UNIVERSAL TECHNICAL INSTITUTE INC 10-K

ITEM 1. BUSINESS Overview Founded in 1965, with more than 250,000 graduates in its history, Universal Technical Institute, Inc. (“we,” “us” or “our”) is a leading provider of transportation and technical training programs. As of September 30, 2022, we offered certificate, diploma or degree programs at 16 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”), NASCAR Technical Institute (“NASCAR Tech”), and MIAT College of Technology (“MIAT”). 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. We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. 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 Innovation and Opportunity Act. Business Model and Industry Partnerships We serve students, partners and communities by providing quality education and training for in-demand careers. 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 across the programs that we offer is large and growing. The United States Department of Labor Bureau of Labor Statistics (“U.S. DOL BLS”) estimates that an average of approximately 117,000 new job openings, due to growth and net replacements, will exist annually for newly trained technicians in the automotive, diesel, and collision fields through 2031. Additionally, the U.S. DOL BLS estimates that an average of 42,500 new jobs openings for industrial machinery mechanics, 47,600 new job openings for welders, 40,100 new job openings in the HVAC industry, 14,700 new job openings for computer-controlled machine tool operators, 13,100 new job openings for avionic technicians, 6,100 new job openings for robotics, 4,800 new job openings for marine and motorcycle technicians and 1,900 new job openings for wind turbine service technicians will exist annually for new entrants through 2031 in these fields. Our student recruitment efforts begin with our commitment to positive outcomes, both for our students and our industry relationships. 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 (“OEMs”) 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-focused educational model and national presence have enabled us to develop valuable industry relationships, which provide us with significant competitive advantages 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. 3 Table of Contents Business Strategy Our core business strategies are aligned with our mission to serve students, partners and communities by providing quality education and training for in-demand careers. Additionally, as we evolve our business model, we are focused on growth and diversification achieved through acquisitions, opening new campus locations, expanding program offerings, and new funding and business operating models. Recruit, Train and Identify Employment Opportunities for More Students Our student recruitment efforts begin with our commitment to positive outcomes 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. Our student recruitment efforts for prospective students 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 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. • Adult : Campus-based representatives serve adult career-seeking or career changing students who typically inquire with our schools as a result of our advertising campaigns. • Military : 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. 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. 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. We provide relevant services to assist students with possible tuition financing options, educational and career counseling, opportunities for part-time work while attending school, and ultimately, graduate employment. Our national career services team develops job opportunities and outreach, while our local career services teams advise 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. 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 4 Table of Contents 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. Growth and Diversification Our growth strategy is predicated on adding new campuses and expanding program offerings in the transportation and skilled trades fields. We also have the opportunity to pursue our growth 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 such as other skilled trades or high demand energy, 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 resulting in better usage of campus facilities and instructional costs per student; executing on new 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. During the year ended September 30, 2022, we executed the following as part of our growth and diversification strategy: Acquisitions • Entered into a definitive agreement to acquire Concorde Career Colleges, Inc. (“Concorde”) in May 2022. Concorde is a leading provider of industry-aligned healthcare education programs in fields such as nursing, dental hygiene and medical diagnostics. Concorde currently operates 17 campuses across eight states with approximately 8,000 students, and offers its programs in ground, hybrid and online formats. The acquisition aligns with our growth and diversification strategy, which is focused on offering a broader array of high-quality, in-demand workforce solutions which both prepare students for a variety of careers in fast-growing fields and help close the country's skills gap by leveraging key industry partnerships. On December 1, 2022, we closed the Concorde acquisition. • Completed the acquisition of MIAT College of Technology (“MIAT”) from HCP & Company on November 1, 2021. MIAT had an average of approximately 950 undergraduate full-time active students during the year ended September 30, 2022 through its campuses in Canton, Michigan and Houston, Texas. MIAT offers vocational and technical certificates as well as associates degrees in fields with robust and growing demand for skilled technical workers, including aviation maintenance, energy technology, wind power, robotics