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Item 7. Management’s Discussion and Analysis

2023-12-01 compared with 2022-12-12 · 219 added, 219 removed, 263 unchanged (62% of the section changed)

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Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under “Risk Factors” “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K.

General 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.

Company Overview

Universal Technical Institute, Inc., which together with its subsidiaries is referred to as the “Company,” “we,” “us” or “our,” was founded in 1965 and is a leading workforce solutions provider of transportation, skilled trades and healthcare education programs, whose mission is to serve students, partners, and communities by providing quality education and support services for in-demand careers across a number of highly-skilled fields.

We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs.

Our revenues consist primarily of student tuition and fees derived from the programs we provide after reductions are made for discounts and scholarships that we sponsor and for refunds for students who wi t hdraw from our programs prior to specified dates.

Concord Career Colleges Acquisition

On December 1, 2022, we completed the acquisition contemplated by the previously announced Stock Purchase Agreement (the “Purchase Agreement”), dated May 3, 2022, by and among the Company, Concorde Career Colleges, Inc., a Delaware corporation (“Concorde”);

Liberty Partners Holdings 28, L.L.C., a Delaware limited liability company, and Liberty Investment IIC, LLC, a Delaware limited liability company (each a “Seller,” and collectively, the “Sellers”);

and Liberty Partners L.P., a Delaware limited partnership, in its capacity as a representative of the Sellers.

Under the terms of the Purchase Agreement, we acquired of all of the issued and outstanding shares of capital stock of Concorde for a base purchase price of $50.0 million, less $1.9 million in net adjustments including the post-closing working capital adjustment, for total cash consideration paid of $48.1 million.

See the “Liquidity and Capital Resources” section of this MD&A for a discussion on the financing used to fund the acquisition.

See Note 4 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the acquisition.

In conjunction with the Concorde acquisition on December 1, 2022, we redefined our reporting structure into two reportable segments as follows:

Universal Technical Institute (“UTI”):

UTI operates 16 campuses located in nine states and offers a wide range of degree and non-degree transportation and skilled trades technical training programs under brands such as Universal Technical Institute, Motorcycle Mechanics Institute, Marine Mechanics Institute, NASCAR Technical Institute, and MIAT College of Technology (“MIAT”).

UTI also offers manufacturer specific advanced training programs (“MSAT”), which include student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

Lastly, UTI provides dealer technician training or instructor staffing services to manufacturers.

UTI works closely with multiple original equipment manufacturers and industry brand partners to understand their needs for qualified service professionals.

Concorde Career Colleges (“Concorde”):

Concorde operates 17 campuses located in eight states and online, offering degree, non-degree, and continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields.

The Company has designated campuses that offer degree granting programs “Concorde Career College;” where allowed by State regulation.

The remaining campuses are designated as “Concorde Career Institute.” Concorde believes in preparing students for their healthcare careers with practical, hands-on experiences including opportunities to learn while providing care to real patients.

Prior to graduation, students will complete a number of hours in a clinical setting or externship, depending upon their program of study.

“Corporate” includes corporate related expenses that are not allocated to the UTI or Concorde reportable segments.

In prior years, these costs were allocated across our former “Postsecondary Education” reportable segment and “Other” category based upon compensation expense.

See Note 22 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on our segments.

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

Department of Education.

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 and under the Workforce Innovation and Opportunity Act.

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

Our revenues consist primarily of student tuition and fees derived from the programs we provide after reductions are made for discounts and scholarships that we sponsor and for refunds to students who wi t hdraw from our programs prior to specified dates.

Tuition and fee revenue is recognized ratably over the term of the course or program offered.

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We supplement our tuition and fee revenues with additional revenues from sales of textbooks and program supplies and other revenues, which are recognized as the transfer of goods or services occurs.

Through the proprietary loan program, the bank provides the students who participate in this program with extended payment terms for a portion of their tuition.

Under ASC 606, the portion of tuition revenue related to the proprietary loan program is considered a form of variable consideration.

We estimate the amount we ultimately expect to collect from the portion of tuition that is funded by the proprietary loan program, resulting in a note receivable.

Estimating the collection rate requires significant management judgment.

Upon adoption of

ASU 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments (Topic 326) as of October 1, 2020, we revised our estimated collection rate to only include historical collections from the past ten years as we determined that such population better represents our current expected collections.

The estimated amount is determined at the inception of the contract and we recognize the related revenue as the student progresses through school.

Each reporting period, we update our assessment of the variable consideration associated with the proprietary loan program.

Accordingly, we recognize tuition and loan origination fees financed by the loan and any related interest revenue under the effective interest method required under the loan based on this collection rate.

Tuition revenue and fees generally vary based on the average number of students enrolled and average tuition charged per program.

We also provide dealer technician training or instructor staffing services to manufacturers, and we recognize revenue as the transfer of services occurs.

For students at our UTI and MMI branded schools, we offer a proprietary loan program, where we provide the students who participate in this program with extended payment terms for a portion of their tuition for up to ten years.

UTI also provides dealer technician training or instructor staffing services to manufacturers where revenue is recognized as the transfer of services occurs.

Student Enrollment and Tuition

Average full-time enrollments vary depending on, among other factors, the number of continuing students at the beginning of a period, new student enrollments during the period, students who have previously withdrawn but decide to re-enroll during the period, graduations and withdrawals during the period.

Our average full-time enrollments are influenced by the:

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• Persistence of our students;

the length of our education programs;

• Length of our education programs;

• Availability of federal and alternative funding for our programs;

• Number of graduates of our programs who elect to attend the advanced training programs we offer and general economic conditions.

The introduction of additional program offerings at existing campuses and opening additional campuses is expected to influence our average full-time enrollment.

We currently offer start dates at our campuses that range from every three to six weeks throughout the year in our core programs.

The number of start dates of advanced training programs varies by the duration of those programs and the needs of the manufacturers which sponsor them.

The introduction of additional program offerings at existing campuses and the opening of additional campuses is expected to influence our average full-time enrollment.

UTI currently offers start dates at its campuses that range from every three to nine weeks throughout the year in the core programs.

The number of start dates of UTI advanced training programs varies by the duration of those programs and the needs of the manufacturers that sponsor them.

Concorde enrolls students throughout the year with core terms starting every month and clinical terms starting every ten weeks.

Although Concorde operates year-round with lower seasonality than UTI, Concorde experiences population fluctuations dictated by their clinical programmatic accreditors and how many student starts are allowed and the time required between those starts.

Our tuition charges vary by type and length of our programs and the program level, such as core or advanced training.

We implemented tuition rate increases of up to 2.5%, 2.5% and 3.5% for each of the years ended September 30, 2022, 2021 and 2020, respectively.

