact our performance under the federal 90/10 Rule calculation.

If we acquire an institution that participates in Title IV Programs or open an additional location, one or more of our regulators could decline to approve the acquired institution or additional location, or could impose material conditions or restrictions, which could impair our ability to operate the acquired institution and/or the additional location as planned or to realize the anticipated benefits from the acquisition of that institution and/or opening of the additional location.

If we acquire an institution that participates in Title IV Program funding or open an additional location, we must obtain approval from ED and applicable state education agencies and accrediting commissions in order for the institution or additional location to be able to operate and participate in Title IV Programs.

Such approvals may be withheld or delayed.

An acquisition can result in the temporary suspension of the acquired institution’s participation in Title IV Programs and opening an additional location can result in a delay of the campus’ participation in Title IV Programs unless we submit a timely and materially complete application for approval of the acquisition or the opening of the new location.

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However, ED, or state education agencies, and our accreditor could decline to approve a new program, or impose material conditions or restrictions on us.

Any such denial or material limitation could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.

Any such denial or material limitation could have a material adverse effect on our operations, cash flows, results of operations, or financial condition.

If regulators do not approve or delay their approval of transactions involving a change of control of our company or any of our schools, our ability to participate in Title IV Programs may be impaired.

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Risks Related to Our Business

Public health pandemics, epidemics or outbreaks could have a material adverse effect on our business and operations.

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, China.

While initially concentrated in China, the outbreak has spread to other countries and infections have been reported globally including in the United States.

The World Health Organization has declared the outbreak to be a pandemic, the United States had declared a state of national emergency, and many state and local governments are continuing to take various actions to combat the spread of the virus.

The extent to which COVID-19, like any other rapidly spreading contagious illness, may impact our business and operations will depend on the evolution of the outbreak, which is highly speculative at this time and cannot be predicted with any level of certainty.

The duration of the outbreak, new information which emerges concerning the severity of the illness and the actions to be taken to contain the spread of COVID-19 or its treatment remains unclear.

We believe that the continued spread of COVID-19 could adversely impact our business and operations.

In addition, a quarantine of one or more of our faculty members for two or more weeks due to exposure to COVID-19 or other contagious illness could eliminate a program unless a substitute was readily available and quarantine of a faculty member or student could cause the temporary closure of an affected campus which could have an adverse impact on our business and our financial results.

Further, workforce limitations and travel restrictions resulting from pandemics or disease outbreaks and related government actions may impact many aspects of our business.

Public health pandemics, epidemics or outbreaks, including the COVID-19 pandemic, could have a material adverse effect on our business and operations.

The ongoing COVID-19 pandemic and the resulting containment measures have caused economic and financial disruptions globally.

The extent to which COVID-19, like any other rapidly spreading contagious illness, may impact our business and operations will depend on a variety of factors beyond our control, including the actions of governments, businesses and other enterprises in response to the COVID-19 pandemic, the effectiveness of those actions, and vaccine availability, distribution and adoption, all of which cannot be predicted with any level of certainty.

We believe that the continued spread of COVID-19 could adversely impact our business and operations, including as a result of workforce limitations and travel restrictions and related government actions.

If a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions in connection with pandemics or disease outbreaks, our operations and enrollment may be negatively impacted.

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We also cannot predict the types of conditions that may be attached to participation in emergency relief and aid programs, and whether and to what extent compliance with such conditions will be monitored and enforced.

On March 19, 2020, we suspended all in-person classes at all of our campuses for the safety and protection of our students and staff, to help slow the spread of COVID-19 and to comply with state and local orders and restrictions.

Upon the suspension of all in-person classes, we provided all students with the opportunity to take a leave of absence or to continue their education via an online curriculum.

On March 25, 2020, we began offering the classroom portion of our training online so that the more than 8,000 students who elected to remain active in the program could continue their education remotely.

As our training is a combination of classroom lectures and hands-on labs, there is a portion of most classes that cannot be delivered online and needs to be completed in-person at the campus labs.

We 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 CDC and state and local jurisdictions, while still meeting our accreditation and curriculum requirements.

In May 2020, we resumed in-person labs at eight of our campus locations.

Four of our campuses resumed in-person labs in June 2020, and our final campus in Bloomfield, New Jersey resumed in-person labs on July 1, 2020.

Once a student returns to campus for in-person labs, under the new guidelines it takes on average approximately six to nine weeks for that student to catch-up on the lab work that he was unable to complete during the campus closure and prior to his return.