and automation, non-destructive testing, HVACR, and welding. The acquisition enables us to further expand our program offerings into growing industry sectors and rapidly expanding fields likely to be bolstered by technological innovation and the country’s focus on sustainable energy. Campus Openings and Optimization • Expanded our operations through the opening of our new campuses in Austin, Texas and Miramar, Florida. Austin is our third school in Texas and Miramar is our second school in Florida. Both campuses help to broaden the reach of our skilled trade programs to high demand geographies. • Completed the consolidation and reconfiguration of our UTI and MMI Orlando, Florida campus facilities into one site and the consolidation of the MMI Phoenix campus into our Avondale, Arizona building. • Purchased the Lisle, Illinois campus in February 2022, for approximately $28.7 million in cash consideration, including closing costs and other fees and assumed debt of $18.3 million. In April 2022, we completed the financing for the purchase which retired the assumed debt and replenished approximately $20.0 million of the funds used to purchase the campus. See Notes 9, 12, 13 and 15 of the notes to our consolidated financial statements herein for additional details on the purchase and related debt and interest rate swap. Program Expansion and New Industry Partnerships • Executed on the next phase of our growth and diversification strategy by announcing the addition of 15 new programs across our campus footprint, including Aviation, HVACR, Robotics, Industrial Maintenance and Wind Energy Technician training to UTI and NASCAR Tech branded campuses, and initiated efforts to add Auto and 5 Table of Contents Diesel Essentials to the MIAT Canton, Michigan campus. Pending all regulatory approvals, the initial planned program additions are projected to begin launching in the second quarter of 2023. • Launched electric vehicle (“EV”) technician training coursework to meet increasing demand for clean cars and trucks. This enhanced training is the initial step in our overall EV strategy to prepare future technicians for anticipated increasing EV sales in the coming decades. ▪ As part of this initiative, we rolled out new curriculum in our Ford Accelerated Credential Training program to prepare students for the next generation of vehicles on the road. This new curriculum will feature blended learning courses on high voltage systems safety, hybrid vehicle components and operation, EV battery components and operation and an introduction to high voltage battery service, as well as a Ford instructor-led class on hybrid and EV operation and diagnosis. • We have also selected Bosch to support the development of new courseware that helps meet the needs of the growing EV market, which continues to see record sales and a demand for skilled technicians. • Expanded our welding technology program to our Mooresville, North Carolina and Exton, Pennsylvania campuses in January and July 2022, respectively. • Launched the BMW Fast Track program at our Avondale, Arizona and Orlando, Florida campuses in January 2022, our Long Beach, California campus in April 2022, our Houston, Texas campus in May 2022 and our Exton, Pennsylvania campus in August 2022. We expect to launch the program at our Lisle, Illinois campus in Spring 2023 and Miramar, Florida campus in Summer 2023. • Formed a new strategic alliance with Napa Auto Parts (“NAPA”). NAPA will supply essential parts for hands-on labs, including brake kits, rotors, bulbs, bearing kits, wheel weights and more. The initial stage of the partnership will impact UTI, MMI and NASCAR Tech campuses and may be expanded to MIAT-branded campuses in the future. Schools and Programs We offer certificate, diploma or degree programs at campuses across the United States under the banner of several well-known brands. The majority of our UTI programs are designed to be completed in 36 to 90 weeks while our MIAT programs are completed in 28 to 96 weeks. Our advanced training programs range from 12 to 23 weeks in durations. These programs culminate in a certificate, diploma, associate of occupational studies degree, or associate of applied science 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. The table below sets forth our current locations that operate under the UTI, MMI, NASCAR Tech, and MIAT brands, the year the campus opened, and the principal programs taught at each location. Location Brand Year Campus Opened Principal Programs Arizona (Avondale) UTI 1965 Automotive; Diesel; Welding Arizona (Avondale) (1) MMI 1973 Motorcycle California (Long Beach) UTI 2015 Automotive; Diesel; Collision Repair and Refinishing; Welding California (Rancho Cucamonga) UTI 1998 Automotive; Diesel; Welding California (Sacramento) UTI 2005 Automotive; Diesel Florida (Miramar) UTI 2022 Automotive; Diesel; Welding Florida (Orlando) UTI/MMI 1986 Automotive; Diesel; Motorcycle; Marine Illinois (Lisle) UTI 1988 Automotive; Diesel; Welding Michigan (Canton) MIAT 1969 Airframe and Powerplant; Aviation Maintenance; Energy; HVACR; Industrial Maintenance; Robotics & Automation; Wind Power; Welding New Jersey (Bloomfield) UTI 2018 Automotive; Diesel; Welding North Carolina (Mooresville) NASCAR Tech 2002 Automotive; NASCAR; CNC Machining; Welding Pennsylvania (Exton) UTI 2004 Automotive; Diesel; Welding 6 Table of Contents Location Brand Year Campus Opened Principal Programs Texas (Austin) UTI 2022 Automotive; Diesel; Welding Texas (Dallas/Ft. Worth) UTI 2010 Automotive; Diesel; Welding Texas (Houston) UTI 1983 Automotive; Diesel; Collision Repair and Refinishing; Welding Texas (Houston) MIAT 2010 Airframe and Powerplant; Aviation Maintenance; Energy; HVACR; Industrial Maintenance; Non-Destructive Testing; Robotics & Automation; Wind Power; Welding (1) As previously noted, the MMI Phoenix, Arizona campus was consolidated into our