The UTI segment implemented tuition rate increases of up to 6.0%, 2.5% and 2.5% for each of the years ended September 30, 2023, 2022 and 2021, respectively, and the Concorde segment implemented a tuition rate increase of 3.0% for the year ended September 30, 2023.

We regularly evaluate our tuition pricing based on individual campus markets, the competitive environment and ED regulations.

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Additionally, approximately 10% of our revenues, on a cash basis, were collected from funds distributed under various veterans' benefits programs for the year ended September 30, 2023.

We extend credit for tuition and fees, for a limited period of time, to the majority of our students.

The Company extends credit for tuition and fees, for a limited period of time, to the majority of our students.

Our credit risk is mitigated through the students’ participation in federally funded financial aid and veterans' benefit programs unless students withdraw prior to the receipt by us of Title IV or veterans' benefit funds for those students.

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Any regulatory violation could be the basis for the initiation of potential adverse actions, including a suspension, limitation, placement on reimbursement status or termination proceeding, which could have a material adverse effect on our business.

If any of our institutions were to lose its eligibility to participate in federal student financial aid or veterans' benefit programs, the students at that institution, and other locations of that institution, would lose access to funds derived from those programs

and would have to seek alternative sources of funds to pay their tuition and fees.

The receipt of financial aid and veterans’ benefit funds reduces the students’ amounts due to us and has no impact on revenue recognition, as the transfer relates to the source of funding for the costs of education which may occur through Title IV, veterans’ benefit or other funds and resources available to the student.

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Selling, general and administrative expenses include:

compensation and benefits of employees who are not directly associated with the provision of educational services, such as:

executive management, finance and central accounting, information technology, legal, human resources, marketing and student admissions;

compensation and benefits, including stock-based compensation, of employees who are not directly associated with the provision of educational services, such as executive management, finance and central accounting, information technology, legal, human resources, marketing and student admissions;

marketing and student enrollment expenses;

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End of period undergraduate full-time active students 14,833 14,380 3.2 %

The increase in new student starts, average undergraduate full-time active students and end of period undergraduate full-time active students was due to strong student demand throughout fiscal 2021 and the acquisition of MIAT in November 2021.

The opening of new campuses in Austin, TX and Miramar, FL during fiscal 2022 also contributed positively.

Our ability to start new students continues to be influenced by various factors including:

Total new student starts 8,432 — 100.0 %

Average undergraduate full-time active students 7,654 — 100.0 %

End of period undergraduate full-time active students 8,369 — 100.0 %

Total new student starts 22,613 13,374 69.1 %

Average undergraduate full-time active students 20,268 12,838 57.9 %

End of period undergraduate full-time active students 23,202 14,380 61.3 %

The increase in consolidated new student starts, average undergraduate full-time active students and end of period undergraduate full-time active students was due primarily to the acquisition of Concorde in December 2022.

The new student starts for the UTI segment increased during the year, partially due to the opening of new campuses in Austin, Texas and Miramar, Florida during late fiscal 2022 and program expansion during both the current and prior year.

Our ability to start new students can be influenced by various factors including:

the state of the general macro-economic environment and its impact on price sensitivity and the ability and willingness of students and their families to incur debt to fund their education;

unemployment rates;

adverse media coverage, legislative hearings, regulatory actions and investigations by attorneys general and various agencies related to allegations of wrongdoing on the part of other companies within the education and training services industry, which have cast the industry in a negative light;

and the state of the general macro-economic environment and its impact on price sensitivity and the ability and willingness of students and their families to incur debt.

adverse media coverage;

legislative, or regulatory actions and investigations by attorneys general and various agencies related to allegations of wrongdoing on the part of other companies within the education and training services industry, which can cast the aggregate “for-profit” education industry in a negative light;

and pandemics and or other national, state or local emergencies as declared by various government authorities.

For more information, see Item 1A.

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Our revenues for the year ended September 30, 2023 were $607.4 million, an increase of $188.6 million, or 45.0%, from the prior year.

The increase in revenue was due to growth in students, increased revenue per student due to the impact of the COVID-19 pandemic in the prior year, and the acquisition of MIAT.

In fiscal 2022, we had operating income of $22.4 million, as compared to $14.9 million in the prior year.

Our operating expenses for fiscal 2022 increased 23.8% as compared to the prior year primarily due to support activities related to the increase in student enrollment and the acquisition of MIAT.

Productivity improvements and proactive cost actions have been a key part of our operating model for the past several years, and we continue to identify and execute on efficiency

opportunities throughout our cost structure, while improving and investing in the overall student experience.

Excluding Concorde, which contributed $178.1 million of revenue between December 1, 2022 and September 30, 2023, UTI revenues increased 2.5% when compared to the prior year.

In fiscal 2023, we had operating income of $21.4 million, as compared to $22.4 million in the prior year, with the acquired Concorde segment contributing $10.5 million.

Our operating expenses for fiscal 2023 were $586.0 million, a 47.8% increase over the prior year, with the acquired Concorde segment contributing $167.6 million .

The remainder of the increase was primarily driven by the incremental cost of delivery associated with UTI new campus and program rollouts in the prior year, and both one-time and ongoing investments in support of our growth and diversification strategy.

Productivity improvements and proactive cost actions have been a key part of our operating model for the past several years, and we continue to identify and execute on efficiency opportunities throughout our cost structure, while improving and investing in the overall student experience.

Net income for the year ended September 30, 2023 was $12.3 million compared to $25.8 million in the prior year.

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 which is achieved through acquisitions, opening new campus locations, the expansion of new program offerings, and new funding and business operating models.

During the year ended September 30, 2022, we executed the following as part of our growth and diversification strategy:

• 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 (“Lisle 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.

Our business strategy has three key tenets:

to grow the business by more deeply penetrating existing target markets and adding new markets;

to diversify the business by adding new locations, programs, and offerings that maximize the lifetime value of our students;

and to continually optimize the business by constantly enhancing operational efficiency.

During the year ended September 30, 2023, we executed the following as part of our growth, diversification and optimization strategy:

Acquisition and Optimization

• We closed the acquisition of Concorde on December 1, 2022.

The acquisition aligns with our growth and diversification strategy, which is focused on offering a broader array of high-quality, in-demand workforce education 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.

• In March 2023, we purchased the three primary buildings and the associated land at our UTI Orlando, Florida campus which were previously leased.

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 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.