Additionally, some students have not returned to campus to complete the in-person labs and remain only in the online portion of the curriculum, essentially only completing half of each course, while others are completing catch-up labs, but over an extended period of time.

We continue to recognize revenue ratably over the term of the course or program offered, taking into consideration those only completing the online curriculum, and the catch-up period for active students and the impact it has on expected graduation dates.

As a result, as of September 30, 2020, we deferred revenue of $6.1 million.

While we have reopened all of our campus locations, some students have delayed returning to campus for in-person labs even with the new social distancing protocols in place and remain on leave of absence or continue only with the online instruction portion of the curriculum.

If students continue to remain on a leave of absence, withdraw, or do not make up the required in person labs on a timely basis, our revenues could continue to be impacted in fiscal 2021.

During the year ended September 30, 2020, we 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 so that our students could continue their education during the COVID-19 pandemic.

On-campus labs are designed to meet the current national guidelines recommended by the Centers for Disease Control (“CDC”) as well as state and local mandates, while still meeting our accreditation and curriculum requirements.

All of our campuses remained open during the year ended September 30, 2021, and as of September 30, 2021, all students were back in person for labs at our campuses with less than 1% of students with catch-up lab work outstanding.

If further outbreaks occur and more students elect to take a leave of absence, withdraw, or do not make up the required in person labs on a timely basis, our revenues could be impacted in fiscal 2022.

The occurrence of natural or man-made catastrophes, including those caused by climate change and other climate-related causes, could materially and adversely affect our business, financial condition, results of operations and prospects.

Our business and operations could be materially adversely affected in the event of earthquakes, hurricanes, severe storms, blackouts or other power losses, floods, fires, telecommunications failures, break-ins, acts of terrorism, public health crises, including the ongoing COVID-19 pandemic, other inclement weather or similar events.

We teach our UTI and MMI programs at leased campus locations in Orlando, Florida, and have signed a lease for a new campus in Miramar, Florida, both areas that can experience tropical storms and hurricanes, severe storms, floods, coastal storms, tornadoes and power outages.

We also lease three campus locations in California, two campus locations in Texas and have signed a lease for a new campus in Austin, Texas, all areas that have historically been susceptible to severe weather events.

If floods, fire, inclement weather, including extreme rain, wind, heat, or cold, or accidents due to human error were to occur and cause damage to our campus facilities, or limit the ability of our students or faculty to participate in or contribute to our academic programs or our ability to comply with federal and state educational requirements or our agreements with our vendors, our business may be adversely effected, especially if such events were to occur in the midst of ongoing academic programs during an academic cycle.

Such disruptions may also result in increases in student attrition, voluntary or mandatory closure of some or all of our facilities, or our inability to procure essential supplies or travel during the pendency of mandated travel restrictions.

We may not be able to effectively shift our operations due to disruptions arising from the occurrence of such events, and our business and results of operations could be affected adversely as a result.

Moreover, damage to or total destruction of our campus facilities from various weather events may not be covered in whole or in part by any insurance we may have.

Macroeconomic conditions and aversion to debt could adversely affect our business.

We believe that our enrollment is affected by changes in economic conditions, although the nature and magnitude of this effect are uncertain and may change over time.

Enrollment tends to be counter cyclical, and the strength or weakness of the economy directly impacts us.

We believe that our enrollment, which tends to be counter cyclical, is affected by changes in economic conditions.

During periods when the unemployment rate declines or remains stable, prospective students have more employment options and recruiting new students has traditionally been more challenging.

Affordability concerns associated with increased living expenses, relocation expenses and the availability of full- and part-time jobs for students attending classes have made it more challenging for us to attract and retain students.

In addition, affordability concerns associated with increased living expenses, relocation expenses and the availability of full- and part-time jobs for students attending classes have made it more challenging for us to attract and retain students.

Conversely, an increase in the unemployment rate and weaker macroeconomic conditions could reduce the willingness of employers to sponsor educational opportunities for their employees and affect the ability of our students to find employment in the industries that we serve, any of which could have a material adverse effect on our cash flows, results of operations and financial condition.

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The awareness of our programs among high school graduates, military personnel and working adults seeking advanced training is critical to the continued acceptance and growth of our programs.

Factors that could impact our ability to increase such awareness include:

continued school district limitations on access to students by for-profit institutions;

actions that would limit our access to military bases and installations;

and our failure to maintain relationships with automotive, diesel, collision repair, motorcycle and marine manufacturers and suppliers.