Avondale, Arizona building during fiscal 2022. While the MMI program shares the same building as UTI in Avondale, it is considered a separate campus for our reporting requirements to the ED. Description of Current Programs Offered Many of our students receive their training in a blended training model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. The blended learning model not only increases access for students, but better prepares 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. The table below provides an overview of the programs taught by UTI owned and operated institutions, including the year a program was first offered at one of our campuses, the focus of the program, and the type of employment the program was designed to prepare graduates to obtain. Program Year Established Program Focus Target Job Placement (1) 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 Airframe and Powerplant 1969 Aircraft troubleshooting, hydraulics and pneumatics, powerplant lubrication systems and turbine engine operation Entry-level opportunities in various areas of the aviation industry 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 7 Table of Contents Program Year Established Program Focus Target Job Placement (1) NASCAR 2002 Automotive training along with additional NASCAR-specific elective courses Entry-level service technicians in automotive dealer service departments or automotive repair facilities, or opportunities in racing-related industries Energy Technology 2007 Associate of Applied Science degree which focuses on power generation, wind power, compression technology and powerplant operations Entry-level positions in the wind, nuclear, gas, coal, power distribution, or solar industries Industrial Maintenance 2007 Diagnose, service, test and repair various types of machinery Entry-level industrial maintenance technician in a wide range of industries including gas, coal, nuclear and solar industries Wind Power 2007 Diagnose, service and repair wind turbine towers Entry-level service technicians for the wind power industry Aviation Maintenance Technology 2012 Perform inspections, routine maintenance and repairs to keep aircraft in operating condition Entry-level service technicians in aviation repair stations and hangers, and on airfields Heating, ventilation, air conditioning and refrigeration (HVACR) 2012 An awareness of safety procedures, knowledge of heating and cooling, familiarity with tools used in the industry, and the ability to perform a variety of manual skills Entry-level service technicians in the heating and cooling industry 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 Robotics & Automation 2018 Robotics is the process of creating and using robots to complete certain tasks. Automation refers to the process of using technology to perform tasks typically completed by humans. Entry-level technician in a variety of industries Non-Destructive Testing 2019 Training in the discipline focused on the quality and serviceability of materials and structures Entry-level technicians in a variety of industries, from oil and gas and manufacturing to power generation and aviation (1) Target job placement describes the type of employment the program was designed to prepare graduates to obtain. Graduates may also secure positions outside of the Target Job Placement, including, for example, parts associate, service technician, fabricator, paint and preparation, and shop owner or operator, among others. Manufacturer Specific Advanced Training (“MSAT”) Programs 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 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. Our manufacturer-paid MSATs are 8 Table of Contents 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. 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 Fendt Technician Academy by AGCO Lisle Mercedes-Benz DRIVE Mercedes-Benz facilities in Long Beach, California, Jacksonville, Florida, Robbinsville, New Jersey and Grapevine, Texas Peterbilt Technician Institute Lisle, Dallas/Ft. Worth Porsche Technician Apprenticeship Program (PTAP) Porsche facilities in Eastvale, California, Atlanta, Georgia, and Easton, Pennsylvania Volvo Tekniker Apprenticeship Program (1) Avondale, Volvo facility in Ridgeville, South Carolina (1) The Volvo South Carolina training facility launched in June 2022. Student-Paid MSATs 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 BMW FastTrack (1) Avondale, Exton, Houston, Long Beach, Orlando Cummins Engines Avondale, Exton, Houston Cummins Power Generation Avondale Daimler Trucks Finish First Program Avondale, Lisle, Orlando 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 Toyota Professional Automotive Technician (TPAT) Lisle, Rancho Cucamonga MMI Campuses American Honda Motor Company, Inc. Avondale, Orlando BMW Motorrad of North America, LLC Avondale, Orlando Harley-Davidson Motor Company Avondale, Orlando Kawasaki Motors Corporation, USA Avondale, Orlando Mercury Marine Orlando Suzuki Motor of America, Inc. Avondale, Orlando Volvo Penta of the Americas Orlando Yamaha Motor Corporation, USA Avondale, Orlando (1) The BMW STEP program was replaced in fiscal 2022 with the BMW FastTrack Program, a student-paid MSAT program. The FastTrack program is targeted to expand the BMW footprint to seven UTI campuses, with Avondale and Orlando launched in January 2022, Long Beach launched in April 2022, Houston launched in May 2022 and Exton launched in August 2022. It is also expected to launch at Lisle in Spring 2023 and Miramar in Summer 2023. 9 Table of Contents 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 U.S. Army Base Fort Bragg in North Carolina Penske Premier Truck Group Technician Skills Program Fort Bliss in El Paso, Texas Affordability and Accessibility During the year ended September 30, 2022, tuition at our UTI, MMI and NASCAR Tech campuses ranged from approximately $20,000 for our CNC program (lasting 36 weeks) to $60,000 for our Automotive and Diesel program with one specialized elective program (lasting 90 weeks). During fiscal 2022, tuition at our MIAT campuses ranged from approximately $20,000 for our Industrial Maintenance Technician program (lasting 28 weeks) to $50,000 for our Aviation Maintenance Technology program (lasting 96 weeks). During the year ended September 30, 2022, the average annual revenue per student was approximately $32,600, net of scholarships or grants funded by the institution. 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. During the year ended September 30, 2022, approximately 42% of our active students received a UTI-funded scholarship or grant and approximately 22% of active students received funding from the proprietary loan program. 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 5,200 curriculum-specific TEIG agreements in place across the country. This represents approximately 6% 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 5,700 employer location incentive opportunities, which when made available make our training programs more affordable for students and may provide them with valuable relationships or employment opportunities following graduation. Student Enrollment We enroll students throughout the year, and courses typically start every three to six weeks. For the year ended September 30, 2022, our average number of undergraduate full-time active students was 12,838, representing an increase of approximately 11.7% as compared to 11,489 for the year ended September 30, 2021. A portion of this increase was due to our acquisition of MIAT which for the year ended September 30, 2022, had an average number of undergraduate full-time active students of 950. At September 30, 2022, our end of period number of undergraduate full-time active students was 14,380, an increase of 5.1% from our ending full-time enrollment of 13,682 at September 30, 2021. 10 Table of Contents Currently, our student body is geographically diverse. While our campus locations attract local students that live within 50 miles, we estimate that approximately 50% of our students elect to relocate to attend our programs, with this percentage varying across campuses and 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 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 career services team. Our campus-based staff facilitate several career development processes, including instruction and coaching for interview skills, interview etiquette and professionalism. Additionally, the career services team provides students with reference materials and assistance with the composition of resumes. 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 manufacturer brand partners 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 career 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 2021 and 2020 graduates who were employed within one year of graduation was 82% and 80%, respectively. The employment calculation is based on all graduates, including those that completed MSAT programs, from October 1, 2020 to September 30, 2021 and October 1, 2019 to September 30, 2020, respectively, excluding graduates not available for employment because of continuing education, military service, medical reasons, incarceration, death or international student status. We count a graduate as employed based on a verified understanding of the graduate’s job duties to assess and confirm that the graduate’s primary job responsibilities are in his or her field of study. We verify employment by sending written verification requests to the graduate and/or the employer or collecting written information with all required elements. Verifications must include employer name, job duties, job title, hire date and employer contact information. Once we receive written verification from either source, the graduate is classified as employed in field as long as all verification requirements are met. If any information provided in a written format requires clarification, a call is made to clarify certain elements with notes documented in our student database. In instances where we are unable to obtain written verification, we also classify graduates as employed in field if we are able to obtain verbal verification, collecting the same information as noted above, from both the graduate and the employer. We periodically review a sample of employment verifications to ensure accuracy. The table below summarizes the graduate employment rate data (1) : Year Ended September 30, 2021 2020 Graduate employment rate 82 % 80 % Graduates 7,308 6,832 Graduates available for employment 6,914 6,476 Graduates employed 5,692 5,176 (1) We completed the acquisition of MIAT on November 1, 2021. As such, this table does not include the graduate employment rate data for MIAT graduates. Competition 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 for-profit institutions which offer automotive, diesel, collision repair, motorcycle, marine, welding, CNC machining, aviation, HVACR, robotics, and closely related skilled 11 Table of Contents 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. This may include employment with our industry partners or with other manufacturers and employers of our graduates. We compete with local community colleges for students seeking programs that are similar to ours, mainly due to local accessibility, low tuition rates and in certain cases free tuition. 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. 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 and Tulsa Welding School. 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. Human Capital Management As of September 30, 2022, we had approximately 1,950 full-time employees, including approximately 650 instructors, 350 admissions representatives, and 600 student support employees. Each of our employees plays a key role in our mission to serve students, partners and communities by providing quality education and training for in-demand careers. We believe that diversity, equity, and inclusion (“DE&I”) 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. We have a Director of Diversity, Equity, and Inclusion who is responsible for setting the DE&I strategy and roadmap to ensure that we meet our objectives both internally, of creating a company where everyone feels they belong, and externally, by working closely with our marketing and talent acquisition function to attract diverse talent. 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 seven years of experience teaching at UTI. 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, and an career services director. We believe our management team has the experience necessary to effectively implement our growth and diversification 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 We use hazardous materials at our training facilities and campuses and generate small quantities of regulated waste, including, but not limited to, used oil, antifreeze, transmission fluid, paint, solvents, car batteries and aircraft batteries. As a result, our facilities and operations are subject to a variety of environmental laws and regulations governing, among other things, the use, storage and disposal of solid and hazardous substances and waste, and the clean-up of contamination at our 12 Table of Contents facilities or off-site locations to which we send or have sent waste for disposal. Certain of our campuses are required to obtain permits for our air emissions. 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. Regulatory Environment 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, to revise or expand our educational programs, and to 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. The most significant of these is the federal student aid programs administered by the ED pursuant to HEA Title IV Programs. Generally, to participate in Title IV Programs, an institution must be licensed or otherwise legally authorized to operate in the state where it is physically located, be accredited by an accreditor recognized by ED, be certified as an eligible institution by ED, offer at least one eligible program of education, and comply with other statutory and regulatory requirements. We also are subject to oversight by other federal agencies including the Consumer Financial Protection Bureau (“CFPB”), the Securities and Exchange Commission (“SEC”), the Federal Trade Commission (“FTC”), the Internal Revenue Service and the Departments of Veterans Affairs (“VA”), Defense (“DOD”), 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 educational or 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 educating or recruiting students. The level of regulatory oversight varies substantially from state to state and is extensive in some states. 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. Our institutions are also authorized to participate in the State Authorization Reciprocity Agreement (“SARA”). SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. SARA is overseen by a national council (“NC-SARA”) and administered by four regional education compacts. As of September 2022, 49 states (all but California), the District of Columbia, Puerto Rico and the U.S. Virgin Islands have joined SARA. Each of our institutions holds the state and/or SARA authorizations required to operate and offer postsecondary education programs, and to recruit in the states in which it engages in recruiting activities. Accreditation Accreditation is a non-governmental process through which an institution voluntarily submits to ongoing qualitative reviews by an organization of peer institutions. 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 Accrediting Commission of Career Schools and Colleges (“ACCSC”), which is an accrediting agency recognized by ED. 13 Table of Contents 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. Currently 13 of our campuses are classified as ACCSC Schools of Excellence or ACCSC Schools of 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 In Process November 2022 Exton, Pennsylvania (1) October 2022 In Process Est FY23 Houston, Texas (MIAT) (2) December 2022 In Process Est FY23 Dallas/Ft. Worth, Texas (1) March 2023 In Process Est FY23 Sacramento, California (1) December 2023 Renewed March 2017 Mooresville, North Carolina; NASCAR Technical Institute (NASCAR Tech) (1) December 2024 Renewed July 2018 Avondale, Arizona (1) February 2025 Renewed February 2019 Orlando, Florida (1) February 2025 Renewed August 2018 Houston, Texas (1) February 2025 Renewed September 2018 Lisle, Illinois (1) February 2025 Renewed December 2018 Rancho Cucamonga, California (1) February 2025 Renewed March 2019 Avondale, Arizona; Motorcycle Mechanics Institute (MMI) (1) May 2025 Renewed April 2019 Bloomfield, New Jersey (2) May 2025 Renewed December 2019 Canton, Michigan (MIAT) (2) July 2026 Renewed October 2021 Austin, Texas (3) May 2024 Approved Est FY25 Miramar, Florida (3) September 2024 Approved Est FY25 (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. (3) New schools are initially accredited for a two year term after which they are then eligible to renew for the longer five or six year renewal cycle. 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. All of our institutions are certified to participate in Title IV Programs. The HEA, which authorizes Title IV Programs, has not been comprehensively reauthorized since 2008. Despite repeated attempts, Congress has not completed a full reauthorization since then. In addition to HEA reauthorization, policies directly related to Title IV Programs and funding for those programs may be impacted by the annual budget and appropriations process as well as by other legislation. At this 14 Table of Contents time, we cannot predict all or any of the changes that Congress may ultimately make, and any of those changes could potentially have a material adverse effect on our business and operations. In fiscal year 2022, we derived approximately 67% of our revenues, on a cash basis as defined by ED, from Title IV Programs. We derived approximately 49% 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 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. 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 UTI as owning and operating four institutions (“OPE IDs”), organized as follows: Institution: Universal Technical Institute of Arizona Main campus: Universal Technical Institute, Avondale, Arizona Additional campuses: Universal Technical Institute, Lisle, Illinois Universal Technical Institute, Long Beach, California Universal Technical Institute, Miramar, Florida Universal Technical Institute, Rancho Cucamonga, California NASCAR Technical Institute, Mooresville, North Carolina Institution: Universal Technical Institute of Phoenix Main campus: Universal Technical Institute DBA Motorcycle Mechanics Institute, Motorcycle & Marine Mechanics Institute, Avondale, Arizona Additional campuses: Universal Technical Institute, Sacramento, California Universal Technical Institute, Orlando, Florida for the following divisions: Motorcycle Mechanics Institute, Orlando, Florida Marine Mechanics Institute, Orlando, Florida Automotive, Orlando, Florida Institution: Universal Technical Institute of Texas Main campus: Universal Technical Institute, Houston, Texas Additional campuses: Universal Technical Institute, Exton, Pennsylvania Universal Technical Institute, Dallas/Ft. Worth, Texas Universal Technical Institute, Bloomfield, New Jersey Universal Technical Institute, Austin, Texas Institution: MIAT College of Technology Main campus: MIAT College of Technology, Canton, Michigan Additional campuses: MIAT College of Technology, Houston, Texas Generally, to participate in Title IV Programs, an institution must be licensed or otherwise legally authorized to operate in the state where it is physically located, be accredited by an accreditor recognized by ED, be certified as an eligible institution by ED, offer at least one eligible program of education, and comply with other statutory and regulatory requirements. 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 must all comply with this complex framework of statutes, 15 Table of Contents 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 is also 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 fully recertified PPAs for Universal Technical Institute of Texas, Universal Technical Institute of Arizona and Universal Technical Institute of Phoenix in June 2022, which will expire June 30, 2024. The 90/10 Rule As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to comply with the 90/10 rule. Under the current 90/10 rule, to remain eligible to participate in the federal student aid programs, a proprietary institution cannot derive more than 90% of its revenues for each fiscal year from Title IV Program funds. A proprietary institution is subject to sanctions if it exceeds the 90% level for a single year, and loses its eligibility to participate in Title IV Programs if it derives more than 90% of its revenue from Title IV Programs, as applicable, for two consecutive fiscal years. In 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), which amended the 90/10 rule. Section 2013 of the ARPA amended the rule to require covered institutions to derive at least 10% of their revenue from sources other than “Federal education assistance funds.” The phrase “Federal education assistance funds” was broadly defined as “federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution.” Congress directed ED to clarify the impact of this change with new regulations. ED published a new proposed 90/10 rule on July 28, 2022 and a final rule on October 28, 2022. This rule takes effect July 1, 2023 and applies to any annual audit submission for a proprietary institutional fiscal year beginning on or after January 1, 2023. Significantly, pursuant to this proposed rule, “Federal education assistance funds” would include most educational assistance funds provided by a Federal agency to an institution or a student to cover tuition, fees and other institutional charges, including funds provided by the VA or DOD. We regularly monitor compliance with the 90/10 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. As of September 30, 2022, our institutions’ annual Title IV percentages as calculated under the current 90/10 rule ranged from approximately 64% to 70% between our institution’s four OPE IDs. Based on our review of the final 90/10 rule, including the scope of the phrase “Federal education assistance funds” we do not believe our ability to comply with 90/10 requirements will be materially impacted once the new rule takes effect. 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, place the institution on provisional certification as a condition of its continued participation or take other actions against the institution. 16 Table of Contents 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. Under the current calculation, the cohort default rate is derived from student borrowers who first enter loan repayment during a federal fiscal year (“FFY”) ending September 30 and subsequently default on those loans within the two following years; parent borrowers are excluded from the calculation. This represents a three-year measuring period. 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) Institution: 2019 (2) 2018 2017 Universal Technical Institute of Arizona 3.1% 11.9% 13.8% Universal Technical Institute of Phoenix 3.7% 11.9% 14.0% Universal Technical Institute of Texas 2.7% 12.1% 16.1% MIAT College of Technology (3) 1.9% 15.4% 21.8% All proprietary postsecondary institutions (4) 3.1% 11.2% 14.7% (1) Based on information published by ED. (2) Due to the COVID-19 pandemic, ED paused all loan payments from March 13, 2020 through December 31, 2022. This has significantly decreased the default rates starting with the 2019 Cohort. (3) We completed the acquisition of MIAT on November 1, 2021. As a result, the cohort default rates presented here relate to periods prior to our ownership. However, since these rates affect our current collection timing on disbursements of federal student loans, we have included the rates within the table. (4) Includes other proprietary institutions beyond UTI. 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 2019, 2018 or 2017, 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, 2022, Universal Technical Institute of Texas and MIAT College of Technology were 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. 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, and 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; 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. If an institution’s composite score is above 1.5, and it meets all other requirements, it is deemed financially responsible. If its 17 Table of Contents 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. ED has historically evaluated the financial condition of our institutions on a consolidated basis based on the financial statements of Universal Technical Institute, Inc. as the parent company. 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. 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, 2022, 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. 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; • 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; or • 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 may also 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; 18 Table of Contents • 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% of its revenue in compliance with the 90/10 rule for its most recently completed fiscal year as calculated by ED; • The institution has high annual drop-out rates as calculated by ED; or • The institution’s two most recent official cohort default rates are 30% 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 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. Distance Education In response to the COVID-19 pandemic, ED provided broad approval for institutions to use distance education without going through the standard ED approval process. ED also permitted accreditors to waive their distance education review requirements. Taking advantage of these flexibilities, we transitioned our students into blended program formats, which permitted their non-clinical training to be offered online. ED’s temporary flexibilities currently remain in place, and will continue through the end of the payment period that begins after the date on which the federally-declared national emergency related to COVID-19 is rescinded. However, having observed that our blended learning programs offer a range of academic, operational, and financial efficiencies, we have determined to seek the permanent approvals that will permit us to continue offering blended learning programming after the noted temporary flexibilities have expired. We also continue to work to ensure that our blended learning programming complies with applicable distance education rules and standards, including ED’s new distance education rules, which became effective July 1, 2021. We intend to offer our Automotive, Diesel, Automotive/Diesel, Motorcycle and Marine programs in a blended learning format on a permanent basis. Additionally, we intend to continue to invest in our blended learning platform and curriculum to further enhance the student experience and student outcomes. To date, we have received approval from ACCSC to permanently offer blended format programs that utilize both distance and on-ground education. Additionally, we have received permanent approvals from all state education authorizing agencies to offer blended format programs. Title IV Program Rulemaking ED is almost continuously engaged in one or more negotiated rulemakings, which is the process pursuant to which the agency revisits, revises, and expands the complex and voluminous Title IV Program regulations. Currently, ED is conducting two significant, negotiated rulemaking efforts to revise rules concerning 16 different issue areas. 19 Table of Contents Between October and December of 2021, the Affordability and Student Loans committee negotiated new rules relating to nine issue areas: (1) borrower defense to repayment, (2) closed school loan discharges, (3) total and permanent disability discharges, (4) false certification discharges, (5) income-driven loan repayment plans, (6) interest capitalization on Federal student loans, (7) pre-dispute arbitration and class action waiver clauses, (8) Pell Grants for prison education programs, and (9) Public Service Loan Forgiveness. Shortly thereafter, between January and March 2022, the Institutional and Programmatic Eligibility committee considered new rules relating to seven issue areas: (1) the 90/10 rule, (2) ability to benefit, (3) certification procedures for participation in Title IV Programs, (4) change of ownership and control, (5) financial responsibility, (6) gainful employment, and (7) standards of administrative capability. On October 28, 2022, ED published a final rule amending regulations governing Pell Grants for prison education programs, the 90/10 rule, and changes in ownership and control, effective July 1, 2023. On November 1, 2022, ED published a final rule governing borrower defense to repayment rule, closed school loan discharges, pre-dispute arbitration and class action waiver clauses, interest capitalization on Federal student loans, Public Student Loan Forgiveness, total and permanent disability discharges, and false certification discharges, also effective July 1, 2023. The regulated community is awaiting proposed rules on the remaining topics covered by ED’s negotiated rulemakings. We devote significant effort to understanding the effects of ED regulations and rulemakings 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. ED Non-Discrimination Rulemakings As a condition of receiving federal financial assistance, we are responsible for complying with applicable laws and regulations promulgated by ED regarding non-discrimination. On July 12, 2022, ED published a proposed rule to amend the regulations implementing Title IX of the Education Amendments of 1972 (“Title IX”). This proposed rule represents a significant revision of the current rules. ED also has indicated that it will be proposing a rule to amend regulations related to nondiscrimination on the basis of disability in the Spring of 2023. We devote significant effort to complying with non-discrimination laws and regulations. We are monitoring all proposed non-discrimination rules and will carefully review any proposed or final regulations promulgated by ED. Department of Veterans Affairs Benefit Programs Some of our students receive financial aid from VA benefit programs. In 2022, we derived approximately 13% of our revenues, on a cash basis, from veterans’ benefits programs, which include the Post-9/11 GI Bill, the Montgomery GI Bill, the Reserve Education Assistance Program (“REAP”) and VA Vocational Rehabilitation. To continue participation in veterans’ benefits programs, an institution must comply with certain requirements established by the VA, including 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; and comply with applicable limits on the percentage of students receiving certain veterans’ benefits on a program and campus basis. 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. 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. This rule, the 85/15 Rule, prohibits paying VA benefits to students enrolling in a program when more than 85% of the students enrolled in that program are having any portion of their tuition, fees, or other charges paid for them by the school or VA. If the ratio of supported students to non-supported students exceeds 85% at the time a new VA student enters or reenters (such as after a break in enrollment), the student cannot be certified to receive benefits in the program. 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 two newest campuses in Austin, Texas and Miramar, Florida which opened between May and August 2022, all of our campuses are eligible to participate in VA education benefit programs. 20 Table of Contents In 2012, President Obama signed an Executive Order directing the DOD, VA and ED 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 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 DOD. 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. Other Federal and State Student Aid Programs Some of our students receive financial aid from federal sources other than Title IV or VA Programs, such as from the DOD or under the Workforce Innovation and Opportunity Act. Additionally, some states provide financial aid to our students in the form of grants, loans or scholarships. Our Long Beach, Rancho Cucamonga and Sacramento, California campuses, for example, are currently eligible to participate in the Cal Grant program. All of our institutions must comply with the eligibility and participation requirements applicable to each of these funding programs, which vary by funding agency and program. Consumer Protections Laws and Regulations As a postsecondary educational institution, we are subject to a broad range of consumer protection and other laws, such as recruiting, marketing, the protection of personal information, student financing and payment servicing, enforced by federal agencies such as the FTC and CFPB and various state agencies and state attorneys general. We devote significant effort to complying with state and federal consumer protection laws. We received a January 18, 2022 letter from the CFPB explaining that it was assessing whether UTI “is subject to the CFPB’s supervisory authority based on its activities related to student lending.” The CFPB’s letter then requested certain information about extensions of credit to our students; generally explained the source and scope of the CFPB’s regulatory authority; and advised that, after it reviewed the requested materials, the CFPB “anticipates providing guidance regarding whether UTI is subject to CFPB’s supervisory authority.” We have provided the requested information and are awaiting further guidance, if any, from the CFPB. We, along with 69 other proprietary institutions, received an October 6, 2021 letter from the FTC providing notice that engaging in deceptive or unfair conduct in the education marketplace violates consumer protection laws and could lead to significant civil penalties. The notice stated that an institutions receipt of the letter “does not reflect any assessment as to whether they have engaged in deceptive or unfair conduct,” and the FTC did not request any information. Federal Student Loan Forgiveness On August 24, 2022, the Biden administration announced a student loan relief plan. Under this plan, the Department will provide up to $20,000 in debt relief to Pell Grant recipients with loans held by the Department and up to $10,000 in debt relief to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for households. The plan is currently subject to a number of legal challenges in court. Should the plan survive judicial scrutiny, we expect many of our alumni and a portion of our current students as of this filing, would qualify for and take advantage of this relief. 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 free of charge 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 Annual Report on Form 10-K and is not incorporated herein by reference. 21