• In the fourth quarter of 2023 we started the following programs:

Aviation at the UTI Avondale, Arizona and UTI Long Beach, California campuses;

HVACR at the UTI Austin, Texas and NASCAR Tech campuses;

Wind Energy Technician training at the UTI Rancho Cucamonga, California and UTI Lisle, Illinois campuses;

Robotics and Automation at UTI Exton, Pennsylvania, UTI Lisle, Illinois, NASCAR Tech Mooresville, North Carolina, and the UTI Rancho Cucamonga, California campuses;

and Welding at the UTI Sacramento, California campus.

• We executed a new agreement which continues the UTI partnership with Snap-on Tools to ensure automotive, diesel, motorcycle, marine and collision repair technician students have the tools and training they need to launch careers in the transportation industry.

• UTI expanded the Volvo TEKNIKER Apprentice Program, a 12-week, manufacturer-paid apprentice program to Volvo's training facility in Ridgeville, South Carolina.

In addition, we continue to pursue other opportunities that align with our growth, diversification and optimization strategy.

Results of Operations

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Total operating expenses 96.5 % 94.7 % 95.6 %

Income (loss) from operations 5.3 % 4.4 % (1.3) %

Income from operations 3.5 % 5.3 % 4.4 %

Interest (expense) income, net (0.6) % (0.4) % (0.1) %

Other (expense) income (0.1) % 0.2 % — %

Other income (expense) 0.1 % (0.1) % 0.2 %

Total other (expense) income, net (0.5) % (0.5) % 0.1 %

Income (loss) before income taxes 4.8 % 4.5 % (0.9) %

Income tax benefit (expense) 1.3 % (0.2) % 3.5 %

Income before income taxes 3.0 % 4.8 % 4.5 %

Income tax (expense) benefit (0.9) % 1.3 % (0.2) %

Net income 2.1 % 6.1 % 4.3 %

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Year Ended September 30, 2023 Compared to Year Ended September 30, 2022

The following table presents revenue by segment (in thousands):

Year ended September 30, 2023 Year ended September 30, 2022

UTI Concorde Consolidated UTI Concorde Consolidated

Revenue $ 429,317 $ 178,091 $ 607,408 $ 418,765 $ — $ 418,765

Year over Year % Change 2.5 % 100.0 % 45.0 %

Our revenues for the year ended September 30, 2023 were $607.4 million, an increase of $188.6 million, or 45.0%, as compared to revenues of $418.8 million for the year ended September 30, 2022.

During fiscal 2022, our average full-time student enrollment increased by 11.7% and our new student starts increased 2.7%, driven primarily by the addition of MIAT and the opening of the two new campuses in Austin, Texas and Miramar, Florida.

The increase in revenue is due to the growth in the average undergraduate full-time students and an increase in the average revenue per student as compared to the prior year which was impacted by the timing of completion of student make-up lab work and slower student progression due

to the ongoing but diminishing impacts of COVID-19.

The acquisition of MIAT also contributed to our revenue growth, accounting for $23.6 million of revenues for the year ended September 30, 2022.

Revenues for UTI for the year ended September 30, 2023 were $429.3 million, an increase of 2.5% versus the prior period.

Revenue increased primarily due to the addition of two new campuses in fiscal 2022 and an overall increase in average revenue per student.

This was partially offset by a 1.7% decrease in overall average undergraduate full-time active students due to lower student starts across many campuses over the last several quarters.

We recognized $8.8 million on an accrual basis related to revenues and interest under the proprietary loan program for the year ended September 30, 2023, as compared to $9.1 million recognized for the year ended September 30, 2022.

Revenues for Concorde, which represent ten months as Concorde was acquired on December 1, 2022, were $178.1 million.

Concorde programs are offered year-round, however, there can be fluctuations in the student population due to the timing and size of class starts which are dictated by the accrediting bodies governing the clinical and core programs.

Educational services and facilities expenses

Our educational services and facilities expenses for the year ended September 30, 2023 were $329.9 million, representing an increase of $122.6 million, or 59.2%, as compared to $207.2 million for the year ended September 30, 2022.

This increase was primarily due to the acquisition of Concorde on December 1, 2022 and both ongoing and one-time costs associated with our growth, diversification, and optimization strategy.

The following table sets forth the significant components of our educational services and facilities expenses (in thousands):

Year ended September 30, 2023

Salaries expense $ 88,632 $ 75,561

Employee benefits and tax 17,384 11,689

UTI Concorde Consolidated

Salaries, employee benefits and tax expense $ 111,030 $ 68,238 $ 179,268

Bonus expense 2,027 — 2,027

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Occupancy costs 30,798 18,612 49,410

Supplies, maintenance and student expense 27,357 14,114 41,471

Depreciation and amortization expense 19,738 3,618 23,356

Supplies and maintenance expense 17,387 13,069

Student expense 4,908 4,158

Contract services expense 3,763 431 4,194

Taxes and licensing expense 2,749 2,422

Other educational services and facilities expenses 21,666 8,286 29,952

Total educational services and facilities expense $ 216,571 $ 113,299 $ 329,870

Compensation and related costs increased $19.3 million for the year ended September 30, 2022, as compared to the prior year.

Salaries expense increased $13.1 million primarily related to incremental headcount for the two new campuses and two new welding programs launched during the year, as well as other programs and needs to continue enhancing the student experience.

The acquisition of MIAT represented $7.3 million of the increase.

Occupancy costs increased $4.0 million during fiscal year 2022.

Our occupancy cost increased due to the addition of the new Austin, Texas and Miramar, Florida campus locations as well as the two MIAT campus locations.

Depreciation and amortization expense increased $2.5 million during the year ended September 30, 2022 primarily due to the purchase of the Lisle Campus during fiscal year 2022.

Supplies and maintenance expense increased by $4.3 million primarily due to $1.9 million in technical supplies due to the addition of the Austin, Texas and Miramar, Florida campuses and $1.2 million in repairs and maintenance for the buildings and ground due to the consolidation of the MMI Phoenix, Arizona campus into the Avondale, Arizona building and the consolidation of the Orlando, Florida campus into one site.

Student expense increased by $0.8 million primarily due to a $0.3 million increase in student housing expenses.

Year ended September 30, 2022

UTI Concorde Consolidated

Salaries, employee benefits and tax expense $ 106,016 $ — $ 106,016

Bonus expense 2,335 — 2,335

Stock-based compensation 240 — 240

Compensation and related costs 108,591 — 108,591

Occupancy costs 35,408 — 35,408

Supplies, maintenance and student expense 22,295 — 22,295

Depreciation and amortization expense 15,709 — 15,709

Contract services expense 4,764 — 4,764

Other educational services and facilities expenses 20,466 — 20,466

Total educational services and facilities expense $ 207,233 $ — $ 207,233

Compensation and related costs increased $4.7 million for the year ended September 30, 2023 primarily due to increased instructor salaries related to the opening of two new campuses in fiscal 2022 and new program expansions in fiscal 2022 and 2023.

Occupancy costs decreased $4.6 million during fiscal year 2023.

The decrease was primarily due to purchasing the Lisle, Illinois campus in February 2022 and the three primary buildings at our UTI Orlando, Florida campus in March 2023, as well as realizing the benefits of the consolidation of the MMI and UTI campuses in both Arizona and Florida into single sites during fiscal 2022.

Supplies, maintenance and student expense increased by $5.1 million primarily due to approximately $4.4 million in additional grants for student housing and $1.2 million in technical supplies due to the addition of the UTI Austin, Texas and UTI Miramar, Florida campuses.

Depreciation and amortization expense increased $4.0 million during the year ended September 30, 2023 primarily due to the purchase of the UTI Lisle, Illinois campus during fiscal year 2022 and the three primary buildings at our UTI Orlando, Florida campus in March 2023.

Other educational services and facilities expense increased by $1.2 million.

The increase is primarily related to an increased cost of tools of $2.1 million due to our new campus openings and books of $1.3 million due to our increased number of students.

The increase is primarily due to a gain of $1.6 million in the prior year period as a result of the settlement of the UTI Lisle, Illinois campus lease.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the year ended September 30, 2023 were $256.1 million, representing an increase of $67.0 million, or 35.4%, as compared to $189.2 million for the year ended September 30, 2022.

This increase was primarily due to the acquisition of Concorde on December 1, 2022 and both ongoing and one-time costs associated with our growth, diversification and optimization strategy.

The following table sets forth the significant components of our selling, general and administrative expenses (in thousands):

Year ended September 30, 2023

Salaries expense $ 63,319 $ 56,644

Employee benefits and tax 11,734 10,965

UTI Concorde Corporate Consolidated

Salaries, employee benefits and tax expense $ 67,485 $ 21,401 $ 18,869 $ 107,755

Bonus expense 11,257 2,594 5,141 18,992

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Compensation and related costs 79,619 23,995 26,789 130,403

Advertising expense 51,546 38,748

Advertising and marketing expense 52,809 19,358 — 72,167

Professional and contract services expense 8,093 608 9,110 17,811

Intangible asset impairment expense — — — —

Other selling, general and administrative expenses 16,546 10,298 8,914 35,758

Contract services expense 5,815 5,509

Professional services expense 8,755 5,409

Total selling, general and administrative expenses $ 157,067 $ 54,259 $ 44,813 $ 256,139

Year ended September 30, 2022

UTI Concorde Corporate Consolidated

Salaries, employee benefits and tax expense $ 56,521 $ — $ 18,532 $ 75,053

Bonus expense 10,685 — 3,644 14,329

Stock-based compensation 648 — 3,524 4,172

Compensation and related costs 67,854 — 25,700 93,554

Advertising and marketing expense 54,501 — — 54,501

Professional and contract services expense 4,412 — 10,157 14,569

Intangible asset impairment expense 2,000 — — 2,000

Depreciation and amortization expense 1,174 796

Other selling, general and administrative expenses 18,393 — 6,141 24,534

Total selling, general and administrative expenses $ 147,160 $ — $ 41,998 $ 189,158

Compensation and related costs increased by $9.5 million for the year ended September 30, 2022 as compared to the prior year, primarily due to an increase in headcount to support our growth and diversification initiatives, along with an increase in stock-based compensation expense reflecting the cumulative impact of annual grants being resumed in 2020 and adjustments related to the performance conditions in the prior year.

The acquisition of MIAT represented $2.9 million of the increase.

Advertising expense increased by $12.8 million for the year ended September 30, 2022, as compared to the prior year.

The increase was primarily attributable to incremental spend in support of our new campuses and programs launched during the current year.

Advertising expense for MIAT accounted for $5.1 million of the increase.

Advertising expense as a percentage of revenues increased to 12.3% for the year ended September 30, 2022 as compared to 11.6% in the prior year.

Other selling, general and administrative expenses increased by $7.5 million for the year ended September 30, 2022, as compared to the prior year, due to an increase of $1.9 million in travel and entertainment costs, $1.0 million for software, and $0.8 million for bad debt expense.

The increase was also due to acquisition of MIAT which represented $3.9 million.

Professional services increased by $3.3 million and contract services expense increased by $0.3 million for the year ended September 30, 2022.

The increases were primarily due to costs incurred related to our growth and diversification initiatives, including the acquisition of MIAT which closed in November 2021 and pre-closing costs associated with the acquisition of Concorde, which closed in December 2022.

During the year ended September 30, 2022, we recorded an intangible asset impairment charge of $2.0 million for the MIAT trademarks and trade name due to changing the useful life from indefinite to four years.

See Notes 2 and 11 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Compensation and related costs increased by $11.8 million for the year ended September 30, 2023 as compared to the prior year, primarily due to an increase in headcount to support our growth, diversification and optimization initiatives.

Advertising and marketing expense decreased by $1.7 million for the year ended September 30, 2023, as compared to the prior year.

We continue to target cost-efficient marketing with an increased focus on digital media.

Advertising expense as a percentage of revenues decreased to 12.3% for the year ended September 30, 2023 as compared to 13.0% in the prior year.

Professional and contract services increased by $3.7 million for the year ended September 30, 2023.

The increases were primarily due to costs incurred related to our growth, diversification and optimization initiatives.

Other selling, general and administrative expenses decreased by $1.8 million for the year ended September 30, 2023, as compared to the prior year, due to a decrease of $0.9 million for bad debt expense and $0.8 million for employee recruitment and hiring.

Selling, general and administrative expenses for Concorde for the ten months ended September 30, 2023, were $54.3 million.

Concorde advertising and marketing expense as a percentage of revenue for the ten months ended September 30, 2023 was 10.9%.

Selling, general and administrative expenses for Corporate increased by $2.8 million for the year ended September 30, 2023.

This was primarily due to increased integration costs of $2.8 million which is included within other selling, general and administrative costs.

Other (expense) income, net

Other expense for the year ended September 30, 2022 was $1.9 million, a decrease of $2.2 million as compared to other income of $0.2 million for the year ended September 30, 2021.

The $1.9 million of other expense in fiscal 2022 was comprised primarily of $2.0 million of interest expense on our additional term loan entered into during 2022 and increased interest rates due to the increased federal reserve rate, as discussed further below, partially offset by interest income of $0.5 million.

Our income tax benefit for the year ended September 30, 2022 was $5.4 million, or 26.5% of pre-tax income, compared to an income tax expense of $0.6 million, or 4.0% of pre-tax income, for the year ended September 30, 2021.

The effective income tax rate in each period differed from the federal statutory tax rate of 21% primarily as a result of changes in the valuation allowance and state taxes.

Other expense for the year ended September 30, 2023 was $3.3 million, compared to other income of $1.9 million for the year ended September 30, 2022.

The $3.3 million of other expense in fiscal 2023 was comprised primarily of $9.7 million of interest expense from our revolving credit facility and existing term loans, partially offset by interest income of $5.9 million.

Our income tax expense for the year ended September 30, 2023 was $5.8 million, or 31.9% of pre-tax income, compared to an income tax benefit of $5.4 million, or 26.5% of pre-tax income, for the year ended September 30, 2022.

The effective income tax rate for the year ended September 30, 2023 differed from the federal statutory tax rate of 21% primarily due to non-deductible executive compensation, transaction costs, federal research and development tax credits and state and local income and franchise taxes.

The effective income tax rate for the year ended September 30, 2022 differed from the federal statutory rate of 21% primarily as a result of changes in the valuation allowance and state taxes.

The tax benefit recorded during the year ended September 30, 2022 primarily relates to the $12.1 million release of the valuation allowance during the period and the impact of the MIAT deferred tax liability for indefinite lived intangibles which are available to offset a portion of our indefinite lived deferred tax assets.

Our income tax expense during the year ended September 30, 2021 was impacted by a decrease in the valuation allowance of $3.2 million.

See Note 16 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Preferred stock dividends

On June 24, 2016, we sold 700,000 shares of Series A Preferred Stock for $70.0 million in cash, less $1.2 million in issuance costs.

Pursuant to the terms of the certificate of designation defining the rights, preferences, and privileges of the Series A Preferred Stock, we paid preferred stock cash dividends totaling $5.2 million and $5.3 million during the years ended September 30, 2022 and 2021, respectively.

As of September 30, 2023 and 2022, 675,885 shares of Series A Convertible Preferred Stock were issued and outstanding, respectively.

Pursuant to the Certificate of Designations of the Series A Preferred Stock, we paid preferred stock cash dividends of $5.1 million and $5.2 million during the years ended September 30, 2023 and 2022, respectively.

See Note 18 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for further discussion of the preferred stock.

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Income allocated to participating securities

Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis.

Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we must also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis.

The two-class method is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividend and participation rights in undistributed earnings.

Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends.

Under this method,

all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends.

The amount of income allocated to the participating securities for the years ended September 30, 2023 and 2022 was $2.7 million and $7.8 million, respectively.

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To obtain a complete understanding of our performance, this measure should be examined in connection with net income (loss) determined in accordance with GAAP.

Since the items excluded from this measure are

significant components in understanding and assessing financial performance under GAAP, this measure should not be considered to be an alternative to net income (loss) or any other measures derived in accordance with GAAP as a measure of our operating performance or profitability.

Since the items excluded from this measure are significant components in understanding and assessing financial performance under GAAP, this measure should not be considered to be an alternative to net income (loss) or any other measures derived in accordance with GAAP as a measure of our operating performance or profitability.

Exclusion of items in our non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring.

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Interest expense (income), net 3,795 1,495 282

Income tax (benefit) expense (5,407) 602 (10,602)

Income tax expense (benefit) 5,765 (5,407) 602

Depreciation and amortization 25,215 16,883 14,028

16,883 14,028 13,150

EBITDA $ 47,097 $ 38,819 $ 29,493

(1) Includes depreciation of training equipment obtained in exchange for services of $0.9 million, $1.2 million, and $1.3 million for the years ended September 30, 2022, 2021 and 2020, respectively.

Liquidity and Capital Resources

Overview of Liquidity

Based on past performance and current expectations, we believe that our cash flows from operations, cash on hand and investments will satisfy our working capital needs, capital expenditures, commitments and other liquidity requirements associated with our existing operations, as well as announced growth and diversification initiatives through at least the next fiscal year.

Our cash position is available to fund strategic long-term growth initiatives, including opening additional campuses in new markets and the creation and expansion of new programs, such as welding, in existing markets and campus facilities.

Our total liquidity as of September 30, 2022 was $95.4 million, including cash and cash equivalents of $66.5 million and $28.9 million of held-to-maturity investments.

This represents a decrease of $38.4 million from our total liquidity as of September 30, 2021.

Our aggregate liquidity as of September 30, 2023 totaled $159.7 million and was comprised of cash and cash equivalents of $151.5 million and undrawn revolving credit facility capacity of $8.2 million.

This represents an increase of $64.4 million from our total liquidity as of September 30, 2022.

Strategic Uses of Cash

We believe that additional strategic uses of our cash resources may include consideration of acquisitions, the repurchase of common stock, purchase of real estate assets, new campus openings or expansion of programs at existing campuses and subsidizing funding alternatives for our students, among others.

To the extent that potential acquisitions are large enough to require financing beyond cash from operations, cash and cash equivalents, and held-to-maturity investments, or we need capital to fund operations or other new organic investments, we may enter into additional credit facilities, issue debt or issue additional equity.

On November 1, 2021, using operating cash on hand, we acquired all of the issued and outstanding shares of capital stock of MIAT for $26.0 million base purchase price plus $2.8 million working capital surplus for total cash consideration paid of $28.8 million.

On December 1, 2022, using funds from our new revolving credit facility, we acquired all of the issued and outstanding shares of capital stock of Concorde for a base purchase price of $50.0 million, less $1.9 million in net adjustments including the post-closing working capital adjustment, for total cash consideration paid of $48.1 million.

The net cash consideration, taking into account cash acquired from Concorde, was $16.4 million.

See Note 4 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the acquisition.

During February 2022, we purchased the Lisle Campus for approximately $28.7 million, in cash plus assumed debt, including closing costs and other fees.

Due to the timing of the close for the Lisle Campus, we used available operating cash for the purchase.

On April 14, 2022, our wholly owned subsidiary entered into a new loan agreement to fund the acquisition and retirement of the Lisle Term Loan - WA, via a term loan in the original principal amount of $38.0 million with a maturity of seven years.

The net proceeds from the new loan agreement after fees and the retirement of the Lisle Term Loan - WA were approximately $20.0 million.

See Notes 9, 15 and 16 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the purchase and related debt and interest rate swap.

On May 3, 2022, we entered into a definitive agreement to acquire Concorde for a base purchase price of $50.0 million in cash, subject to closing working capital adjustments.

The closing is subject to customary closing conditions, including the receipt of a pre-acquisition review notice from ED that does not contain certain letter of credit requirements.

On December 1, 2022, the company completed the Concorde acquisition.

See Note 26 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on this acquisition.

We purchased three buildings and land at our UTI Orlando, Florida campus in March 2023 for approximately $26.2 million, including closing costs and other fees.

We used previously drawn funds from our revolving credit facility to complete the purchase.

We believe that additional uses of our cash resources may include consideration of strategic acquisitions and organic growth initiatives, purchase of real estate assets, subsidizing funding alternatives for our students, and the repurchase of common stock, among others.

To the extent that potential acquisitions are large enough to require financing beyond cash from operations, cash and cash equivalents, short-term investments, or available revolving credit facility capacity, or we need capital to fund operations, new campus openings or expansion of programs at existing campuses, we may enter into additional credit facilities, issue debt or issue additional equity.

Long-term Debt

As of September 30, 2022, we had $68.1 million of long-term debt outstanding, which is comprised of two term loans.

Of the $68.1 million outstanding, $30.1 million relates to a term loan that bears interest at the rate of LIBOR plus 2.0% over the seven year term secured in connection with the Avondale, Arizona campus property purchased in December 2020.

The remaining $38.0 million relates to a term loan that bears interest at the rate of SOFR plus 2.0% over the seven year term, secured in connection with the purchase of the Lisle Campus property in February 2022.

See Note 15 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the term loans.

On November 18, 2022, we entered into a revolving credit facility with Fifth Third Bank, a national banking association with a three year term (the “Credit Facility”).

Availability under the Credit Facility is $100.0 million with a $20.0 million sub-facility available for letters of credit.

On November 28, 2022, we drew $90.0 million from the credit facility in support of the closing of the Concorde acquisition.

See Note 26 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on this subsequent event item.

As of September 30, 2023, we had $162.6 million of long-term debt outstanding, which is comprised of two term loans, a finance lease and a revolving credit facility.

Of the $162.6 million outstanding, $29.3 million relates to a term loan that bears interest at the rate of Term SOFR plus 2.0% and a tranche rate adjustment of 0.046% over the seven-year term secured in connection with the UTI Avondale, Arizona campus property purchased in December 2020.

Approximately $37.7 million relates to a term loan that bears interest at the rate of Term SOFR plus 2.0% over the seven-year term, secured in connection with the purchase of the UTI Lisle, Illinois campus property in February 2022.

Approximately $5.6 million relates to a finance lease for a campus within our Concorde segment.

The remaining $90.0 million relates to funds drawn from the $100.0 million revolving credit facility that was secured in connection with the Concorde acquisition.

See Note 14 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the term loans and the revolving credit facility.

We currently do not pay a cash dividend on our common stock.

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The first disbursement for first-time borrowers is usually received 30 days after the start of a student’s academic year, and the second disbursement is typically received at the beginning of the 16th week from the start of the student’s academic year.

Under the proprietary loan program, we bear all credit and collection risk and students are not required to begin repayment until six months after the student completes or withdraws from his or her program.

These factors, together with the timing of when our students begin their programs, affect our operating cash flow.

Under our UTI proprietary loan program, we bear all credit and collection risk and students are not required to begin repayment until six months after the student completes or withdraws from his or her program.

Similarly, we bear all credit and collection risk for students paying through UTI cash payment plans and those under a retail installment contract at Concorde.

These factors, together with the timing of when our students begin their programs, affect the timing and seasonality of our operating cash flow.

Each of our campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant certificates, diplomas or degrees to its students.

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Our insurers issue surety bonds for us on behalf of our campuses and admissions representatives with multiple states to maintain authorization to conduct our business.

We are obligated to reimburse our insurers for any surety bonds that are paid by the insurers.

We are obligated to

reimburse our insurers for any surety bonds that are paid by the insurers.

As of September 30, 2023, the total face amount of these surety bonds was approximately $22.3 million.

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Net income, after adjustments for non-cash items, provided cash of $71.8 million for the year ended September 30, 2023.

The non-cash items included $25.2 million for depreciation and amortization expense, $20.6 million for amortization of right-of-use assets for operating leases, $4.6 million of deferred taxes, $3.8 million for stock-based compensation expense and $3.3 million for bad debt expense.

Changes in operating assets and liabilities for the year ended September 30, 2023 used cash of $22.7 million primarily due to the following:

• Changes in our operating lease liability as a result of rent payments used cash of $20.5 million.

• The change in deferred revenue provided cash of $11.4 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at September 30, 2023 as compared to September 30, 2022.

• Changes in our accounts payable and accrued expenses due to the timing of payments used cash of $5.9 million.

• The increase in receivables used cash of $4.9 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

Net income, after adjustments for non-cash items, for the year ended September 30, 2022 provided cash of $64.8 million.

The non-cash items included $16.9 million for depreciation and amortization expense, $15.9 million for amortization of right-of -use assets for operating leases, $4.3 million for stock-based compensation expense, and $2.5 million for bad debt expense, partially offset by an adjustment of deferred taxes of $6.0 million due primarily to the release of our valuation allowance during the year.

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• The increase in prepaid expense and other current assets used cash of $1.7 million primarily related to the change in training equipment credits earned as of September 30, 2022.

Net income, after adjustments for non-cash items, for the year ended September 30, 2021 provided cash of $47.7 million.

The non-cash items included $15.6 million for amortization of right-of -use assets for operating leases, $14.0 million for depreciation and amortization expense, $1.7 million for stock-based compensation expense, and $1.7 million for bad debt expense.

Changes in operating assets and liabilities for the year ended September 30, 2021 used cash of $7.4 million primarily due to the following:

• The increase in deferred revenue used cash of $17.0 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relations to completion of their program at September 30, 2021 as compared to September 30, 2019.

• The decrease in receivables provided cash of $8.5 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

• The decrease in the income taxes receivable provided cash of $7.1 million and was primarily attributable to receipt of the remaining income tax refund originally recorded in fiscal 2020 as a result of the CARES Act which allowed us to carryback NOLs from previous years.

• Changes in our operating lease liability as a result of rent payments used cash of $20.5 million.

• The increase in prepaid expense and other current liabilities used cash of $4.4 million primarily related to the timing of payments to vendors and bonus accruals.

Investing Activities

For the year ended September 30, 2023, net cash used in investing activities was $44.1 million.

The cash outflow was primarily related to the purchase of property and equipment of $79.5 million, of which $28.7 million related to the purchase of the Lisle Campus.

Other capital expenditures included investments for new campuses in Austin, Texas and Miramar, Florida, the consolidation of the Orlando, Florida and Arizona campuses, and the rollout of new programs at our campuses.

The cash outflow was primarily related to the purchase of property and equipment of $56.7 million.

During the year ended September 30, 2023, we purchased three buildings and the associated land at our UTI Orlando, Florida campus for $26.2 million.

Additionally, we had continued capital expenditures for further construction at the UTI Austin, Texas and Miramar, Florida campuses, in addition to program expansion costs for both UTI and Concorde.

Further, on December 1, 2022, we completed the acquisition of Concorde which resulted in $16.4 million of cash paid for acquisitions, net of cash acquired.

Partially offsetting the cash outflows, is the $29.0 million in proceeds from maturities of held-to-maturity securities.

For the year ended September 30, 2022, net cash used in investing activities was $134.6 million.

The cash outflow was primarily related to the purchase of property and equipment of $79.5 million, of which $28.7 million related to the purchase of the UTI Lisle, Illinois campus.

Other capital expenditures included investments for new UTI campuses in Austin, Texas and Miramar, Florida, the consolidation of the UTI Orlando, Florida and the UTI Arizona campuses, and the rollout of new

programs at the UTI campuses.

We purchased $28.8 million of short term held-to-maturity investments.

Additionally, we purchased MIAT for $26.5 million, net of cash consideration received.

For the year ended September 30, 2021, net cash used in investing activities was $23.0 million.

The cash outflow was primarily related to the purchase of property and equipment of $61.6 million, of which $45.2 million related to the purchase of the building and land at our Avondale, Arizona campus location, while the remaining amount represented capital expenditures for the Lisle, Illinois and Bloomfield, New Jersey welding program expansions, the Orlando, Florida and Sacramento, California consolidations, and other campus investments.

The purchase of property and equipment was partially offset by proceeds from maturities of held-to-maturity securities of $37.7 million.

Financing Activities

For the year ended September 30, 2022, net cash provided by financing activities was $12.6 million which was primarily related to proceeds from our new term loan for the Lisle Campus of $38.0 million offset by the repayment of long-term debt of $19.2 million and the semi-annual payments of preferred stock dividends of $5.2 million.

For the year ended September 30, 2021, net cash provided by financing activities was $24.8 million which was primarily the result of the $31.2 million in proceeds received from the financing of the Avondale, Arizona property in May 2021.

This was partially offset by our semi-annual payments of preferred stock dividends of $5.3 million.

For the year ended September 30, 2023, net cash provided by financing activities was $81.8 million which was primarily related to proceeds from our revolving credit facility of $90.0 million, offset by the semi-annual payments of preferred stock dividends of $5.1 million, and the repayment of long-term debt of $1.8 million.

For the year ended September 30, 2022, net cash provided by financing activities was $12.6 million which was primarily related to proceeds from the term loan related to the UTI Lisle, Illinois campus purchase of $38.0 million, offset by the repayment of long-term debt of $19.2 million and the semi-annual payments of preferred stock dividends of $5.2 million.

For a discussion of our liquidity for the year ended September 30 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” of our 2022 Form 10-K filed with the SEC on December 12, 2022 which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

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We did not repurchase any shares during the years ended September 30, 2023, 2022, and 2021.

Related Party Transactions

Information concerning certain related party transactions is included in Note 13 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K.

For a description of additional information regarding related party transactions, see the information included in our proxy statement for the 2023 Annual Meeting of Stockholders under the heading “Certain Relationships and Related Transactions.”

Our operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in total student population and costs associated with opening or expanding our campuses.

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September 30 170,298 28.0 % 110,638 26.4 % 97,481 29.1 %

Fiscal year $ 418,765 100.0 % $ 335,083 100.0 % $ 300,761 100.0 %

Total fiscal year $ 607,408 100.0 % $ 418,765 100.0 % $ 335,083 100.0 %

The increase in revenues for each of the three months ended December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023, as compared to the same periods in fiscal 2022, was due to an increase in student population during fiscal 2023 primarily related to the acquisition of Concorde.

The increase in revenues for each of the three months ended December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022, as compared to the same periods in fiscal 2021, was primarily due to an increase in student population during fiscal 2022 in conjunction with the acquisition of MIAT.

The first three periods also benefited from lower average revenue per student in the prior year period due to lingering impacts of COVID-19.

The increase in revenues from December 31, 2020 to September 30, 2021 was primarily related to student growth and the rebound in full-time active students during fiscal 2021 as the COVID-19 pandemic became more contained and vaccines became available.

Our revenue recognized for active students improved in fiscal 2021 versus fiscal 2020, but was still impacted by COVID-19, with lower average revenue per student versus pre-COVID levels driven by the pace in which students were progressing through their programs and by students retaking courses previously completed or attempted.

Income (Loss) from Operations

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September 30 10,339 48.3 % 3,465 15.5 % 12,781 85.5 %

Fiscal year $ 22,374 100.0 % $ 14,947 100.0 % $ (3,871) 100.0 %

Total fiscal year $ 21,399 100.0 % $ 22,374 100.0 % $ 14,947 100.0 %

The decrease in income from operations for fiscal year 2023 was primarily due to increased compensation related costs primarily due to an increase in headcount to support our growth, diversification and optimization initiatives.

The increase in income from operations for fiscal year 2022 was primarily due to increased revenues well as continued execution of cost control measures.

The increase in income from operations from December 31, 2020 to September 30, 2021 was primarily due to increased revenue as well as continued execution of cost control measures.

Effect of Inflation

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Revenues consist primarily of student tuition and fees derived from the programs we provide after reductions are made for discounts and scholarships that we sponsor and for refunds for students who withdraw from our programs prior to specified dates.

We apply the five-step model outlined in Accounting Standards Codification Topic 606, Revenue from Contracts from

Customers (“ASC 606”).

We apply the five-step model outlined in Accounting Standards Codification Topic 606, Revenue from Contracts from Customers (“ASC 606”).

Tuition and fee revenue is recognized ratably over the term of the course or program offered.

Approximately 99% of our revenues for each of the years ended September 30, 2023, 2022 and 2021, respectively, consisted of gross tuition.

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.

We supplement our revenues with sales of textbooks and program supplies and other revenues, which are recognized as the transfer of goods or services occurs.

Deferred revenue represents the excess of tuition and fee payments received as compared to tuition and fees earned and is reflected as a current liability in our consolidated balance sheets because it is expected to be earned within the next 12 months.

We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs.

We continue to recognize revenue ratably over the term of the course or program offered.

All of our campuses were fully operational during fiscal 2022 and 2021.

As a result, there was no deferred revenue related to the impact of COVID-19 as of September 30, 2022 and September 30, 2021, while we had $6.1 million of deferred revenue as of September 30, 2020.

We provide dealer technician training or instructor staffing services to manufacturers.

The majority of the UTI programs are designed to be completed in 30 to 100 weeks.

The UTI advanced training programs range from 8 to 26 weeks in duration.

UTI also provides dealer technician training or instructor staffing services to manufacturers.

Revenues are recognized as transfer of the services occurs.

The majority of Concorde’s core programs are

nine to ten months in duration, Concorde’s clinical programs are completed in 12 to 24 months.

In addition to revenue from tuition and fees, UTI and Concorde derive supplemental revenues from sales of textbooks and program supplies and other revenues, which are recognized as the transfer of goods or services occurs.

Deferred revenue represents the excess of tuition and fee payments received as compared to tuition and fees earned and is reflected as a current liability on our consolidated balance sheets because it is expected to be earned within the next 12 months.

All of our revenues are generated within the United States.

The impact of economic factors on the nature, amount, timing and uncertainty of revenue and cash flows is consistent across our various programs for both the UTI and Concorde segments.

Proprietary Loan Program

In order to provide funding for students who are not able to fully finance the cost of their education under traditional governmental financial aid programs, commercial loan programs or other alternative sources, we established a private loan program with a bank.

Through the proprietary loan program, the bank provides the students who participate in this program with extended payment terms for a portion of their tuition.

This program is currently offered to students at our UTI and MMI branded schools.

Through the proprietary loan program, the bank originates the loans to the students who participate in this program for a portion of their tuition.

Based on historical collection rates, we can demonstrate that a portion of these loans are collectible.

Under the terms of the proprietary loan program, the bank originates loans for our students who meet specific credit criteria with the related proceeds used exclusively to fund a portion of their tuition.

Under the terms of the proprietary loan program, the bank originates loans for our students who meet specific criteria with the related proceeds used exclusively to fund a portion of their tuition.

We then purchase all such loans from the bank at least monthly and assume all of the related credit risk.

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Estimating the collection rate requires significant management judgment.

Upon adoption of ASU 2016-13, Financial Instruments-Credit Losses:

Upon adoption of Accounting Standards Update 2016-13, Financial Instruments-Credit Losses:

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When a student with Title IV loans withdraws, Title IV rules determine if we are required to return a portion of Title IV funds to the lender.

entitled to collect these funds from the students, but collection rates for these types of receivables is significantly lower than our collection rates for receivables for students who remain in our programs.

We are then entitled to collect these funds from the students, but collection rates for these types of receivables is significantly lower than our collection rates for receivables for students who remain in our programs.

Although we believe that our allowance is adequate, if we underestimate the allowances required, additional allowances may be necessary, which would result in increased selling, general and administrative expenses in the period such determination is made.

Goodwill and Intangible Assets

We test goodwill and indefinite-lived intangible assets for impairment annually as of August 1, or more frequently if events and circumstances warrant.

Under ASC 350, Intangibles - Goodwill and Other , to evaluate the impairment of goodwill, we first assess qualitative factors, such as deterioration in the operating performance of the acquired business, adverse market conditions, adverse changes in the applicable laws or regulations and a variety of other circumstances, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount.

To evaluate the impairment of the indefinite-lived intangible assets, we assess the fair value of the assets to determine whether they were greater or less than the carrying values.

If we conclude that it is more likely than not that the fair value is less than the carrying amount based on our qualitative assessment, or that a qualitative assessment should not be performed, we proceed with the quantitative impairment tests to compare the estimated fair value of the reporting unit to the carrying value of its net assets.

Determining the fair value of indefinite-lived intangible assets is judgmental in nature and involves the use of significant estimates and assumptions.

We believe the most critical assumptions and estimates in determining the estimated fair value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate.

Determining the fair value of acquired goodwill and intangible assets is judgmental in nature and involves the use of significant estimates and assumptions.

We believe the most critical assumptions and estimates in determining the estimated

fair value include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate.

The assumptions used in determining our expected future cash flows consider various factors such as historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives.

We also have definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs.

The definite-lived intangible assets are recognized at cost less accumulated amortization.

Amortization is computed using the straight-line method based on estimated useful lives of the related assets.

2022 Impairment Testing

Our total recorded goodwill was $16.9 million as of September 30, 2022.

Of this balance, $8.6 million relates to our acquisition of MIAT in November 2021.

The remaining $8.2 million relates to our MMI Orlando, Florida campus and resulted from the acquisition of our motorcycle and marine education business in 1998.

We completed our 2022 annual goodwill impairment tests and determined that it was more likely than not that the fair value of the reporting units exceeded the carrying value and concluded that goodwill was not impaired.

As a result, we did not perform the quantitative goodwill impairment evaluation.

Our total recorded intangible assets were $14.2 million as of September 30, 2022 which primarily relates to the MIAT acquisition completed on November 1, 2021.

During the fourth quarter of 2022, in conjunction with our growth and diversification initiatives, we completed a branding study.

As a result of this study, we determined that the useful life of the MIAT trademarks and trade name was no longer indefinite and a 4 year finite useful life was more appropriate.

We completed the required impairment testing when changing from an indefinite to a finite useful life for an intangible asset and determined that the carrying value of the MIAT trademarks and trade name exceeded its fair value.

We determined the fair value of intangible asset to be $1.0 million using the relief from royalty method, and recorded an intangible asset impairment charge of $2.0 million during the year ended September 30, 2022.

Actual results may differ from the amounts included in our assessment, which could result in additional impairment of our intangible assets in the future.

There was no impairment related to our other intangible assets.

As a result, significant judgments and interpretations are required in determining the value of acquired goodwill and intangible assets.

We are subject to the income tax laws of the United States, which are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities.

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The realization of deferred tax assets is dependent, in part, upon future taxable income.

In assessing the need for a valuation allowance, we

consider all available evidence, including our historical profitability and projections of future taxable income.

In assessing the need for a valuation allowance, we consider all available evidence, including our historical profitability and projections of future taxable income.

If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, we record a valuation allowance.

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Changes in the valuation allowance are included in our statement of operations as a charge or credit to income tax benefit (expense).

As a result of our assessment, income tax benefit (expense) within our statements of operations was impacted by decreases of $12.1 million and $3.2 million in the valuation allowance during the years ended September 30, 2022 and 2021, respectively.

As a result of our assessment, income tax (expense) benefit within our statements of operations was impacted by a decrease of $0.2 million and $12.1 million in the valuation allowance during the years ended September 30, 2023 and 2022, respectively.

The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased and if additional weight may be given to subjective evidence such as our projections for growth.

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Recent Accounting Pronouncements

Information concerning recently issued accounting pronouncements which are not yet effective is included in Note 3 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K.

As indicated in Note 3, we are still evaluating the impact of the recently issued accounting pronouncements on our financial statements.

As of September 30, 2023, there were no recently issued accounting pronouncements which are not yet effective that are expected to have an impact on our financial statements.

Note 3 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K includes a discussion on Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting which was effective in fiscal 2023.

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 7. Management’s Discussion and Analysis