Our inability to continue to develop awareness of our programs could reduce our enrollments, which could have a material adverse effect on our cash flows, results of operations and financial condition.

The following are some of the factors that could prevent us from successfully marketing our programs:

• availability of funding sources acceptable to our students;

• recruitment of veterans or other potential students without formal education by our industry partners and other manufacturers;

• our failure to maintain or expand our brand or other factors related to our marketing or advertising practices;

• diminished access to high school student populations, including school district limitations on access to students by for-profit institutions;

• reduced access to military bases and installations;

• our inability to maintain relationships with automotive, diesel, collision repair, motorcycle and marine manufacturers and suppliers;

• student dissatisfaction with our programs and services.

Failure on our part to maintain and expand existing industry relationships and develop new industry relationships with our industry customers could impair our ability to attract and retain students.

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If we are unable to adequately respond to changes in market requirements due to unusually rapid technological changes or other factors, our ability to attract and retain students could be impaired and our graduate employment rates could suffer.

Additionally, if we are unable to address and respond to requirements for new or updated curricula such as training instructors to teach the curricula, obtaining the appropriate equipment to teach the curricula to our students, or obtaining the appropriate regulatory approvals, we may not be able to successfully roll out the curricula to our campuses in a timely and cost-effective manner.

cost-effective manner.

If we are not able to effectively and efficiently integrate curricula, this could have a material adverse effect on our cash flows, results of operations and financial condition.

Growing our online academic programs could be difficult for us.

The expansion of our existing online programs and the creation of new online programs may not be accepted by students or employers, or by government regulators or accreditation agencies.

In addition, our efforts may be materially adversely affected by increased competition in the online education market or because of problems with the performance or reliability of our online program infrastructure.

There is also increasing development of online programs by traditional universities, both in the public and private sectors, which may have more consumer acceptance than programs we develop because of lower pricing or perception of greater value of their degrees in the marketplace, which may materially adversely affect our business, financial condition and results of operations.

Expanding our blended learning format could be difficult for us.

The expansion of existing and creation of new blended programs may not be accepted by students or employers.

Our efforts may be materially adversely affected by increased competition in the online or blended education market, or because of performance or reliability issues with our blended program infrastructure.

Regulators could determine not to grant us the permanent approvals that will permit us to continue offering blended learning programming after the temporary pandemic-based flexibilities have expired, which could result in the loss of eligibility to participate in the federal student aid programs, including VA benefits.

We are heavily dependent on the reliability and performance of an internally developed student management and reporting system, and any difficulties in maintaining this system may result in service interruptions, decreased customer service or increased expenditures.

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We may not be able to retain our key personnel or hire and retain the personnel we need to sustain and grow our business.

Our success to date has depended, and will continue to depend, largely on the skills, efforts and motivation of our executive officers who generally have significant experience with our company and within the technical education industry.

Our success to date has depended, and will continue to depend, largely on the experience, skills, efforts and motivation of our executive officers.

Our success also depends in large part upon our ability to attract and retain highly qualified faculty, campus presidents, administrators and corporate management.

Due to the nature of our business and our operating results in recent years, we face significant competition in the attraction and retention of personnel who possess the skill sets that we seek.

The for-profit education sector is under significant regulatory and government scrutiny, which may make it more difficult to attract and retain talent.

Due to the nature of our business, we face significant competition in the attraction and retention of personnel who possess the skill sets that we seek.

The for-profit education sector can experience periods of significant regulatory and government scrutiny, which may make it more difficult to attract and retain talent.

If we are unable to, or are perceived to be unable to, attract and retain experienced and qualified personnel, our business, financial condition and results of operations may be materially adversely affected.

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In order to support revenue growth and student enrollment, we need to hire and train new admissions representatives, as well as retain and continue to develop our existing admissions representatives, who are our employees dedicated to student recruitment.

Our ability to develop a strong admissions representative team may be affected by a number of factors, including the following:

• the competition we face from other companies in hiring;

• consumer trends causing certain sectors (other than for-profit, postsecondary education) to experience significant growth in less regulated environments with the potential to offer higher compensation;

• our ability to compensate admissions representatives while remaining compliant with ED regulations related to incentive compensation;

• our ability to assimilate and motivate our admissions representatives;

• our ability to effectively train our admissions representatives;

• the length of time it takes new admissions representatives to become productive;

• our ability to effectively manage a multi-location educational organization.

Our ability to develop a strong admissions representative team may be affected by a number of factors, including:

competition in hiring qualified persons;

limitations on compensation payable to admissions representatives arising from the incentive compensation rule;

and our ability to adequately train and motivate our admissions representatives.

If we are unable to hire, develop or retain quality admissions representatives, the effectiveness of our student recruiting efforts would be adversely affected.

If we fail to improve our underutilized capacity, we may experience a deterioration of our profitability and operating margins.

If we fail to reduce our underutilized capacity, we may experience a deterioration of our profitability and operating margins.

We have underutilized capacity at a number of our campuses.

Our ongoing efforts to fill or reduce existing capacity may strain our management, operations, employees or other resources.

Our ongoing efforts to increase utilization may strain our management, operations, employees or other resources.

We may not be able to maintain our current capacity utilization rates, effectively manage our operations or achieve planned capacity utilization on a timely or profitable basis.

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As part of our marketing and advertising, we also subscribe to lead-generating databases in certain markets, the cost of which may increase.

Among the factors that could

prevent us from marketing and advertising our institutions and programs successfully are the failure of our marketing tools and strategies to appeal to prospective students, regulatory constraints on marketing, current student and/or employer dissatisfaction with our program offerings or results and diminished access to high school campuses and military bases.

Among the factors that could prevent us from marketing and advertising our institutions and programs successfully are the failure of our marketing tools and strategies to appeal to prospective students, regulatory constraints on marketing, current student and/or employer dissatisfaction with our program offerings or results and diminished access to high school campuses and military bases.

In order to maintain our growth, we will need to attract a larger percentage of students in existing markets and increase our addressable market by adding locations in new markets and rolling out new academic programs.

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As part of our business strategy, we anticipate opening and operating new schools or campuses.

Establishing new schools or campuses poses unique challenges and requires us to make investments in management and capital expenditures, incur marketing expenses and devote other resources that are different, and in some cases greater, than those required with respect to the operation of acquired schools.

Establishing new schools or campuses poses unique challenges and requires us to make investments in management and capital expenditures, incur

marketing expenses and devote other resources that are different, and in some cases greater, than those required with respect to the operation of acquired schools.

Accordingly, when we open new schools, initial investments could reduce our profitability.

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These results could have a material adverse effect on our cash flows, results of operations and financial condition or result in dilution to current stockholders.

We are party to a Credit Agreement which contains restrictive covenants, and if we are unable to comply with these covenants then the lender could declare an event of default wherein we may need to immediately repay the amounts due under the Credit Agreement.

On May 12, 2021, we entered into a Credit Agreement with Fifth Third Bank, National Association to finance the Avondale, Arizona property that we purchased in December 2020, via a term loan in the maximum principal amount of $31.2 million with a maturity of seven years (the “Term Loan”).

We are required to make monthly payments of principal plus accrued interest.

As of September 30, 2021, $30.9 million in principal was outstanding under the Term Loan.

The Credit Agreement imposes various restrictions and contains customary affirmative and restrictive covenants, including, without limitation, certain reporting obligations and certain limitations on restricted payments;

and limitations on liens, encumbrances and indebtedness.

In addition, borrowings under the Credit Agreement are secured by a first priority lien on our Avondale, Arizona property, including all land and improvements.

If we fail to comply with the covenants or payments specified in the Credit Agreement, the lender could declare an event of default, which would give it the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.

The amount of our outstanding indebtedness could have an adverse effect on our operations and liquidity, including by, among other things:

(i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments;

(ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, capital expenditures and other business activities;

(iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions;

and (iv) limiting our ability to borrow additional monies in the future to fund the activities and expenditures described above and for other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business prospects, strategies or operations.

An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability.

A portion of our Term Loan bears interest at variable rates.

We have entered into an interest rate swap agreement with the lender that effectively fixes the interest rate on 50% of the principal amount of the Term Loan at 3.5% for the entire loan term.

However, increases in interest rates with respect to any amount of our debt not covered by the interest rate swap could

increase the cost of servicing our debt and could reduce our profitability and cash flows.

Such increases may occur from changes in regulatory standards or industry practices, such as the upcoming transition away from LIBOR as a benchmark reference for short-term interests.

Such a transition may result in the usage of a higher reference rate for our variable rate debt.

Excluding the effect of the interest rate swap on the Term Loan, each 1.0% increase in interest rates on the Term Loan would increase our annual interest expense by $0.1 million based on balances outstanding under the Term Loan as of September 30, 2021.

Our proprietary loan program could have a negative effect on our results of operations.

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Our stockholders approved a proposal at the annual meeting of stockholders on February 27, 2020, in accordance with the listing standards of the New York Stock Exchange (“NYSE”), that satisfied NYSE Rule 312.

In September 2020, Coliseum Holdings distributed all of its 700,000 shares of Series A Preferred Stock to its members, who subsequently distributed their shares to (i) limited partners affiliated with Coliseum Holdings and certain other entities for whom Coliseum Capital Management, LLC (an affiliate of Coliseum Holdings) holds voting and dispositive power with respect to the Series A Preferred Stock (the “Affiliated Holders”), which Affiliated Holders, following such distribution, owned Series A Preferred Stock that represented, on an as converted basis, approximately 24.9% of our outstanding shares of common stock and voting power, and (ii) limited partners unaffiliated with Coliseum Holdings (the “Unaffiliated Holders”), which Unaffiliated Holders, following such distribution, each owned shares of Series A Preferred Stock that represented, on an as converted basis, 9.9% or less of our outstanding shares of common stock and voting power (collectively, the “Distributions”).

an as converted basis, 9.9% or less of our outstanding shares of common stock and voting power (collectively, the “Distributions”).

In connection with the Distributions, our board of directors made a good faith determination that :

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Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our common stock.

Additionally, a majority of the voting power of the Series A Preferred Stock must approve certain significant corporate actions, such as (i) amendments to our Certificate of Incorporation or bylaws in a manner adverse to the rights, preferences, privileges or voting powers of the holders of Series A Preferred Stock, (ii) the creation or issuance of a series of stock, or other security convertible into a series of stock, with equal or greater rights than those of the holders of Series A Preferred Stock, (iii) the issuance of equity securities, or securities convertible into equity securities, at a price that is 25% below fair market value at the time of issuance, (iv) subject to certain exceptions, the incurrence of indebtedness, (v) subject to certain exceptions, the sale or licensing of any of our material assets, (vi) subject to certain exceptions, the consummation of acquisitions (of stock or assets), (vii) subject to certain exceptions, the payment of certain dividends or distributions with respect to a series of stock junior to the Series A Preferred Stock, (viii) the voluntary liquidation, dissolution or winding-up of UTI if the Series A Preferred Stock would not have the option to receive the liquidation preference then in effect upon such liquidation, dissolution or winding-up, or (ix) subject to certain exceptions, any merger, consolidation, recapitalization, reclassification or other transaction in which substantially all of our common stock is exchanged or converted into cash, securities or property and in which the holders of the Series A Preferred Stock shall not have the option to receive the full liquidation preference as a result of that transaction.

liquidation, dissolution or winding-up, or (ix) subject to certain exceptions, any merger, consolidation, recapitalization, reclassification or other transaction in which substantially all of our common stock is exchanged or converted into cash, securities or property and in which the holders of the Series A Preferred Stock shall not have the option to receive the full liquidation preference as a result of that transaction.

The interests of the holders of the Series A Preferred Stock may not always coincide with the interests of our other stockholders and Coliseum Holdings’ concentration of ownership may have the effect of delaying or preventing a change of control of UTI otherwise favored by our other stockholders and could depress our stock price.

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Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares.

The market price of our common stock has fluctuated significantly in the past, and may continue to fluctuate significantly for a variety of different reasons, including, without limitation:

• developments regarding the accreditation or state licensing;

The market price of our common stock has fluctuated significantly in the past, and may continue to fluctuate significantly for a variety of different reasons, including, without limitation, developments in our industry;

our quarterly or annual earnings or those of other companies in our industry;

• public reaction to our press releases, corporate communications and SEC filings;

changes in earnings estimates or recommendations by research analysts who track our common stock or the stocks of other companies in our industry;

• seasonal variations in our student enrollment;

• new laws or regulations or new interpretations of laws or regulations applicable to our industry or business;

negative publicity, including government hearings and other public lawmaker or regulator criticism, regarding our industry or business;

changes in enrollment;

• changes in accounting standards, policies, guidance, interpretations or principles;

• litigation involving our company or investigations or audits by regulators into the operations of our company or our competitors;

• sales of common stock by our directors, executive officers and significant stockholders;

• changes in general conditions in the United States and global economies or financial markets, including those resulting from health epidemics, war, incidents of terrorism or responses to such events.

and changes in general conditions in the United States and global economies or financial markets, including those resulting from health epidemics, war, incidents of terrorism or responses to such events.

In addition, in recent years, the stock market has experienced extreme price and volume fluctuations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors