What changed in this filing

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Item 9A. Controls and Procedures

2023-12-01 compared with 2022-12-12 · 689 added, 602 removed, 1174 unchanged (52% of the section changed)

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Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022, pursuant to Exchange Act Rule 13a-15.

Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2022 were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2023, the Company’s disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the

Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On December 1, 2022, we completed the acquisition of Concorde Career Colleges, Inc.

We have excluded the acquired business from our assessment and report on internal control over financial reporting for the year ended September 30, 2023, as permitted under SEC rules.

Other than the foregoing, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Management on Internal Control Over Financial Reporting and Attestation Report of Independent Registered Public Accounting Firm

Management’s Report on Internal Control Over Financial Reporting and the attestation report of our Independent Registered Public Accounting Firm with respect to the effectiveness of our internal control over financial reporting are included on pages F-2 and F-3, respectively, of this Annual Report on Form 10-K.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

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OTHER INFORMATION

During the quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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Smith Executive Vice President, Campus Operations & Services

Fesperman Senior Vice President, Chief Commercial Officer

Hitchcock Senior Vice President, Chief Strategy and Transformation Officer

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Kevane Senior Vice President, Chief Legal Officer

Mason Senior Vice President, Chief Human Resources Officer

Severson Senior Vice President, Admissions

Lorenz Senior Vice President, UTI Division President

Smith Senior Vice President, Chief Information Officer

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Shackelton Managing Partner, Coliseum Capital Management, LLC

Slubowski President, Chief Executive Officer, and Board Member of Trinity Health

Srere Former President, Young and Rubicam Advertising

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(Incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant on February 21, 2017.)

4.6+ Description of Securities.

Exhibit Number Description

4.6+ Description of Securities.

10.1* Universal Technical Institute Executive Benefit Plan, effective March 1, 1997.

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(Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on April 6, 2010.)

10.8* Employment Agreement, dated April 8, 2014, between the Registrant and Kimberly J.

(Incorporated by reference to Exhibit 10.1 to a Form 8-K filed by the Registrant on April 11, 2014.)

10.8.1* Offer Letter, dated as of August 2, 2012, between the Registrant and Sherrell E.

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(Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on June 24, 2016.)

10.16* Retirement Agreement and Release of Claims, dated as of October 31, 2019, by and between the Registrant and Kimberly J.

McWaters, as amended.

(Incorporated by reference to Exhibit 10.16 to the Form 10-K filed by the Registrant on December 6, 2019.)

10.12* Employment Agreement, dated November 1, 2019, by and between the Registrant and Jerome A.

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10.13 Credit Agreement, dated May 12, 2021, by and among the Company, Universal Technical Institute of Arizona, LLC and Fifth Third Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on May 12, 2021.)

Exhibit Number Description

10.14 First Amendment to Credit Agreement, dated April 3, 2023, by and among the Company, Universal Technical Institute of Arizona, LLC and Fifth Third Bank, National Association (incorporated by reference to Exhibit 10.2 to the Form 10-Q dated August 8, 2023).

10.15 Term Promissory Note, issued by the Company, dated May 12, 2021 (incorporated herein by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on May 12, 2021).

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(Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on February 26, 2021).

Exhibit Number Description

10.18 Loan Agreement dated April 14, 2022, by and among 2611 Corporate West Drive Venture LLC and Valley National Bank (incorporated by reference to Exhibit 10.3 to the Form 10-Q dated May 5, 2022).

10.19 Guaranty dated April 14, 2022, by and among Universal Technical Institute, Inc., 2611 Corporate West Drive Venture LLC and Valley National Bank (incorporated by reference to Exhibit 10.4 to the Form 10-Q dated May 5, 2022).

10.20 Credit Agreement, dated as of November 18, 2022, by and among Universal Technical Institute, Inc., Fifth Third Bank, National Association, and the other loan parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 21, 2022).

10.21 Guaranty and Security Agreement, dated as of November 18, 2022, by and among Universal Technical Institute, Inc., Fifth Third Bank, National Association, and the other loan parties thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 21, 2022).

10.22 Consent Letter, dated June 26, 2023, by and among Universal Technical Institute, Inc., Fifth Third Bank, National Association, and the other loan parties thereto (incorporated by reference to Exhibit 10.1 to the Form 10-Q dated August 8, 2023).

10.23 First Amendment to Credit Agreement, dated August 16, 2023, by and among, Universal Technical Institute, Inc., and the other loan parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 29, 2023).

10.24+* Universal Technical Institute, Inc.

Recovery of Erro neously -Awarded Incentive Compensation Policy, adopted September 20, 2023 .

21.1+ Subsidiaries of the Registrant.

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/s/ Robert T.

Chairman of the Board December 12, 2022

Director December 12, 2022

Chairman of the Board November 30, 2023

Director November 30, 2023

/s/ George W.

Brochick Director December 12, 2022

Brochick Director November 30, 2023

/s/ William J.

Director December 12, 2022

Director November 30, 2023

/s/ Shannon L.

Director December 12, 2022

Director November 30, 2023

/s/ Loretta L.

Sanchez Director December 12, 2022

Sanchez Director November 30, 2023

/s/ Christopher S.

Director December 12, 2022

Director November 30, 2023

Christopher S.

Director December 12, 2022

/s/ Michael A.

Slubowski Director November 30, 2023

Director November 30, 2023

/s/ Kenneth R.

Director December 12, 2022

Director November 30, 2023

UNIVERSAL TECHNICAL INSTITUTE, INC.

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Also, projections of any evaluation of effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

As discussed in Note 4 to the Consolidated Financial Statements, the Company completed the acquisition of Concorde Career Colleges, Inc.

(“Concorde”) on December 1, 2022.

Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Concorde, which represented approximately 18% of total assets as of September 30, 2023, and approximately 29% of revenues for the year then ended.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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We have audited the internal control over financial reporting of Universal Technical Institute, Inc.

(the “Company”) as of September 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

and subsidiaries (the “Company”) as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements as of and for the year ended September 30, 2022, of the Company and our report dated December 12, 2022 expressed an unqualified opinion on those financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2023, of the Company and our report dated December 1, 2023, expressed an unqualified opinion on those financial statements.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Concorde Career Colleges, Inc.

(“Concorde”), which was acquired on December 1, 2022, and whose financial statements constitute 18% of total assets and 29% of revenues of the consolidated financial statement amounts as of and for the year ended September 30, 2023.

Accordingly, our audit did not include the internal control over financial reporting at Concorde.

Basis for Opinion

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of Universal Technical Institute, Inc.

(the "Company") as of September 30, 2022 and 2021, the related statements of operations, other comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2022, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Universal Technical Institute, Inc.

and subsidiaries (the "Company") as of September 30, 2023 and 2022, the related consolidated statements of operations, other comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

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The Company estimates the amount it expects to collect on these loans by calculating the amount due compared to historical loan collections over the past 10 years, and recognizes that amount of estimated revenue over the student’s program, resulting in a Notes Receivable balance of $36.7 million as of September 30, 2023.

The Company evaluates the collectability rate of its outstanding loans each quarter, which requires significant management judgment.

We identified the expected collection rate for the proprietary loan program as a critical audit matter, because the Company evaluates the collection rate of its outstanding loans each quarter, which requires significant management judgment.

The Company currently uses the actual collection experience over the past 10 years to determine the expected collection rate.

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• Tested the design and effectiveness of the Company’s internal controls related to the Company’s evaluation of the proprietary loan program expected collection rate.

• Considered how the expected collection rate might change if the Company had used a different time period in the calculation of the expected collection rate, and what impact it would have on the financial statements.

• Performed a trend analysis by comparing recent repayment trends and collection rates by quarter over the past 3 years compared to the expected collection rate calculated to evaluate whether the expected collection rate estimate is reasonable.

• Considered how the expected collection rate might change if the Company had used a different time period in the calculation of the expected collection rate, and the impact it would have on the financial statements.

• Recalculated the expected collection rate based on the actual collection rates of the loan portfolio for the most recent 10 years.

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Right-of-use assets for operating leases 176,657 132,038

Deferred tax assets, net 3,365 —

Deferred tax assets 3,768 3,365

Other assets 10,823 5,958

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Deferred revenue 85,738 54,223

Accrued tool sets 3,176 3,292

Operating lease liability, current portion 22,481 12,959

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Total current liabilities 184,700 137,722

Deferred tax liabilities, net — 674

Deferred tax liabilities 663 —

Operating lease liability 165,026 129,302

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Preferred stock, $ 0.0001 par value, 10,000 shares authorized;

676 and 700 shares of Series A Convertible Preferred Stock issued and outstanding as of September 30, 2022 and 2021, liquidation preference of $ 100 per share

676 shares of Series A Convertible Preferred Stock issued and outstanding as of September 30, 2023 and 2022, liquidation preference of $ 100 per share

Paid-in capital - common 151,439 148,372

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( 365 ) ( 365 )

Retained deficit ( 1,307 ) ( 21,996 )

Accumulated other comprehensive income (loss) 2,213 ( 279 )

Retained earnings (deficit) 5,946 ( 1,307 )

Accumulated other comprehensive income 2,463 2,213

Total shareholders’ equity 225,967 215,397

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Total operating expenses 586,009 396,391 320,136

Income (loss) from operations 22,374 14,947 ( 3,871 )

Income from operations 21,399 22,374 14,947

Other (expense) income:

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Interest expense ( 9,656 ) ( 2,002 ) ( 365 )

Other (expense) income ( 438 ) 518 135

Other income (expense) 483 ( 438 ) 518

Total other (expense) income, net ( 3,312 ) ( 1,933 ) 236

Income (loss) before income taxes 20,441 15,183 ( 2,594 )

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

Income before income taxes 18,087 20,441 15,183

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

Net income 12,322 25,848 14,581

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Net income $ 12,322 $ 25,848 $ 14,581

Other comprehensive income:

Other comprehensive income (loss):

Unrealized gain (loss) on interest rate swaps, net of taxes 250 2,492 ( 279 )

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Capital - Common Paid-in

Capital - Preferred Treasury Stock Retained Deficit Accumulated Other Comprehensive Income (Loss) Total

Capital - Preferred Treasury Stock Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total

Shareholders’

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Net income — — — — — — — — 14,581 — 14,581

Adjustment for the adoption of ASC 842 — — — — — — — — 8,958 — 8,958

Issuance of common stock under employee plans 328 — — — — — — — — — —

Cumulative effect from adoption of ASC 326 — — — — — — — — 1,644 — 1,644

Issuance of common stock under stock-based compensation plans 251 — — — — — — — — — —

Shares withheld for payroll taxes ( 66 ) — — — ( 421 ) — — — — — ( 421 )

Stock-based compensation — — — — 1,733 — — — — — 1,733

Shares issued for equity offering — — — — ( 47,870 ) — 6,783 97,023 — — 49,153

Preferred stock cash dividends declared — — — — — — — — ( 5,250 ) — ( 5,250 )

Unrealized loss on interest rate swap — — — — — — — — — ( 279 ) ( 279 )

Balance as of September 30, 2021 32,915 $ 3 700 $ — $ 142,314 $ 68,853 ( 82 ) $ ( 365 ) $ ( 21,996 ) $ ( 279 ) $ 188,530

Net income — — — — — — — — 25,848 — 25,848

Cumulative effect from adoption of ASC 326 — — — — — — — — 1,644 — 1,644

Issuance of common stock under employee plans 251 — — — — — — — — — —

Issuance of common stock under stock-based compensation plans 300 — — — — — — — — — —

Shares withheld for payroll taxes ( 82 ) — — — ( 651 ) — — — — — ( 651 )

Stock-based compensation — — — — 4,337 — — — — — 4,337

Preferred stock conversion 724 — ( 24 ) — 2,372 ( 2,372 ) — — — — —

Preferred stock cash dividends declared — — — — — — — — ( 5,159 ) — ( 5,159 )

Unrealized loss on interest rate swap — — — — — — — — — ( 279 ) ( 279 )

Unrealized gain on interest rate swap, net of taxes — — — — — — — — — 2,492 2,492

Balance as of September 30, 2022 33,857 $ 3 676 $ — $ 148,372 $ 66,481 ( 82 ) $ ( 365 ) $ ( 1,307 ) $ 2,213 $ 215,397

Net income — — — — — — — — 12,322 — 12,322

Issuance of common stock under employee plans 300 — — — — — — — — — —

Issuance of common stock under stock-based compensation plans 410 — — — — — — — — — —

Shares withheld for payroll taxes ( 110 ) — — — ( 781 ) — — — — — ( 781 )

Stock-based compensation — — — — 3,848 — — — — — 3,848

Preferred stock conversion 724 — ( 24 ) — 2,372 ( 2,372 ) — — — — —

Preferred stock cash dividends declared — — — — — — — — ( 5,069 ) — ( 5,069 )

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Training equipment credits earned, net 1,375 180 364

Unrealized gain (loss) on derivative contract 2,492 ( 279 ) —

Unrealized gain (loss) on interest rate swaps, net of taxes 250 2,492 ( 279 )

Other losses (gains), net 276 663 ( 13 )

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Other assets 740 ( 1,673 ) ( 768 )

Accounts payable and accrued expenses 5,652 1,790 7,020

Accounts payable, accrued expenses and other current liabilities ( 5,885 ) 7,337 3,815

Deferred revenue 11,370 ( 5,268 ) 16,954

Income tax receivable — — 7,145

Accrued tool sets and other current liabilities 1,685 2,025 1,863

Operating lease liability ( 20,474 ) ( 13,952 ) ( 20,469 )

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Purchase of property and equipment ( 56,685 ) ( 79,450 ) ( 61,306 )

Proceeds from disposal of property and equipment 7 280 64

Purchase of held-to-maturity investments — ( 28,821 ) —

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Cash flows from financing activities:

Proceeds from term loan 38,000 31,150 —

Debt issuance costs related to the term loan ( 378 ) ( 272 ) —

Proceeds from equity offering — — 49,153

Proceeds from revolving credit facility 90,000 — —

Proceeds from term loans — 38,000 31,150

Debt issuance costs related to long-term debt ( 516 ) ( 378 ) ( 272 )

Payment of preferred stock cash dividend ( 5,069 ) ( 5,159 ) ( 5,250 )

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CARES Act funds received for institutional costs (See Note 24) — — 2,677

CARES Act funds for institutional costs included in Receivables, net (See Note 25) — — 1,797

The accompanying notes are an integral part of these consolidated financial statements.

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Note 1 - Business Description

Founded in 1965, with approximately 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.

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.

We work closely with over 35 original equipment manufacturers and industry brand partners to understand their needs for qualified service professionals.

Revenues generated from our schools consist primarily of tuition and fees paid by students.

In conjunction with the Concorde Career Colleges, Inc.

acquisition on December 1, 2022 (the “Concorde Acquisition”), 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 and Marine Mechanics Institute (“MMI”), NASCAR Technical Institute, and MIAT College of Technology (“MIAT”).

UTI also offers manufacturer specific advanced training programs, 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.

We acquired Concorde on December 1, 2022.

See Note 4 on “Acquisitions” for additional information.

“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.

Additional information about our reportable segments is presented in Note 22.

Our primary source of revenues is currently tuition and fees paid by students.

To pay for a substantial portion of their tuition, the majority of students rely on funds received from federal financial aid programs under Title IV Programs of the Higher Education Act of 1965, as amended (“HEA”), as well as from various veterans’ benefits programs.

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Principles of Consolidation

The accompanying consolidated financial statements include the accounts of UTI and its wholly owned subsidiaries.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

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The results of our analysis form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements.

Revenue Recognition

Postsecondary education

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”).

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, 2022, 2021 and 2020, 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 duration.

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.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

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

Revenues are recognized as transfer of the services occurs.

Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements.

Fair Value of Financial Instruments

The carrying value of cash equivalents, restricted cash, held-to-maturity investments (when outstanding), accounts receivable, accounts payable, accrued liabilities, deferred tuition, and debt approximates their respective fair value as of September 30, 2023 and 2022 due to the short-term nature of these instruments or variable interest rates which approximate market rates.

Restricted Cash

Restricted cash includes funds held as collateral for certain of the surety bonds that our insurers issue on behalf of our campuses and admissions representatives with multiple states which are required to maintain authorization to conduct our business, funds transferred in advance of loan purchases under the proprietary loan program and funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account.

Additionally, we have letters of credit with some of our landlords in connection with leased campuses.

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 selected UTI and MMI 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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Under the terms of the related agreement, we transfer funds for loan purchases to a deposit account with the bank in advance of the bank funding the loan, which secures our related loan purchase obligation.

Such funds are classified as restricted cash in our consolidated balance sheet.

All related expenses incurred with the bank or other service providers are expensed as incurred within educational services and facilities expense and were approximately $ 1.1 million, $ 1.1 million, and $ 0.9 million for the years ended September 30, 2022, 2021, and 2020, respectively.

Such funds are classified as restricted cash on our consolidated balance sheets.

All related expenses incurred with the bank or other service providers are expensed as incurred within educational services and facilities expense in the consolidated statements of operations and were approximately $ 1.0 million, $ 1.1 million, and $ 1.1 million for the years ended September 30, 2023, 2022, and 2021, respectively.

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.

These amounts are presented as “Notes receivable, current portion” and “Notes receivable, less current portion” on our consolidated balance sheets.

Estimating the collection rate requires significant management judgment.

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

Restricted Cash

Allowance for Uncollectible Accounts

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability, failure or refusal of our students to make required payments.

We offer a variety of payment plans to help students pay that portion of their education expenses not covered by financial aid programs or alternate fund sources, which are unsecured and not guaranteed.

Management analyzes accounts receivable, historical percentages of uncollectible accounts, customer credit worthiness and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts.

We use an internal

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

group of collectors, augmented by third party collectors as deemed appropriate, in our collection efforts.

Retail Installment Contract Receivables

Concorde currently and historically offers certain students retail installment contracts for payment of their tuition that are not covered by federal student financial aid or other funding sources.

The retail installment contracts are due to Concorde from current and former students, are generally due over a period of up to five years , and bear interest at market rates ranging from 0 percent to 15 percent.

Starting in fiscal year 2023, retail installment contracts are being issued at interest rates between 0 percent to 9 percent.

Due to the fact that there is no interest imposed on certain of the retail installment contracts, primarily while students are actively completing their selected programs, we calculate the imputed interest expense on the retail installment contracts.

However, the imputed interest expense is not considered material for such retail installment contracts.

Retail installment contract receivables are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.

The allowance for credit losses is recognized at inception and is reassessed each reporting period.

The short-term portion of the retail installment contract receivable and related allowance for credit losses are included in “Receivables, net” while the long-term portion of the retail installment contract receivable and related allowance for credit losses is presented in “Other assets” on our consolidated balance sheets.

Allowance for Uncollectible Accounts

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability, failure or refusal of our students to make required payments.

As previously noted, we offer a variety of payment plans to help students pay the portion of their education expenses not covered by financial aid programs or alternate fund sources, which are unsecured and not guaranteed.

We use an internal group of collectors, augmented by third party collectors as deemed appropriate, in our collection efforts.

Although we believe that our allowance is adequate, if the financial condition of our students deteriorates, resulting in their ability to make payments, or 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.

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Assets may also be evaluated by identifying independent market values.

If we determine that an asset’s carrying value is impaired, we will write-down the carrying value of the asset to its estimated fair value and charge the impairment as an operating expense in the period in which the determination is made.

If we determine that an asset’s carrying value is impaired, we will write-down the carrying value of the asset to its estimated fair value and record the impairment as an operating expense in the period in which the determination is made.

There were no impairment charges recorded for property and equipment for the years ended September 30, 2023, 2022 and 2021.

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.

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.

There were no indicators of impairment for our goodwill as of September 30, 2022.

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

We reviewed the results of this study and determined that the useful life of the MIAT trademarks and trade name was no longer indefinite and a four-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 were no impairment charges related to intangible assets recorded for the years ended September 30, 2021 and 2020 and no impairments for the remaining intangible assets in 2022.

Our goodwill balance of $ 28.5 million as of September 30, 2023 resulted from our MMI, MIAT and Concorde acquisitions.

Goodwill represents the excess of the cost of an acquired business over the estimated fair values of the assets acquired and liabilities assumed.

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.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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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.

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 Topic 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.

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 for goodwill to compare the estimated fair value of the reporting unit to the carrying value of its net assets.

An impairment charge is recorded in an amount equal to the excess of the carrying amount over its estimated fair value, limited to the total amount of goodwill allocated to the reporting unit.

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.

Determining the fair value of a reporting unit or 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 include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate.

Based on our qualitative assessment, there were no indicators of impairment for our goodwill or indefinite-lived intangible assets as of September 30, 2023.

See Note 10 and Note 11 for additional details on our goodwill and intangible assets.

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We lease the majority of our administrative and educational facilities under operating lease agreements.

Upon adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) as of October 1, 2019, we derecognized our previously recorded deferred rent balance.

ASC 842 requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases.

ASC Topic 842, Leases (“ASC 842”) requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We adopted ASC 842 under a modified retrospective method without the recasting of comparative periods’ financial information.

To determine if a contract is or contains a lease, we considered whether (1) explicitly or implicitly identified assets have been deployed in the contract and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract.

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We have elected to account for the lease and non-lease components as a single lease component.

For all leases we are a party to, the discount rate implicit in the lease was not readily determinable.

Therefore, we used our incremental borrowing rate for each lease to determine the present value of the lease.

We determined the incremental borrowing rate applicable to each lease through a model that represents the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The incremental borrowing rate was applied to each lease based on the remaining term of the lease.

For all our leases the discount rate implicit in the lease is not readily determinable.

Therefore, we use our incremental borrowing rate for each lease to determine the present value of the lease.

We calculate the incremental borrowing rate applicable to each lease through a model that represents the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The incremental borrowing rate applied to each lease is based on the remaining term of the lease.

See Note 12 for additional disclosures on our leases.

Advertising Costs

Costs related to advertising are expensed as incurred and totaled approximately $ 51.5 million, $ 38.7 million, and $ 39.7 million for the years ended September 30, 2022, 2021, and 2020, respectively.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Derivative Financial Instruments

On occasion, we may use interest rate swaps to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows, primarily with variable-rate debt.

We recognize all derivatives at fair value within the line items “Other current assets,” “Other assets,” “Other current liabilities,” and “Other liabilities” on the consolidated balance sheets.

Management reviews our derivative positions and overall risk management strategy on a regular basis.

We only enter into transactions that we believe will be highly effective at offsetting the underlying risk, and we do not use derivatives for trading or speculative purposes.

We may choose to designate our derivative financial instruments, which are generally interest rate swaps, to hedge future interest payments on variable debt.

At inception of the transaction, we formally designate and document the derivative financial instrument as a hedge of a specific underlying exposure, the risk management objective, and strategy for undertaking the hedge transaction.

We formally assess both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions.

Due to the high degree of effectiveness between the hedging instruments and the underlying exposures hedged, fluctuations in the value of the derivative financial instruments will generally be offset by the changes in the cash flows or fair value of the underlying exposures being hedged.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in “Accumulated other comprehensive income” on the consolidated balance sheets.

For cash flow hedges, we report the effective portion of the gain or loss as a component of “Accumulated other comprehensive income” and reclassify it to “Interest expense” in the consolidated statements of operations over the corresponding period of the underlying hedged item.

The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs.

To the extent the hedged forecasted interest payments on debt related to our interest rate swap is paid off, the remaining balance in “Accumulated other comprehensive income” is recognized in “Interest expense” in the consolidated statements of operations.

See Note 15 for additional disclosures related to our derivative financial instruments.

Revenue Recognition

We apply the five-step model outlined in Accounting Standards Codification (“ASC”) 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.

See Note 5 for further information on our revenues.

Advertising and Marketing Costs

Costs related to advertising and marketing are expensed as incurred and totaled approximately $ 72.2 million, $ 54.5 million, and $ 40.9 million for the years ended September 30, 2023, 2022, and 2021, respectively.

Stock-Based Compensation

Historically, we have issued restricted stock units and stock options.

All restricted stock units are subject to service vesting conditions, while some are also subject to performance conditions.

We measure all share-based payments to employees at estimated fair value.

We recognize the compensation expense for restricted stock units with only service conditions on a straight-line basis over the requisite service period.

We granted restricted stock units with service only conditions (“RSUs”) and restricted stock units with both service and performance conditions (“PSUs”) during the years ended September 30, 2023, 2022 and 2021.

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Shares issued under our equity compensation plans are new shares.

Compensation expense associated with RSUs is measured based on the grant date fair value of our common stock and recognized on straight-line basis over the requisite service period, which is generally the vesting period.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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Compensation expense associated with RSUs, PSUs or stock options is measured based on the grant date fair value of our common stock.

The requisite service period for RSUs and PSUs is generally the vesting period.

We estimate the fair value of PSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rates of return, and dividend yields.

Expected volatilities are derived using a method that calculates historical volatility over a period equal to the length of the measurement period for UTI.

Expected volatilities are derived using a method that calculates historical volatility over a period equal to the length of the measurement period.

We use a risk-free rate of return that is equal to the yield of a zero-coupon U.S.

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The fair value of the PSUs is amortized on a straight-line basis over the requisite service period based upon the fair market value on the date of grant, adjusted on a quarterly basis for the anticipated or actual achievement against the established performance condition.

We issue stock-based compensation awards to certain members of management as well as our non-employee directors.

We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model.

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Concentration of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, short-term held-to-maturity investments and receivables.

As of September 30, 2022, we held cash and cash equivalents of $ 66.5 million, restricted cash of $ 3.5 million, and held-to-maturity investments of $ 28.9 million.

We place our cash and cash equivalents, restricted cash, and held-to-maturity investments with high quality financial institutions and limit the amount of credit exposure with any one financial institution.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, and receivables.

We do also on occasion invest in short-term held-to-maturity investments.

We place our cash and cash equivalents, restricted cash, and short-term held-to-maturity investments with high quality financial institutions and limit the amount of credit exposure with any one financial institution.

We mitigate the concentration risk of our investments by limiting the amount invested in any one issuer.

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We have the ability and intention to hold our short-term investments until maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost.

As of September 30, 2023, we held cash and cash equivalents of $ 151.5 million and restricted cash of $ 5.4 million.

There were no short-term held-to-maturity investments outstanding as of September 30, 2023.

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

A substantial portion is repaid through the student’s participation in federally funded financial aid programs.

Transfers of funds from the financial aid programs to us are made in accordance with the ED requirements.

Transfers of funds from the financial aid programs to us are made in accordance with the U.S.

Department of Education (“ED”) requirements.

Approximately 67 % of our revenues, on a cash basis, were collected from funds distributed under Title IV Programs for the year ended September 30, 2023 as calculated under the 90/10 rule.

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Extensive and complex regulations govern the financial assistance programs in which our students participate.

Our administration of these programs is periodically reviewed by various

Our administration of these programs is periodically reviewed by various regulatory agencies.

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

UNIVERSAL TECHNICAL INSTITUTE, INC.

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regulatory agencies.

effect on our business.

ED and other regulators have increased the frequency and severity of their enforcement actions against postsecondary schools which have resulted in the imposition of material liabilities, sanctions, letter of credit requirements and other restrictions and, in some cases, resulted in the loss of schools’ eligibility to receive Title IV funds or in closure of the schools.

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The receipt of financial aid funds reduces the student’s 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 either through Title IV or other funds and resources available to the student.

Fair Value of Financial Instruments

The carrying value of cash equivalents, restricted cash, held-to-maturity investments, accounts receivable, accounts payable, accrued liabilities and deferred tuition approximates their respective fair value as of September 30, 2022 and 2021 due to the short-term nature of these instruments.

Start-up Costs

Costs related to the start-up of new campuses and programs are expensed as incurred.

Derivative Financial Instruments

On occasion, we may use interest rate swaps to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows, primarily with variable-rate debt.

We do not use derivative financial instruments for trading or speculative purposes.

Management reviews our derivative positions and overall risk management strategy on a regular basis.

We only enter into transactions that we believe will be highly effective at offsetting the underlying risk, and we do not use derivatives for trading or speculative purposes.

We may choose to designate our derivative financial instruments, which are generally interest rate swaps, to hedge future interest payments on variable debt.

We formally assess both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

For cash flow hedges, we report the effective portion of the gain or loss as a component of “Accumulated other comprehensive income (loss)” and reclassify it to “Interest expense” in the consolidated statements of operations over the corresponding period of the underlying hedged item.

The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs.

To the extent the hedged forecasted interest payments on debt related to our interest rate swap is paid off, the remaining balance in “Accumulated other comprehensive income (loss)” is recognized in “Interest expense” in the consolidated statements of operations.

See Note 16 for additional disclosures related to our derivative financial instruments.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Reclassifications

Due to the acquisition of MIAT on November 1, 2021, which is described in further detail in Note 4, we added a new line to the consolidated balance sheet:

“Intangible Assets.” We have presented the intangible assets arising from the MIAT acquisition as well as the previously recorded intangible assets in this line.

As of September 30, 2021, $ 0.1 million of intangible assets was reclassified from “Other assets” to “Intangible assets” on the consolidated balance sheet for comparable presentation.

Certain other prior year amounts have been reclassified to conform to current year presentation in our Income taxes disclosures included in Note 17.

As previously noted, as a result of the Concorde Acquisition, beginning with the year ended September 30, 2023, we have two reportable segments:

UTI and Concorde.

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

The segment disclosures presented in Note 22 for the years ended September 30, 2021 and 2022 have been revised from the prior year presentation to reflect the new reportable segments.

Additionally, starting with the year ended September 30, 2023, we have reclassified “Accrued tool sets” into “Accounts payable and other accrued expenses” on our consolidated balance sheets for reporting purposes.

As of September 30, 2022, $ 3.2 million was reclassified from “Accrued tool sets” to “Accounts payable and other accrued expenses” on the consolidated balance sheets for comparable presentation.

The breakout of accrued tool sets is now disclosed in Note 13.

Further, the activity related to the accrued tool sets balance is now reported in the “Accounts payable and other accrued expenses” line on the consolidated statement of cash flows for the year ended September 30, 2023.

We reclassified $ 1.7 million and $ 2.0 million from “Accrued tool sets and other current liabilities” to “Accounts payable, accrued expenses and other current liabilities” on the consolidated statement of cash flow for the years ended September 30, 2022 and 2021, respectively, for comparable presentation.

Note 3 - Recent Accounting Pronouncements

Accounting Pronouncements Effective in Fiscal 2023

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

We have evaluated the new guidance and determined that there is no material impact on our results of operations, financial condition and financial statement disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

The amendments in ASU 2021-08 require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts from Customers (“ASC 606”).

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree financial statements were prepared in accordance with generally accepted accounting principles).

For public business entities, the amendments in ASU 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption of ASU 2021-08 is permitted, including adoption in an interim period.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

Due to the MIAT acquisition on November 1, 2021, we have elected to early adopt ASU 2021-08 as of October 1, 2021 and have applied the guidance in ASU 2021-08 to the deferred revenue recorded for MIAT.

See Note 4 for further information on the acquisition of MIAT.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met.

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The amendments in ASU 2020-04 do not apply to contract modifications made after December 31, 2022.

Given the interest rate for one of our term loans (which is further described in Note 15) references LIBOR, we are currently evaluating the new reference rate reform practical expedients and will consider adopting this guidance when we are required to modify our contract for the discontinuation of LIBOR.

On April 3, 2023, we executed an amendment for our Avondale Term Loan (as defined in Note 14) to convert the stated rate from LIBOR to Term Secured Overnight Financing Rate (“SOFR”) (which is further described in Note 14).

Additionally, on March 31, 2023, we terminated our existing interest rate swap and entered into a new interest rate swap agreement, effective April 3, 2023, with the Avondale Lender that effectively fixes the interest rate we pay on 50 % of the principal amount of the Avondale Term Loan at 1.45 % for the entire loan term (which is further described in Note 15).

In executing the amendment, we adopted several of the practical expedients allowed under ASU 2020-04, including updating the designated hedged risk in our outstanding cash flow hedging relationship to match the risk presented in the modified interest payments and to continue our hedging relationship that falls within the scope of ASU 2020-04.

The adoption of the new guidance in ASU 2020-04 did not have a material impact on our consolidated financial statements.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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Note 4 - Acquisition MIAT College of Technology

On November 1, 2021, we completed the acquisition contemplated by the previously announced Stock Purchase Agreement (the “Purchase Agreement”), dated March 29, 2021, by and among UTI, HCP Ed Holdings, LLC, a Delaware limited liability company (“Seller”), HCP Ed Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Seller (“HCP”), and Michigan Institute of Aeronautics, Inc.

d/b/a MIAT, a Michigan corporation and wholly subsidiary of HCP.

MIAT is a post-secondary school that offers vocational and technical certificates and degrees across aviation maintenance, energy technology, wind energy technology, robotics and automation, non-destructive testing, heating ventilation air conditioning and refrigeration (“HVACR”), and welding disciplines.

HCP is MIAT’s holding company that owns no assets other than the issued and outstanding shares of MIAT.

The acquisition is part of our growth and diversification strategy and allows us to expand MIAT programs throughout UTI brand campuses and extend UTI’s presence and programs into the Canton, MI market where MIAT has been for over 50 years.

Other expected synergies include operating and purchasing cost efficiencies and broadening the opportunity for student growth at the acquired MIAT campuses by leveraging our high school and national marketing and admissions infrastructure.

Under the terms of the Purchase Agreement, we acquired all of the issued and outstanding shares of capital stock of HCP from the Seller for $ 26.0 million base purchase price plus $ 2.8 million working capital surplus for total cash consideration paid of $ 28.8 million.

As a result, HCP is now a wholly owned subsidiary of UTI and MIAT remains as a wholly owned subsidiary of HCP.

The consideration paid was funded by available operating cash.

In connection with this acquisition, we incurred total transaction costs of $ 1.7 million of which $ 0.9 million were incurred during the year ended September 30, 2022 and $ 0.8 million during the year ended September 30, 2021.

In both periods, these costs are included in “Selling, general and administrative” expenses in the consolidated statements of operations.

Under the acquisition method of accounting, the total purchase price was allocated to the identifiable assets acquired and the liabilities assumed based on our valuation estimates of the fair values as of the acquisition date.

As we have finalized the related tax returns, there will be no further adjustments to the carrying value of the respective recorded assets and liabilities, or residual amount allocated to goodwill.

The final allocation of the purchase price at November 1, 2021 is summarized as follows:

Note 4 - Acquisitions

Concorde Career Colleges

On December 1, 2022, we completed the Concorde Acquisition.

Concorde operates 17 campuses located in eight states with approximately 7,600 students, and offers its programs via in-person, hybrid and online formats.

Concorde offers more than 20 programs across the allied health, dental, nursing, patient care, and diagnostic fields.

The acquisition expands our portfolio of offerings into the higher-growth healthcare arena and creates the opportunity to bring workforce educational solutions to a broader array of students and employers.

Under the terms of the Stock Purchase Agreement (the “Purchase Agreement”), dated May 3, 2022, by and among the Company, 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, 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 of net adjustments including the post-closing working capital adjustment, for total cash consideration paid of $ 48.1 million.

As a result of the transactions contemplated by the Purchase Agreement, Concorde is now a wholly-owned subsidiary of the Company.

We funded the consideration paid for the Concorde Acquisition by the revolving credit facility entered into on November 18, 2022.

See Note 14 for further details on the revolving credit facility.

In connection with the Concorde Acquisition, we incurred total transaction costs of $ 5.3 million, of which $ 3.0 million was incurred during the year ended September 30, 2022 and $ 2.3 million was incurred during the year ended September 30, 2023.

These costs are included in “Selling, general and administrative” expenses in the consolidated statements of operations for the applicable period.

Allocation of the purchase price

Under the acquisition method of accounting, the total purchase price was allocated to the identifiable assets acquired and the liabilities assumed based on our preliminary valuation estimates of the fair values as of the acquisition date.

The fair value and allocation of the business combination are preliminary, are based upon management’s best estimates and assumptions, and are subject to future revision.

We will continue our analysis under the provisions of ASC Topic 805, Business Combinations , which allows companies one year to complete acquisition related adjustments which may result in potential adjustments to the carrying value of the respective recorded assets and liabilities.

The preliminary allocation of the purchase price at December 1, 2022 is summarized as follows:

Assets acquired:

Cash and cash equivalents $ 30,064

Restricted cash 1,689

Accounts receivable, net 6,740

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Property and equipment 23,950

Right-of-use assets for operating leases 71,153

Goodwill 11,600

Intangible assets 5,400

Right-of-use assets for operating leases 14,979

Deferred tax assets 4,460

Other assets 4,997

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Operating lease liability, current portion 10,011

Long-term debt, current portion (1)

Other current liabilities 208

Long-term debt (1)

Operating lease liability 63,582

Total liabilities assumed 115,703

Net assets acquired $ 48,134

(1) Long-term debt consists of one lease classified as a finance lease under ASC 842.

Due to the timing of the acquisition, the amounts for income tax liabilities, including deferred income taxes, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction, are considered preliminary and subject to change.

Any changes in the amounts for income tax liabilities could cause further changes to intangible assets and property and equipment.

The Company will finalize these amounts no later than one year from the acquisition date once it obtains the information necessary to complete the measurement process.

Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified.

Since the initial purchase price allocation reported at December 31, 2022, we have adjusted the purchase price allocation for operating and finance lease assets and liabilities due to changes in the incremental borrowing rates.

Additionally, we identified further adjustments required for accounts receivable, prepaid expenses, deferred income taxes, deferred revenue, and accounts payable and accrued expenses.

The adjustments noted resulted in further changes to both intangible assets and goodwill.

Other than an $ 8.9 million adjustment to operating lease liabilities, the noted adjustments did not have a material impact on the financial statements since the date of acquisition.

The amount allocated to goodwill of $ 11.6 million represents the acquired assembled workforce.

None of the goodwill is expected to be deductible for tax purposes.

Factors that contributed to a purchase price resulting in the recognition of goodwill include Concorde’s strategic fit into 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.

The purchase price allocation requires subjective estimates that, if incorrectly estimated, could be material to our consolidated financial statements including the amount of depreciation and amortization expense.

The fair value of the property and equipment was estimated using the cost and market approaches as of the valuation date.

The fair value of the leases was estimated using the income and market approaches to determine if there was any favorable or unfavorable terms in place.

The intangible assets acquired, which primarily consist of the accreditations and regulatory approvals, trademarks and trade names, and curriculum, were valued using different valuation techniques depending upon the nature of the intangible asset acquired, all of which are considered level 3 as defined in Note 8.

The accreditations and regulatory approvals were valued using the multi-period excess earnings method (“MPEEM”) under the income approach.

The MPEEM is a variation of discounted cash-flow analysis.

Rather than focusing on the whole entity, the MPEEM isolates the cash flows that can be associated with a single intangible asset and measures fair value by discounting them to present value.

The trademarks and trade names were valued using the relief from royalty method.

The value of the trade name encompasses all items necessary to generate revenue utilizing the trade name.

The curriculum was valued using the cost approach.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The table below presents the summary of the intangible assets acquired and the useful lives of these assets based upon the current preliminary purchase price allocation:

Intangible Asset Useful life Amount

Accreditations and regulatory approvals Indefinite $ 3,500

Trademarks and trade names 10 years 500

Curriculum 5 years 1,400

Total $ 5,400

See Note 10 and Note 11 and for additional details on goodwill and intangible assets.

Student receivables

When financial assets are acquired in connection with a business combination, we evaluate whether those acquired financial assets have experienced a more-than-insignificant deterioration in credit quality since origination.

Financial assets acquired with evidence of such credit deterioration are referred to as purchased credit deteriorated (“PCD”) assets and reflect the acquirer’s assessment at the acquisition date.

The student receivables acquired in the Concorde Acquisition were reviewed to determine if any had experienced a more-than-insignificant deterioration in credit quality since origination.

Student receivables of approximately $ 2.3 million met the established criteria to indicate a more-than insignificant deterioration in credit quality and were identified as PCD assets.

Using our best estimate of projected losses over the term of the contracts, we calculated an allowance for credit losses on these PCD assets of approximately $ 1.0 million.

Pro forma financial information

The following unaudited pro forma financial information summarizes our results of operations as though the acquisition occurred on October 1, 2020:

Twelve Months Ended

September 30, 2023 September 30, 2022 September 30, 2021

Revenue $ 643,429 $ 618,949 $ 514,703

Net income 12,567 27,081 10,108

The unaudited pro forma financial information includes adjustments to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets and the finance lease asset had been applied from October 1, 2020, with the related tax effects.

The unaudited pro forma financial information also includes adjustments to reflect the additional interest expense on the revolving credit facility issued to fund the acquisition (see Note 14).

Lastly, the unaudited pro forma financial information includes adjustments to reflect the reduction in depreciation expense assuming the fair value adjustments to property and equipment assets had been applied from October 1, 2020.

This unaudited pro forma financial information is for informational purposes only.

It does not reflect the integration of the business or any synergies or incremental costs that may result from the acquisition.

As such, it is not indicative of the results of operations that would have been achieved had the acquisition been consummated on October 1, 2020.

In addition, the unaudited pro forma financial information amounts are not indicative of future operating results.

MIAT College of Technology

On November 1, 2021, using available operating cash, 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.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

These costs are included in “Selling, general and administrative” expenses in the consolidated statements of operations for the applicable period.

The final allocation of the purchase price at November 1, 2021 is summarized as follows:

Assets acquired:

Cash and cash equivalents $ 2,301

Accounts receivable, net 3,230

Prepaid expenses 268

Other current assets 507

Property and equipment 3,043

Goodwill 8,637

Intangible assets 16,200

Right-of-use assets for operating leases 14,979

Other assets 314

Total assets acquired $ 49,479

Liabilities assumed

Accounts payable and accrued expenses $ 1,720

Deferred revenue 1,843

Operating lease liability, current portion 817

Deferred tax liabilities, net 1,975

6 unchanged sentences

See Note 10 for additional details on goodwill.

The fair value of the tangible assets was estimated using the cost approach.

The intangible assets acquired, which primarily consists of the accreditations and regulatory approvals, trademarks and trade names, and curriculum, were valued using different valuation techniques depending upon the nature of the intangible asset acquired.

The accreditations and regulatory approvals were valued using the multiperiod excess earnings method (“MPEEM”) under the income approach.

The MPEEM is a variation of discounted cash-flow analysis.

Rather than focusing on the whole entity, the MPEEM isolates the cash flows that can be associated with a single intangible asset and measures fair value by discounting them to present value.

The accreditations and regulatory approvals were valued using the MPEEM under the income approach.

The trademarks and trade names were valued using the relief from royalty method.

The value of the trade name encompasses all items necessary to generate revenue utilizing the trade name.

The curriculum was valued using the cost approach.

See Note 11 for further details on the intangible assets recorded.

As previously discussed in Note 3, we early adopted ASU 2021-08 and applied the new guidance when recording the initial deferred revenue.

Pro forma financial information is not presented as the fiscal 2021 revenues and earnings of MIAT are not material to our consolidated statements of operations.

MIAT’s principal business is providing postsecondary education and is included in our “Postsecondary Education” reporting unit disclosed in Note 23 on Segments.

MIAT’s corporate expenses are allocated to “Postsecondary Education” and the “Other” category based on compensation expense.

Note 5 - Revenue from Contracts with Customers

Nature of Goods and Services

See Note 2 for a description of the nature of revenues.

Postsecondary Education

We apply the five-step model outlined in ASC 606.

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

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.

Additionally, certain students participate in the proprietary loan program that extends repayment terms for their tuition.

We purchase said loans from the lender and, based on historical collection rates, believe a portion of these loans are collectible.

The table below presents a summary of the intangible assets acquired and the useful lives of these assets:

Intangible Asset Useful life Amount

Accreditations and regulatory approvals Indefinite $ 12,800

Trademarks and trade names (1)

Indefinite 3,000

Curriculum 5 years 400

Total $ 16,200

(1) During the fourth quarter of 2022, in conjunction with our growth and diversification initiatives, we completed a branding study and determined that the useful life of the MIAT trademarks and trade name was no longer indefinite, and a four-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

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

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 the amount we expect to collect, and we recognize these revenues ratably over the term of the course or program offered.

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

and trade name exceeded its fair value.

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

Pro forma financial information is not presented as revenues and earnings of MIAT were not material to our consolidated statements of operations.

MIAT is included in the “UTI” reportable segment disclosed in Note 22 on Segments.

Note 5 - Revenue from Contracts with Customers

Nature of Goods and Services

As previously described in Note 2, revenues across the UTI and Concorde segments 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 ASC 606.

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

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.

We provide postsecondary education and other services in the same geographical market, the United States.

The impact of economic factors on the nature, amount, timing and uncertainty of revenue and cash flows is consistent among our various postsecondary education programs.

The majority of Concorde’s core programs are nine to ten months in duration and are billed in full at the start of the program.

Clinical programs are 12 to 24 month programs that are billed by academic term.

Clinical programs may have up to nine academic terms that last two to three months each.

Revenues are recognized as transfer of the services occurs.

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.

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.

See Note 22 for disaggregated segment revenue information.

Revenues from our Proprietary Loan Program

As previously described in Note 2, certain UTI students participate in a proprietary loan program that extends repayment terms for their tuition beyond the time that they are in school.

We purchase said loans from the lender.

Based on historical collection rates, we believe at least a portion of these loans are collectible.

Contract Balances

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The advance consideration received from students or Title IV funding is deferred revenue until the training program has been delivered to the students.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The following table provides information about receivables and deferred revenue resulting from our enrollment agreements with students:

September 30,

Receivables, which includes tuition and notes receivable $ 46,826 $ 46,489

Receivables (1)

$ 59,863 $ 46,826

Deferred revenue $ 85,738 $ 54,223

During the year ended September 30, 2022, the deferred revenue balance included decreases for revenues recognized during the period and increases related to new students who started their training programs during the period.

(1) Receivables, net of allowances, includes tuition receivables, retail installment contract receivables and notes receivable, both current and long term.

During the year ended September 30, 2023, the deferred revenue balance included decreases for revenues recognized during the period, increases related to new students who started their training programs during the period, and the addition of

deferred revenue from the Concorde Acquisition.

Note 6 - Receivables, net

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September 30,

Tuition receivables $ 18,931 $ 16,265

Tuition and fees receivables $ 29,616 $ 18,931

Tax receivables 740 —

Other receivables 3,858 3,153

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We write off receivable balances against the allowance for uncollectible accounts at the time we transfer the balance to a third-party collection agency.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The following table summarizes the activity for our allowance for uncollectible accounts for the years ended September 30, 2023, 2022 and 2021:

2 unchanged sentences

Balance at beginning of period $ 5,634 $ 2,787 $ 1,793

Additions due to opening balance of Concorde acquisition 6,740 — —

Additions due to opening balance of MIAT acquisition — 1,682 —

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In July 2022, we invested a portion of our cash and cash equivalents in short-term investments which primarily consist of corporate and municipal bonds with a minimum credit rating of A.

We have the ability and intention to hold these investments until maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost and presented them in “Held-to-maturity investments” on our consolidated balance sheet as of September 30, 2022.

The amortized cost, gross unrealized gains or losses, and fair value of held-to-maturity investments at September 30, 2022 are noted in the table below.

As of September 30, 2021, there were no outstanding held-to-maturity investments.

We had the ability and intention to hold these investments until maturity and therefore classified these investments as held-to-maturity and recorded them at amortized cost and presented them in “Held-to-maturity investments” on our consolidated balance sheet as of September 30, 2022.

As of September 30, 2023, there were no outstanding held-to-maturity investments as all of the securities matured by December 31, 2022 and there were no new purchases of held-to-maturity investments during the year ended September 30, 2023.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The amortized cost, gross unrealized gains or losses, and fair value of held-to-maturity investments at September 30, 2022 were as follows:

September 30, 2022

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Any transfers of investments between levels occurs at the end of the reporting period.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Assets measured or disclosed at fair value on a recurring basis consisted of the following:

8 unchanged sentences

36,663 — — 36,663

Corporate bonds, municipal bonds, and other (3)

28,899 28,899 — —

Total assets at fair value on a recurring basis $ 66,350 $ 29,687 $ — $ 36,663

Revolving credit facility and term loans (4)

156,991 — 156,991 —

Total liabilities at fair value on a recurring basis $ 156,991 $ — $ 156,991 $ —

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Fair Value Measurements Using

7 unchanged sentences

35,872 — — 35,872

Corporate and government bonds (3)

28,899 28,899 — —

Total assets at fair value on a recurring basis $ 88,210 $ 52,338 $ — $ 35,872

(1) Money market funds and other highly liquid investments with maturity dates less than 90 days are reflected as “Cash and cash equivalents” in our consolidated balance sheets as of September 30, 2022 and 2021.

(2) Notes receivable relate to the proprietary loan program and are reflected as “Notes receivable, current portion” and “Notes receivable, less current portion” in our consolidated balance sheets as of September 30, 2022 and 2021.

Term loans (4)

68,083 — 68,083 —

Total liabilities at fair value on a recurring basis $ 68,083 $ — $ 68,083 $ —

(1) Money market funds and other highly liquid investments with maturity dates less than 90 days are reflected as “Cash and cash equivalents” on our consolidated balance sheets as of September 30, 2023 and 2022.

(2) Notes receivable relate to the proprietary loan program and are reflected as “Notes receivable, current portion” and “Notes receivable, less current portion” on our consolidated balance sheets as of September 30, 2023 and 2022.

See Note 2 for further discussion over the proprietary loan program.

(3) Corporate bonds, municipal bonds and other are reflected as “Held-to-maturity investments” in our consolidated balance sheet as of September 30, 2022.

(3) Corporate and government bonds are reflected as “Held-to-maturity investments” on our consolidated balance sheet as of September 30, 2022.

(4) The revolving credit facility and term loans bear interest at rates commensurate with market rates, and therefore, the respective carrying values approximate fair value (Level 2).

Note 9 - Property and Equipment, net

Property and equipment, net consisted of the following:

September 30,

Depreciable Lives (in years) 2022 2021

Depreciable Lives (in years) September 30,

Land — $ 25,601 $ 16,603

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Property and equipment, net $ 266,346 $ 214,292

Depreciation expense related to property and equipment was $ 24.6 million and $ 16.8 million for years ended September 30, 2023 and 2022, respectively.

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

The purchase resulted in an increase in our buildings of $ 15.2 million, an increase in land of $ 9.0 million and the reclassification of assets from leasehold improvements to building improvements of $ 19.1 million.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

Depreciation expense related to property and equipment was $ 16.8 million and $ 14.0 million for years ended September 30, 2022 and 2021, respectively.

Acquisition of Lisle

On February 11, 2022, we completed the acquisition of 2611 Corporate West Drive Venture LLC (“2611”) which owns our Lisle, Illinois campus (the “Lisle Campus”).

Prior to the acquisition, we had a 28 % interest in 2611 through our unconsolidated affiliate, as described in Note 12, and previously leased the campus from 2611.

The total cash consideration paid, including transaction related costs, for the remaining 72 % interest in 2611 was $ 28.7 million.

In addition to the cash consideration paid, we assumed $ 18.3 million in debt for a loan agreement with a third-party bank that was secured by a mortgage on the Lisle Campus.

The total net assets recorded for the transaction equals $ 33.2 million, of which $ 8.2 million was allocated to land, $ 43.3 million was allocated to buildings, and $ 18.3 million was allocated to debt.

Additionally, prior to the acquisition of 2611, there was $ 4.0 million in leasehold improvements recorded for the Lisle Campus which we have reclassified to building and building improvements.

Note 10 - Goodwill

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Additions to goodwill for acquisition of MIAT — 8,637

Additions to goodwill for acquisition of Concorde $ 11,600

Balance at end of period $ 28,459 $ 16,859

Of the $ 16.9 million recorded as goodwill as of September 30, 2022, $ 8.6 million relates to the acquisition of MIAT as of November 1, 2021 as previously described in Note 4, and $ 8.2 million resulted from the acquisition of our motorcycle and marine education business in Orlando, Florida in 1998.

All of the goodwill relates to our Postsecondary Education reportable operating segment.

Goodwill is reviewed at least annually for impairment, which may result from the deterioration in the operating performance of the acquired businesses, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other circumstances.

Historically, this testing has been performed as of September 30 of each fiscal year.

E ffective as of October 1, 2021, we determined that our goodwill will be tested annually for impairment as of August 1 and more frequently if events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

We do not consider this change to be material and believe that the timing is preferable as it allows additional time to complete the annual assessment in advance of the annual reporting deadline.

This change in assessment date did not delay, accelerate, or cause avoidance of a potential impairment charge.

T here were no indicators of goodwill impairment as of September 30, 2022 .

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The table below summarizes the goodwill balance by reportable segment:

September 30, 2023 September 30, 2022

UTI $ 16,859 $ 16,859

Concorde 11,600 —

Total goodwill $ 28,459 $ 16,859

Note 11 - Intangible Assets, net

1 unchanged sentence

Gross Carrying Value Accumulated Amortization Net Book Value Weighted Average Remaining Useful Life (Years)

Accreditations and regulatory approvals - MIAT $ 12,800 $ — $ 12,800 Indefinite

Trademarks and trade names - MIAT 1,000 — 1,000 4.00

Curriculum - MIAT 400 ( 73 ) 327 4.08

Non-compete agreement and trade name 442 ( 354 ) 88 2.58

Accreditations and regulatory approvals $ 16,300 $ — $ 16,300 Indefinite

Trademarks, trade names and other 1,942 ( 680 ) 1,262 5.17

Curriculum 1,800 ( 387 ) 1,413 3.98

Total $ 20,042 $ ( 1,067 ) $ 18,975 4.54

Of the $ 14.6 million gross carrying value recorded as intangible assets as of September 30, 2022, $ 14.2 million relates to the MIAT acquisition completed on November 1, 2021 as previously described in Note 4, and $ 0.4 million relates to previously recorded non-complete agreements and trade names.

The remaining weighted average useful lives shown are calculated based on the net book value and remaining amortization period of each respective intangible asset.

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

Amortization expense related to finite-lived intangible assets was $ 108.8 thousand and $ 35.5 thousand for the years ended September 30, 2022 and 2021, respectively.

As discussed in Note 2, we determined the fair value of our MIAT trademarks and trade names intangible asset to be $ 1.0 million and recorded an intangible asset impairment charge of $ 2.0 million within “Selling, general and administrative” on the consolidated statement of operations during the year ended September 30, 2022.

There were no impairment charges related to intangible assets recorded for the year ended September 30, 2021 or the other remaining intangible assets for the year ended September 30, 2022.

Note 12 - Investment in Unconsolidated Affiliate

In 2012, we invested $ 4.0 million to acquire an equity interest of approximately 28 % in a joint venture (“JV”) related to the lease of our Lisle, Illinois campus facility which was accounted for under the equity method of accounting.

As discussed in Note 9, in February 2022, this JV was dissolved and we acquired the building, land and debt associated with this campus through the acquisition of the 2611 entity.

Our equity in earnings of unconsolidated affiliates was $ 0.1 million for the year ended September 30, 2022, and $ 0.4 million for the years ended 2021 and 2020.

Investment in unconsolidated affiliate is included within “Other assets” on our consolidated balance sheets as noted below:

September 30,

Carrying Value Ownership Percentage Carrying Value Ownership Percentage

Investment in JV $ — — % $ 4,627 28.0 %

The following table provides the gross carrying value, accumulated amortization, net book value and remaining useful life for those intangible assets that were subject to amortization as of September 30, 2022:

Gross Carrying Value Accumulated Amortization Net Book Value Weighted Average Remaining Useful Life (Years)

Accreditations and regulatory approvals $ 12,800 $ — $ 12,800 Indefinite

Trademarks, trade names and other 1,442 ( 354 ) 1,088 3.88

Curriculum 400 ( 73 ) 327 4.08

Total $ 14,642 $ ( 427 ) $ 14,215 3.93

Amortization expense for the year ended September 30, 2023, 2022, and 2021 was $ 0.6 million, $ 108.8 thousand, and $ 35.5 thousand, respectively.

UNIVERSAL TECHNICAL INSTITUTE, INC.

2 unchanged sentences

(In thousands, except per share amounts)

Investment in our unconsolidated affiliate included the following activity during the period:

Year ended September 30,

Balance at beginning of period $ 4,627 $ 4,494

Equity in earnings of unconsolidated affiliate 113 410

Return of capital contribution from unconsolidated affiliate ( 188 ) ( 277 )

Dissolution of unconsolidated affiliate ( 4,552 ) —

Balance at end of period $ — $ 4,627

Intangible assets subject to amortization as of September 30, 2023, will be amortized as follows:

2024 2025 2026 2027 2028 Thereafter

Estimated future amortization expense $ 696 $ 677 $ 660 $ 337 $ 97 $ 208

Of the $ 20.0 million gross carrying value recorded as intangible assets as of September 30, 2023, $ 5.4 million relates to the Concorde asset group and $ 14.6 million relates to the UTI asset group.

The remaining weighted average useful lives shown are calculated based on the net book value and remaining amortization period of each respective intangible asset.

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

Our indefinite-lived intangible assets are reviewed at least annually for impairment as of August 1, or more frequently if there are indicators of impairment.

There were no indicators of impairment for our indefinite-lived intangible assets as of the year ended September 30, 2023.

As discussed in Note 4, during the year ended September 30, 2022, we determined the fair value of our MIAT trademarks and trade names intangible asset to be $ 1.0 million and recorded an intangible asset impairment charge of $ 2.0 million within “Selling, general and administrative” on the consolidated statement of operations during the year ended September 30, 2022.

Note 12 - Leases

As of September 30, 2022, we lease 12 of our 16 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases.

As of September 30, 2023, we lease 29 of our 33 campuses and three other locations under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases.

Our facility leases have original lease terms ranging from 5 to 20 years and expire at various dates through 2036.

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All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our consolidated balance sheets.

As previously discussed in Note 9, in February 2022 we purchased the 2611 entity which owns the Lisle Campus.

While the lease for the Lisle Campus remains in place between the 2611 and UTI of Illinois, LLC entities, at the UTI, Inc consolidated level, the right-of-use asset and the operating lease liability for this campus were settled, resulting in a gain on settlement of $ 1.6 million which has been included within “Educational services and facilities” on our consolidated statement of operations for the year ended September 30, 2022.

Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”).

2 unchanged sentences

There are no early termination with penalties, residual value guarantees, restrictions or covenants imposed by our facility leases.

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the consolidated statements of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”

The components of lease expense during the years ended September 30, 2023, 2022, and 2021 are presented below.

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Operating lease assets Right-of-use assets for operating leases (1)

$ 176,657 $ 132,038

Finance lease assets Property and equipment, net (2)

1 unchanged sentence

Operating lease liabilities Operating lease liability, current portion (1)

$ 22,481 $ 12,959

Finance lease liabilities Long-term debt, current portion 844 23

Operating lease liabilities Operating lease liability (1)

165,026 129,302

Finance lease liabilities Long-term debt 4,757 —

Total lease liabilities $ 193,108 $ 142,284

(1) As noted in Note 4, during the year ended September 30, 2023, our right-of-use assets and operating lease liabilities increased due to the acquisition of Concorde.

This increase was partially offset in March 2023, with the purchase of the three primary buildings and associated land that we previously leased at the UTI Orlando, Florida campus, as discussed in Note 9.

This purchase reduced our right-of-use assets balance by approximately $ 10.5 million and our operating lease liabilities by approximately $ 12.4 million.

(2) The finance lease assets and liabilities as of September 30, 2023 consisted of one campus lease, and as of September 30, 2022 were made up of three equipment leases.

Finance lease assets are recorded net of accumulated amortization of $ 0.8 million and $ 0.2 million as of September 30, 2023 and 2022, respectively.

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Finance leases 6.02 % 3.08 %

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Year ended September 30,

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Lease assets obtained in exchange for new operating lease liabilities (1)

Leases assets obtained in exchange for new finance lease liabilities — — 215

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

$ 4,568 $ 3,313 $ 30,017

(1) Excludes the operating leases recorded for the Concorde and MIAT acquisitions discussed in Note 4.

During the year ended September 30, 2023, Concorde renewed the campus lease for their Orlando, Florida campus and signed a new lease for a smaller corporate office in Kansas City, Kansas.

Maturities of lease liabilities were as follows:

7 unchanged sentences

2029 and thereafter 81,311 438

Total lease payments 168,329 23

Total future minimum lease payments 224,485 6,589

interest ( 36,978 ) ( 988 )

2 unchanged sentences

Long-term lease liabilities $ 165,026 $ 4,757

Related Party Transactions for Leases

From 1991 through February 2022, two of our properties comprising our MMI Orlando, Florida location were leased from entities controlled by John C.

White, a former director on our board of directors.

Effective as of November 30, 2020, Mr.

White voluntarily retired from our board of directors.

During October and November 2020, we paid rent expense to the entities controlled by Mr.

White of $ 0.3 million and $ 2.0 million for the year ended September 30, 2020.

The leases were terminated in February 2022 in connection with the consolidation of the Orlando, Florida campus into one site.

Note 13 - Accounts Payable and Accrued Expenses

4 unchanged sentences

Other accrued expenses 15,075 13,328

Accrued tool sets $ 4,096 $ 3,176

Accounts payable and accrued expenses $ 69,941 $ 66,680

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 14 - Debt

2 unchanged sentences

Carrying Value of Debt (6)

Revolving Credit Facility (1)

7.57 % Nov 2025 $ 90,000 $ —

Avondale Term Loan (2)

7.38 % May 2028 29,251 30,083

Lisle Term Loan - VN (2)

Lisle Term Loan (3)

7.33 % Apr 2029 37,740 38,000

Lisle Term Loan - WA (3)

5.29 % Nov 2031 — —

Finance leases (4)

Finance lease (4)

6.02 % Various 5,601 23

Total debt 162,592 68,106

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

September 30, 2022 September 30, 2021

Interest Rate Maturity Date Carrying Value of Debt (6)

Carrying Value of Debt (6)

Debt issuance costs presented with debt (5)

3 unchanged sentences

Long-term debt $ 159,600 $ 66,423

(1) Interest on the Avondale Term Loan (as defined below) accrues at annual rate equal to the LIBOR plus 2.0 %.

(2) Interest on the Lisle Term Loan - VN (as defined below) accrues at annual rate equal to the SOFR plus 2.0 %.

(3) The Lisle Term Loan - WA (as defined below) was paid off and retired.

(4) Our finance leases include finance lease arrangements related to various equipment with a weighted-average annual interest rate of approximately 3.08 %, which mature in varying installments between 2022 and 2023.

(1) Interest on the Revolving Credit Facility (as defined below) accrues at annual rate equal to Term SOFR plus a margin of 2.0 % and a lender specific spread of 0.15 %.

(2) Interest on the Avondale Term Loan (as defined below) accrues at annual rate equal to Term SOFR plus 2.0 % and a tranche adjustment of 0.046 %.

(3) Interest on the Lisle Term Loan (as defined below) accrues at annual rate equal to the Term SOFR plus 2.0 %.

(4) The finance lease balance as of September 30, 2023 is related to a facility lease with an annual interest rate of 6.02 % that matures in 2029.

See Note 12 for additional details on our finance leases.

(5) The unamortized debt issuance costs as of September 30, 2022 relate to the Avondale Term Loan and the Lisle Term Loan - VN.

The unamortized debt issuance costs as of September 30, 2021 relate entirely to the Avondale Term Loan.

(6) Our term loans and finance leases bear interest at rates commensurate with market rates and therefore the respective carrying values approximate fair value (Level 2).

(5) The unamortized debt issuance costs as of September 30, 2023 relate to the Avondale Term Loan and the Lisle Term Loan.

(6) The Revolving Credit Facility, Avondale Term Loan, Lisle Term Loan and finance leases bear interest at rates commensurate with market rates, and therefore, the respective carrying values approximate fair value (Level 2).

Revolving Credit Facility

On November 18, 2022, we entered into a $ 100.0 million senior secured revolving credit facility with Fifth Third Bank, a national banking association (the “Credit Facility” or “Revolving Credit Facility”), which includes a $ 20.0 million sub facility that is available for letters of credit.

The Credit Facility has a term of three years , unless earlier terminated pursuant to the terms and conditions set forth in the credit agreement.

This agreement provides that borrowings under the Credit Facility will amortize on an interest-only basis during its term with principal able to be borrowed, re-paid and re-borrowed throughout the term of the Credit Facility and with the outstanding principal due and payable at maturity.

Advances made under the Credit Facility bear interest at a floating rate equal to, at our option, either (a) a variable rate equal to the greater of:

(i) 3.50 %, or (ii) the rate that the lender publicly announces, publishes or designates from time to time as its index rate or prime rate, or any successor rate thereto, in effect at its principal office, or (b) a variable rate equal to the greater of (i) 0 %, or (ii) Term SOFR relating to quotations for one (1) or three (3) months, as selected by us or as otherwise set pursuant to the terms of the credit agreement, as applicable, plus, in the case of any Term SOFR loan, an adjustment equal to 0.10 % if the interest period is one (1) month and 0.15 % if the interest period is three (3) months.

Interest in the case of tranche rate loans will be increased by an applicable margin that varies from 1.75 % up to 2.25 % based on our then-current total leverage ratio.

In executing the Credit Facility, we incurred $ 0.5 million in debt issuance costs which have been recorded in “Other assets” on the consolidated balance sheets as of September 30, 2023.

On November 28, 2022, we drew $ 90.0 million from the Credit Facility in support of the closing of the Concorde Acquisition.

In December 2022, a $ 1.8 million letter of credit was issued on the Credit Facility.

The remaining availability under the Credit Facility as of September 30, 2023 was $ 8.2 million.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

We are also subject to certain customary affirmative and negative covenants under the credit agreement, including financial covenants such as total leverage ratio, a fixed charge coverage ratio, and a quick ratio.

In addition, we are required to maintain a financial responsibility composite score of at least 1.4 as of the end of the fiscal year ending September 30, 2023 and of at least 1.5 as of the end of any fiscal year thereafter.

On August 23, 2023 the Credit Facility was amended to remove the “clean off” provision, under which the amount outstanding on the Credit Facility was not to exceed $ 20.0 million for a single 30 consecutive day period from our initial draw and ending on December 31, 2024.

As of September 30, 2023, we were in compliance with all covenants under our Credit Facility.

Avondale Term Loan

In connection with the Avondale, Arizona building purchase in December 2020, we entered into a Credit Agreement with Fifth Third Bank, National Association (the “Lender”) on May 12, 2021 in the maximum principal amount of $ 31.2 million with a maturity of seven years (the “Term Loan”).

The Term Loan bears interest at the rate of LIBOR plus 2.0 %.

In connection with the Avondale, Arizona building purchase in December 2020, we entered into a credit agreement with Fifth Third Bank, national banking association (the “Avondale Lender”) on May 12, 2021 in the maximum principal amount of $ 31.2 million with a maturity of seven years (the “Avondale Term Loan”).

Originally, the Avondale Term Loan bore interest at the rate of LIBOR plus 2.0 %.

On April 3, 2023 in connection with applying the guidance in ASU 2020-04, we executed an amendment for our Avondale Term Loan to convert the stated rate from LIBOR to Term SOFR.

As of April 3, 2023, the Avondale Term Loan bears interest at the rate of Term SOFR plus 2.0 % and a tranche rate adjustment of 0.046 %.

Principal and interest payments are due monthly.

The Term Loan is secured by a first priority lien on our Avondale, Arizona property, including all land and improvements.

Additionally, on May 12, 2021, we entered into an interest rate swap agreement with the Lender that effectively fixes the interest rate on 50 % of the principal amount of the Term Loan, or approximately $ 15.6 million, at 3.5 % for the entire loan term.

The Avondale Term Loan is secured by a first priority lien on our Avondale, Arizona property, including all land and improvements.

Additionally, we entered into an interest rate swap agreement with the Avondale Lender.

See Note 15 below for further discussion on the interest rate swap.

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The Term Loan is also subject to certain financial maintenance covenants.

The debt service coverage ratio shall not be less than 1.25 to 1.00 and is defined as the ratio of the sum of consolidated income (loss) for the year, to the extent deducted in determining income for such period, before income taxes, interest expense, amortization, depreciation and other non-cash charges including net stock-based compensation, fees and expenses related to potential acquisitions and expansion of operations and certain non-recurring charges, including relating to restructuring, business optimization and diversification strategy, less any extraordinary non-recurring gains, interest income and non-cash gains (“Consolidated EBITDA”) (less dividends payable on our Series A Preferred Stock) and other extraordinary items to the current portion of long-term debt and interest paid during the period being measured (which commenced on September 30, 2021 and is tested annually thereafter on a trailing 12-month basis).

The funded debt to Consolidated EBITDA ratio is required to be no greater than 3.50 to 1.00 (which commenced on June 30, 2021 and is tested quarterly thereafter on a trailing 12-month basis).

The funded debt to Consolidated EBITDA ratio is required to be no greater than 3.50 to 1.00.

Beginning on May 12, 2024, the Lender may request new appraisals of the Avondale property in order to maintain the ratio of the amortized loan balance to the value of the location at 70 %, the approximate ratio that existed at May 12, 2021.

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If we fail to meet the minimum debt service coverage ratio, loan-to-value or debt yield and fail to cure such non-compliance within a time period acceptable to the Lender, we will be in default.

As of September 30, 2022, we were in compliance with all debt covenants.

Lisle Term Loan - WA

As discussed in Note 9, in connection with the Lisle Campus purchase, we assumed a Loan Agreement with Western Alliance Bank on February 14, 2022 in the principal amount of $ 18.3 million, maturing in October 2031 (the “Lisle Term

As of September 30, 2023, we were in compliance with the debt covenants for the Avondale Term Loan.

Lisle Term Loan

On April 14, 2022, our consolidated subsidiary, 2611 Corporate West Drive Venture LLC (the “Borrower”), entered into a new Loan Agreement (“Lisle Loan Agreement”) with Valley National Bank (the “Lisle Lender”), to fund the acquisition and retire the prior loan agreement with Western Alliance bank, via a term loan in the original principal amount of $ 38.0 million with a maturity of seven years (the “Lisle Term Loan”).

The Lisle Term Loan bears interest at a rate of one-month Term SOFR plus 2.0 %.

The Lisle Term Loan is secured by a mortgage on the Lisle, Illinois campus and is guaranteed by the Company.

In connection with the Lisle Term Loan, we entered into an interest rate swap agreement.

See Note 15 below for further discussion on the interest rate swap.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

In April 2022, this term loan was repaid in full with proceeds from the Lisle Term Loan - VN, as discussed below.

Lisle Term Loan - VN

On April 14, 2022, 2611 (the “Borrower”) entered into a new Loan Agreement (“Lisle Loan Agreement - VN”) with Valley National Bank (the “Lisle Lender”), 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 “Lisle Term Loan - VN”).

The Lisle Term Loan - VN bears interest at a rate of one-month Secured Overnight Financing Rate (“SOFR”) plus 2.0 %.

In connection with the Lisle Term Loan - VN, we entered into an interest rate swap agreement with the Lisle Lender that effectively fixes the interest rate on 50 % of the principal amount of the Lisle Term Loan - VN, or $ 19.0 million, at 4.69 % for the entire loan term.

The Lisle Term Loan - VN is secured by a mortgage on the Lisle Campus and is guaranteed by the Company.

As guarantor, the Company is subject to certain customary affirmative and negative covenants under the Lisle Loan Agreement - VN, including, without limitation, reporting and notice obligations and certain financial maintenance covenants.

The Company’s fixed charge coverage ratio is required to be not less than 1.25 to 1.00 during the period being measured (which commences on June 30, 2022 and may be tested no more than quarterly thereafter on a trailing 12-month basis) and is defined as the ratio of (a) the sum of consolidated net income (loss) for the year, before interest expense, income taxes, depreciation and amortization, and other extraordinary non-recurring items (“Adjusted EBITDA”) plus rent paid to Borrower and less cash taxes paid, distributions, and unfinanced capital expenditures to (b) principal and interest expenses plus rent paid to Borrower.

The ratio of total indebtedness to Adjusted EBITDA is required to be no greater than 3.50 to 1.00 (which commences on the date the Company shall submit its initial compliance certificate in accordance with the Loan Agreement and may be tested no more than annually thereafter on a trailing 12-month basis).

In addition, the Borrower’s debt service coverage ratio is required to equal or exceed 1.20 to 1.00 during the period being measured (which commences on June 30, 2022 and may be tested no more than quarterly thereafter on a trailing 12-month basis) and is defined as the ratio of (a) net operating income of the Lisle Campus to (b) actual annual debt service due under the Loan Agreement.

The Company’s fixed charge coverage ratio is required to be not less than 1.25 to 1.00 during the period being measured and is defined as the ratio of (a) the sum of consolidated net income (loss) for the year, before interest expense, income taxes, depreciation and amortization, and other extraordinary non-recurring items (“Adjusted EBITDA”) plus rent paid to Borrower and less cash taxes paid, distributions, and unfinanced capital expenditures to (b) principal and interest expenses plus rent paid to Borrower.

The ratio of total indebtedness to Adjusted EBITDA is required to be no greater than 3.50 to 1.00.

In addition, the Borrower’s debt service coverage ratio is required to equal or exceed 1.20 to 1.00 during the period being measured and is defined as the ratio of (a) net operating income of the Lisle Campus to (b) actual annual debt service due under the Loan Agreement.

Events of default under the Loan Agreement include, among others, the failure to make payments when due, breach of covenants (including certain financial maintenance covenants) and breach of representations or warranties.

If the Company fails to meet the minimum fixed charge coverage ratio or ratio of total indebtedness to Adjusted EBITDA and fails to cure such non-compliance within a time period acceptable to the Lender, the Company will be in default.

As of September 30, 2022, we were in compliance with all debt covenants.

As of September 30, 2023, we were in compliance with the debt covenants for the Lisle Term Loan.

Debt Maturities

Scheduled principal payments due on our debt for each year through the period ended September 30, 2028, and thereafter were as follows at September 30, 2023:

Maturity Term Loans Finance Leases Total

Maturity Revolving Credit Facility & Term Loans Finance Leases Total

2024 $ 1,673 $ 844 $ 2,517

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Total $ 156,516 $ 5,601 $ 162,117

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 15 - Derivative Financial Instruments

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See Note 2 for our derivative financial instruments policy.

On May 12, 2021, in connection with the Avondale Term Loan discussed in Note 15, we entered into an interest rate swap agreement with the Lender that effectively fixes the interest rate on 50 % of the principal amount of the Avondale Term Loan, or approximately $ 15.6 million, at 3.5 % for the entire loan term, or seven years (the “Swap”).

On May 12, 2021, the Swap was designated as an effective cash flow hedge for accounting and tax purposes.

On April 14, 2022, in connection with the Lisle Term loan - VN discussed in Note 15, we entered into an interest rate swap agreement with the Lisle Lender that effectively fixes the interest rate on 50 % of the principal amount of the Lisle Term Loan - VN at 4.69 % for the entire loan term, or seven years (the “Lisle Swap”).

On May 12, 2021, in connection with the Avondale Term Loan discussed in Note 14, we entered into an interest rate swap agreement with the Lender that effectively fixes the interest rate on 50 % of the principal amount of the Avondale Term Loan, or approximately $ 15.6 million, at 3.5 % for the entire loan term, or seven years (the “Avondale Swap”).

On May 12, 2021, the Avondale Swap was designated as an effective cash flow hedge for accounting and tax purposes.

On March 31, 2023 in connection with applying the guidance in ASU 2020-04, we terminated our existing interest rate swap and entered into a new interest rate swap agreement, effective April 3, 2023, with the Avondale Lender that effectively fixes the interest rate we pay on 50 % of the principal amount of the Avondale Term Loan at 1.45 % for the entire loan term.

Further, the floating rate we receive under this new swap has been converted to one month Term SOFR, versus one month LIBOR under the previous swap.

The adoption of the new guidance in ASU 2020-04 did not have a material impact on our consolidated financial statements and the Avondale Swap is still designated as an effective cash flow hedge for accounting and tax purposes.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

On April 14, 2022, in connection with the Lisle Term loan described in Note 14, we entered into an interest rate swap agreement with the Lisle Lender that effectively fixes the interest rate on 50 % of the principal amount of the Lisle Term Loan at 4.69 % for the entire loan term, or seven years (the “Lisle Swap”).

On April 14, 2022, the Lisle Swap was designated as an effective cash flow hedge for accounting and tax purposes.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs.

Of the net amount of the existing gains that are reported in “Accumulated other comprehensive income (loss)” as of September 30, 2023, we estimate that $ 1.0 million will be reclassified to “Interest expense” within the next twelve months.

As of September 30, 2022, the notional amounts of the Avondale Swap and Lisle Swap was approximately $ 15.0 million and $ 19.0 million, respectively.

As of September 30, 2023, the notional amounts of the Avondale Swap and Lisle Swap were approximately $ 14.6 million and $ 18.9 million, respectively.

Fair Value of Derivative Instruments

The following table presents the fair value of our Swap and Lisle Swap (Level 2), both of which are designated as a cash flow hedges, and the related classification on the consolidated balance sheets as of September 30, 2022 and 2021:

The following table presents the fair value of our Avondale Swap and Lisle Swap (Level 2), both of which are designated as cash flow hedges, and the related classification on the consolidated balance sheets as of September 30, 2023 and 2022:

September 30,

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Effect of Cash Flow Hedge Accounting on the Consolidated Statement of Operations and Accumulated Other Comprehensive Income (Loss)

The table below presents the effect of cash flow hedge accounting for our Swap and Lisle Swap on the consolidated statement of operations and Accumulated other comprehensive income (loss) for the years ended September 30, 2022 and 2021:

The table below presents the effect of cash flow hedge accounting for our Avondale Swap and Lisle Swap on the consolidated statements of operations and accumulated other comprehensive income for the years ended September 30, 2023, 2022 and 2021:

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income

Year Ended September 30, 2023

Avondale and Lisle Swaps $ ( 1,169 ) $ ( 835 )

Year Ended September 30, 2022

Avondale and Lisle Swaps $ 2,787 $ ( 192 )

Year Ended September 30, 2021

Avondale Swap $ ( 365 ) $ ( 86 )

UNIVERSAL TECHNICAL INSTITUTE, INC.

2 unchanged sentences

(In thousands, except per share amounts)

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income

Year Ended September 30, 2022

Interest Rate Swaps $ 2,787 Interest expense $ ( 192 )

Year Ended September 30, 2021

Interest Rate Swaps $ ( 365 ) Interest expense $ ( 86 )

Note 16 - Income Taxes

The components of income tax benefit (expense) for the years ended September 30, 2022, 2021 and 2020 are as follows:

The components of income tax (expense) benefit for the years ended September 30, 2023, 2022 and 2021 are as follows:

Year Ended September 30,

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Total current (expense) benefit ( 1,129 ) ( 1,082 ) ( 602 )

Deferred benefit (expense):

Deferred (expense) benefit:

United States federal ( 4,190 ) 2,380 —

State ( 446 ) 4,109 —

Total deferred benefit (expense) 6,489 — ( 345 )

Total income tax benefit (expense) $ 5,407 $ ( 602 ) $ 10,602

Total deferred (expense) benefit ( 4,636 ) 6,489 —

Total income tax (expense) benefit $ ( 5,765 ) $ 5,407 $ ( 602 )

The income tax provision differs from the tax that would result from application of the statutory federal tax rate of 21.0 % to pre-tax income for the years ended September 30, 2023, 2022 and 2021.

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2023 2022 2021

Income tax (expense) benefit at statutory rate $ ( 4,293 ) $ ( 3,188 ) $ 545

Income tax expense at statutory rate $ ( 3,798 ) $ ( 4,293 ) $ ( 3,188 )

State income taxes, net of federal tax benefit ( 1,188 ) ( 1,356 ) ( 480 )

Excess officers compensation ( 387 ) ( 276 ) ( 203 )

Transaction Costs ( 479 ) — —

Adjustment to deferred taxes ( 322 ) ( 345 ) —

R&D Credits Generated 546 — —

Decrease in valuation allowance 236 12,075 3,229

Net operating losses carryback to higher federal statutory rate years — — 4,270

Other, net ( 373 ) ( 398 ) 40

Total income tax benefit (expense) $ 5,407 $ ( 602 ) $ 10,602

Total income tax (expense) benefit $ ( 5,765 ) $ 5,407 $ ( 602 )

UNIVERSAL TECHNICAL INSTITUTE, INC.

5 unchanged sentences

Gross deferred tax assets:

Right-of-use assets for operating leases $ 36,212 $ 43,039

Operating lease liability $ 47,349 $ 36,212

Deferred compensation 558 542

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Tax credit carryforwards 929 165

Capitalized R&D costs 3,109 —

Charitable contribution carryovers 1,223 1,252

Deductions limited by Section 382 5 249

Other comprehensive income — 70

Valuation allowance ( 3,192 ) ( 1,200 )

1 unchanged sentence

Gross deferred tax liabilities:

Operating lease liability ( 33,655 ) ( 40,984 )

Right of use assets for operating leases ( 44,726 ) ( 33,655 )

Amortization of goodwill and intangibles ( 5,540 ) ( 4,666 )

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Total gross deferred tax liabilities ( 69,094 ) ( 51,389 )

Net deferred tax assets (liabilities) $ 3,365 $ ( 674 )

In assessing whether a valuation allowance was required, we considered the weight of all available positive and negative evidence.

Net deferred tax assets $ 3,105 $ 3,365

The following table summarizes the activity for the valuation allowance for the years ended September 30, 2023, 2022 and 2021:

3 unchanged sentences

Reductions to income tax ( 236 ) ( 12,075 ) ( 3,957 )

Write-offs (1)

Write-offs/Adjustments (1)

2,228 ( 217 ) —

Balance at end of period $ 3,192 $ 1,200 $ 13,492

(1) The write-offs in the year ended September 30, 2020 relate to the adoption of ASC 842 as of October 1, 2019.

(1) The fiscal year 2023 balance primarily relates to purchase accounting for the Concorde acquisition.

We had a valuation allowance of $ 3.2 million and $ 1.2 million against the deferred tax assets as of September 30, 2023 and 2022, respectively, based on our assessment of the ability to utilize the deferred tax assets.

The change in valuation allowance during the year is primarily a result of purchase accounting in conjunction with the Concorde acquisition.

We continue to maintain a valuation allowance on certain federal and state attributes for which we determined that it was more likely than not that a benefit will not be realized prior to expiration.

In assessing whether a valuation allowance was required, we considered the weight of all available positive and negative evidence.

UNIVERSAL TECHNICAL INSTITUTE, INC.

2 unchanged sentences

(In thousands, except per share amounts)

During the year ended September 30, 2022, based in part on our sustained positive earnings, we determined that there was sufficient evidence to meet the more likely than not realizability threshold and support the reversal of a majority of the previously recorded valuation allowance against our deferred tax assets.

The release of the valuation allowance resulted in the recognition of certain deferred tax assets on the consolidated balance sheet and a non-cash tax benefit recorded in the consolidated statement of operations for the year ended September 30, 2022.

As of September 30, 2022, our remaining valuation allowance of $ 1.2 million relates to certain federal and state attributes for which we determined that it was more likely than not that a benefit will be realized prior to expiration.

As of September 30, 2023, we had approximately $ 25.8 million and $ 92.3 million in net operating losses for federal and state tax purposes, respectively.

The federal net operating losses can be carryforward indefinitely, while the state net operating losses expires in the years 2027 through 2042 if not utilized.

The federal net operating losses can be carried forward indefinitely, while the state net operating losses will expire at various dates beginning 2023 through 2043 if not utilized or carried forward indefinitely.

Additionally, we had $ 0.4 million of federal research and development tax credits under Internal Revenue Code §41 and other general business tax credits.

If unused, these credits begin to expire in 2038.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities.

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Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

The following table summarizes the activity related to the Company's gross unrecognized tax benefits for the fiscal year ended September 30, 2022 (amounts in thousands):

The following table summarizes the activity related to the gross unrecognized tax benefits for the fiscal years ended September 30, 2023 and 2022:

Year Ended September 30,

Balance at beginning of period $ 387 $ —

Increases relates to current year tax positions 109

Increases related to acquisitions — 387

1 unchanged sentence

The total amount of gross unrecognized tax benefits was $ 0.5 million as of September 30, 2023, of which $ 0.4 million, if fully recognized, would decrease our effective tax rate.

The current year increase relates to research and development tax credits generated in the current year.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense.

3 unchanged sentences

Our tax filings remain subject to examination by applicable tax authorities for certain length of time, generally three to four years, following the tax year to which these filings relate.

In 2019 and 2020, we filed returns to carried back federal and certain state net operating losses to prior years.

In 2020, we filed returns to carried back federal and certain state net operating losses to prior years.

The statute of limitations for adjustment of the net operating losses utilized on these tax returns remains open an additional three to four years, depending on jurisdiction, from the date these returns were filed.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (“IRA”) which, among other changes, created a new corporate alternative minimum tax based on adjusted financial statement income and imposes a 1% excise tax on corporate stock repurchases.

The effective date of these provisions is January 1, 2023.

We do not expect the enactment of the IRA will have an impact on our financial statements.

Note 17 - Commitments and Contingencies

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The expense for the license fees under these various agreements totaled $ 2.3 million, $ 2.1 million, and $ 2.0 million for the years ended September 30, 2023, 2022 and 2021, respectively, and were recorded in “Educational services and facilities expenses” on the consolidated statements of operations.

Snap-on Tools Product Support Agreement

In February 2023, UTI entered into a new agreement with Snap-on Industrial (“Snap-on Tools”), as a result of the expiration of the previous agreement, that allows UTI to purchase promotional tool kits for its students at a discount from the list price (see below paragraph).

In addition, UTI earns credits that are redeemable for Snap-on Tools equipment that is utilized in UTI training programs.

Credits are earned on UTI’s purchases as well as purchases made by students enrolled in the UTI programs.

As part of the agreement, UTI has agreed to grant Snap-on Tools exclusive access to its campuses, to display

UNIVERSAL TECHNICAL INSTITUTE, INC.

2 unchanged sentences

(In thousands, except per share amounts)

Snap-on Tools Product Support Agreement

We have an agreement with Snap-on Tools that allows us to purchase promotional tool kits for our students at a discount from the list price.

In addition, we earn credits that are redeemable for equipment from the Snap-on Tools that we use in our business.

Credits are earned on our purchases as well as purchases made by students enrolled in our programs.

We have agreed to grant Snap-On Tools exclusive access to our campuses, to display advertising and to use their tools to train our students.

The credits under this agreement may be redeemed in multiple ways, which historically has been for additional equipment at the full retail list price, which is more than we would be required to pay using cash.

The renewal was executed in October 2017 and originally expired October 31, 2022, however we executed an extension through January 6, 2023.

The renewal allowed us to redeem our credits for a portion of the tool sets we purchase for our students.

Any product credits remaining at termination will expire 60 days after the date of termination.

A net prepaid expense with Snap-on Tools resulted from an excess of credits earned over credits used of $ 4.0 million and $ 4.8 million as of September 30, 2022 and 2021, respectively, included in “Other current assets” in our consolidated balance sheets.

Students are provided a Career Starter Tool Set Voucher which can be redeemed for a tool set near graduation.

The cost of the tool sets, net of the discount, is accrued during the time period in which the students begin attending school until they have progressed to the point that the promotional tool set vouchers are provided.

Our consolidated balance sheets include an “Accrued tool sets” liability of $ 3.2 million and $ 3.3 million as of September 30, 2022 and 2021, respectively.

Additionally, our liability to Snap-on Tools for vouchers redeemed by students was $ 2.3 million and $ 1.6 million as of September 30, 2022 and 2021, respectively, and is included in “Accounts payable and accrued expenses” in our consolidated balance sheets.

advertising and primarily use their tools to train UTI students.

Additionally, per the new agreement, UTI receives a quarterly product donation allowance towards the purchase of tools and equipment which are to be utilized in the UTI training programs at its campuses.

The credits and allowances under this agreement may be redeemed in multiple ways.

This agreement will expire in December 2027.

A net prepaid expense with Snap-on Tools has resulted from an excess of credits earned over credits used of $ 1.9 million and $ 4.0 million as of September 30, 2023 and 2022, respectively, included in “Other current assets” on our consolidated balance sheets.

UTI students are provided a Career Starter Tool Set Voucher which can be redeemed for a tool set near graduation.

The cost of the tool sets, net of the discount, is accrued during the time period in which the UTI students begin attending school until they have progressed to the point that the promotional tool set vouchers are provided.

The consolidated balance sheets include a liability in “Accounts payable and accrued expenses” for the tool sets that are expected to be redeemed of $ 4.1 million and $ 3.2 million as of September 30, 2023 and 2022, respectively.

Additionally, UTI’s liability to Snap-on Tools for vouchers redeemed by students was $ 0.5 million and $ 2.3 million as of September 30, 2023 and 2022, respectively, and is included in “Accounts payable and accrued expenses” on our consolidated balance sheets.

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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When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure.

If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we would accrue a liability for the loss.

If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we accrue a liability for the loss.

When a loss is not both probable and estimable, we do not accrue a liability.

Where a loss is not probable but is reasonably possible, including if a loss in excess of an accrued liability is reasonably possible, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim.

We are not currently a party to any material legal proceedings, but note that legal proceedings could, generally, have a material adverse effect on our business, cash flows, results of operations or financial condition.

3 unchanged sentences

Any future common stock dividends require the approval of a majority of the voting power of the Series A Preferred Stock.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Preferred Stock

2 unchanged sentences

The Series A Preferred Stock is perpetual, and therefore does not have a maturity date.

In June 2022, one stockholder elected to convert its 24,115 shares of Series A Preferred Stock into 724,174 shares of our common stock in accordance with the terms of the Series A Preferred Stock as set forth in the Certificate of Designations (“Certificate of Designations”), which reduced the Series A Preferred Stock outstanding to 675,885 shares.

As of September 30, 2022 and 2021, 675,885 and 700,000 shares of Series A Preferred Stock were issued and outstanding, respectively.

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

The liquidation preference associated with the Series A Preferred Stock was $ 100 per share at September 30, 2023 and 2022.

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Alternatively, the holder may choose to receive the amount that would be payable per share of common stock issued upon conversion of the Series A Preferred Stock immediately prior to such liquidation event.

Mergers (regardless of whether we remain the surviving entity), sale of substantially all of our assets or any other recapitalization, reclassification or other transaction in which substantially all of our common stock is exchanged or converted into cash or other property are considered “Deemed Liquidation Events.” The Certificate of Designations provides that, in the case of a Deemed Liquidation Event, each holder of Series A Preferred Stock shall be entitled to receive the liquidation amount they would receive under a normal liquidation event;

however, the liquidation amount must be in the same form of consideration as is payable to the holders of our common stock.

The liquidation preference associated with the Series A Preferred Stock was $ 100 per share at September 30, 2023 and 2022.

Holders of Series A Preferred Stock are entitled to vote with the holders of shares of common stock on an as converted basis, subject to the Continuing Caps as discussed below.

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converted into cash or other property are considered “Deemed Liquidation Events.” The Certificate of Designations provides that, in the case of a Deemed Liquidation Event, each holder of Series A Preferred Stock shall be entitled to receive the liquidation amount they would receive under a normal liquidation event;

however, the liquidation amount must be in the same form of consideration as is payable to the holders of our common stock.

The liquidation preference associated with the Series A Preferred Stock was $ 100 per share at September 30, 2022 and 2021.

Holders of Series A Preferred Stock are entitled to vote with the holders of shares of common stock on an as converted basis, subject to the Continuing Caps as discussed below.

A majority of the voting power of the Series A Preferred Stock must approve certain significant actions, including, without limitation, the issuance of certain equity securities;

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The removal of the Conversion Cap and Voting Cap became effective as of the date of the Distributions, subject to the Continuing Caps remaining in place with respect to the Series A Preferred Stock distributed to the Affiliated Holders.

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Education Regulatory Approval continue to be required for, and the Continuing Caps will remain in place with respect to, the Series A Preferred Stock acquired by the Affiliated Holders in the Distributions to the extent such shares, on an as converted basis, represent in excess of 9.9 % of our common stock and voting power as of the date of the Distributions.

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Following the Distributions, the Conversion Cap currently applies to the Affiliated Holders.

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Optional Conversion by Our Company

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If either the Investor Voting Cap or Conversion Cap is in effect at the date of the notice of redemption, the holder may request that we obtain the necessary regulatory approval for its removal.

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Anti-dilution

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If this reserve is not sufficient at any point to allow for full conversion, we shall be required to take action to increase our pool of authorized but unissued shares.

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Under the Securities Act, we were not required to register the offer or sale of the Series A Preferred Stock to the Purchaser.

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That registration statement became effective on October 30, 2019.

Equity Offering

On February 20, 2020, we entered into an Underwriting Agreement with B.

Riley FBR, Inc., as representative of the several underwriters named therein (the “Underwriters”), to issue and sell an aggregate of 6,782,610 shares (the “Firm Shares”) of our common stock, par value $ 0.0001 per share (the “Common Stock”), in a public offering, at a price to the public of $ 7.75 per share, pursuant to a registration statement on Form S-3 (Registration No.

333-236146) (the “Registration Statement”) and the accompanying prospectus , and related prospectus supplement, filed with the SEC (the “Offering”).

In addition, we granted the Underwriters an option (“Option”) to purchase up to an additional 1,017,390 shares of the Common Stock for a period of 30 days from February 20, 2020.

The Offering of the Firm Shares closed on February 25, 2020.

The net proceeds from the Offering were approximately $ 49.2 million, after deducting underwriting discounts.

Direct costs of $ 0.4 million related to the offering were recorded to equity during the three months ended March 31, 2020.

The Underwriters did not exercise the Option in full for the additional 1,017,390 shares.

The 6,782,610 shares purchased were issued from Treasury Stock on February 25, 2020, leaving 82,287 shares in Treasury stock.

We utilized the proceeds for our growth and diversification initiatives.

Share Repurchase Program

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The 2021 Plan replaced the Management 2002 Stock Option Program and the 2003 Incentive Compensation Plan, as amended (the “Former Plans”).

Under the 2021 Plan, we are authorized to issue incentive compensation convertible into up to

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2.0 million shares of common stock, increased by 0.7 million shares that remained available for future grants of awards under the Former Plans immediately prior to termination.

Under the 2021 Plan, we are authorized to issue incentive compensation convertible into up to 2.0 million shares of common stock, increased by 0.7 million shares that remained available for future grants of awards under the Former Plans immediately prior to termination.

Additionally, subject to and in accordance with the 2021 Plan, 1.5 million shares that are subject to outstanding awards under the Former Plans that are subsequently expired, forfeited, or are otherwise terminated will also become available for awards under the 2021 Plan.

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Income tax benefit $ 962 $ 1,103 $ 452

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Stock Options

We have not issued stock options since fiscal 2019.

These options, under the Former Plans, have an expiration date of seven years .

Under the 2021 Plan, the maximum term of any option granted under the 2021 Plan is ten years and, unless otherwise permitted by our Compensation Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date.

Outstanding options under the Former Plans have an expiration date of seven years .

Under the 2021 Plan, the maximum term of any option granted is ten years and, unless otherwise permitted by our Compensation Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date.

The following table summarizes stock option activity under the Former Plans and the 2021 Plan for the years ended September 30, 2023, 2022 and 2021:

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Life Aggregate

(In thousands) (per Share) (Years)

Outstanding as of September 30, 2018 — $ — — $ —

Granted 210 $ 3.14

Outstanding as of September 30, 2019 210 $ 3.14 6.19 $ 483

(In thousands) (per Share) (Years) (In thousands)

Outstanding as of September 30, 2021 210 $ 3.14 4.18 $ 760

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Stock options exercisable as of September 30, 2023 210 $ 3.14 2.18 $ 1,100

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Restricted Stock Units and Performance Units

Restricted Stock Units

Our RSUs are issued at fair market value, which is based on the closing price of our stock on the grant date.

Our RSUs are issued at fair market value, which is based on the closing price of our common stock on the grant date.

RSUs generally vest ratably over a three-year service period from the date of grant.

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As of September 30, 2023, unrecognized stock compensation expense related to PSUs was $ 3.0 million, which is expected to be recognized over a weighted average period of 2.0 years.

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The following table summarizes the activity for RSUs and PSUs granted under the Former Plans and 2021 Plan for the years ended September 30, 2023, 2022 and 2021:

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Outstanding as of September 30, 2023 845 $ 7.33 743 $ 7.55

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Note 20 - Earnings per Share

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Dilutive potential common shares include outstanding stock options, unvested restricted stock units, unvested performance units and convertible preferred stock.

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The following table summarizes the computation of basic and diluted earnings per common share under the two-class or as-converted method, as well as the anti-dilutive shares excluded:

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Diluted income per common share $ 0.13 $ 0.38 $ 0.17

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Year Ended September 30,

2022 2021 2020

Anti-dilutive shares excluded:

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Additionally, we have a legacy deferred compensation plan into which certain members of management were eligible to defer a maximum of 75 % of their regular compensation and a maximum of 100 % of their incentive compensation.

No new members have been added to the deferred compensation plan in the past two years.

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members have been added to the deferred compensation plan in the past three years.

We are not obligated to fund the deferred compensation plan;

however, we have purchased life insurance policies on the participants in order to fund the related benefits and such policies have been placed into a rabbi trust.

Our obligations under the deferred compensation plan totaled $ 2.2 million and $ 2.8 million as of September 30, 2022 and 2021, respectively, and are included in “Other liabilities” while the cash surrender value of the life insurance policies totaled $ 2.6 million and $ 3.1 million as of September 30, 2022 and 2021, respectively, and are included in “Other assets” in our consolidated balance sheets.

Our obligations under the deferred compensation plan totaled $ 2.2 million and $ 2.2 million as of September 30, 2023 and 2022, respectively, and are included in “Other liabilities” while the cash surrender value of the life insurance policies totaled $ 2.8 million and $ 2.6 million as of September 30, 2023 and 2022, respectively, and are included in “Other assets” on our consolidated balance sheets.

Note 22 - Segment Information

Our principal business is providing postsecondary education.

We also provide manufacturer-specific training, and these operations are managed separately from our campus operations.

These operations do not currently meet the quantitative criteria for segments and therefore are reflected in the “Other” category.

Our equity method investment and other non-postsecondary education operations are also included within the “Other” category.

Corporate expenses are allocated to “Postsecondary Education” and the “Other” category based on compensation expense.

During the three months ended December 31, 2022, and in conjunction with the Concorde Acquisition, we revised our reportable segments to reflect the manner in which Jerome Grant, our CEO and the chief operating decision-maker, evaluates performance and allocates resources.

These segments are organized by key market segments to enhance operational alignment within each segment to more effectively execute our strategic plan.

We have two reportable segments as follows:

UTI operates 16 campuses located in 9 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.

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

Concorde operates 17 campuses located in 8 states and online, offering degree, non-degree and continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields.

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 and is included to reconcile segment results to the consolidated financial statements.

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

Prior periods have been updated to conform to the revised presentation.

Summary information by reportable segment is as follows:

Postsecondary Education Other Consolidated

UTI Concorde Corporate Consolidated

Year Ended September 30, 2023

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Depreciation and amortization 21,113 4,077 25 25,215

16,779 105 16,884

Net income (loss) 51,241 10,700 ( 49,619 ) 12,322

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Postsecondary Education Other Consolidated

Year Ended September 30, 2022

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Depreciation and amortization 16,822 — 62 16,884

13,941 86 14,027

Net income (loss) 62,459 — ( 36,611 ) 25,848

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UTI Concorde Corporate Consolidated

Year Ended September 30, 2021

Revenues $ 335,083 $ — $ — $ 335,083

Loss from operations ( 3,493 ) ( 378 ) ( 3,871 )

Income (loss) from operations 46,529 — ( 31,582 ) 14,947

Depreciation and amortization 13,965 — 62 14,027

11,698 106 11,804

Net income (loss) 46,199 — ( 31,618 ) 14,581

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Total assets $ 434,706 $ — $ 118,205 $ 552,911

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

(2) Excludes depreciation of training equipment obtained in exchange for services of $ 1.3 million for the year ended September 30, 2020.

Note 23 - Government Regulation and Financial Aid

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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 (its “Home State”).

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

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,

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.

Institutions that offer instruction outside of their Home State must comply with federal regulations governing state authorization for distance education in order to participate in the Title IV student financial aid programs.

All UTI institutions and the Concorde, Kansas City and Memphis institutions are authorized to participate in the State Authorization Reciprocity Agreement (“SARA”).

SARA is an agreement among member states, districts and territories of the United States of America 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.

Forty-nine states (all but California), the District of Columbia, Puerto Rico and the U.S.

Virgin Islands have joined SARA.

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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.

Accreditation

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

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

We also have received approval from the Accrediting Commission of Career Schools and Colleges (“ACCSC”) and the Council on Occupational Education (“COE”) 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.

We continue to work to ensure that we comply with applicable distance education rules and standards.

We also will closely monitor any new rulemakings that concern state authorization or distance education.

State Licensing Boards

Many educational programs leading to professional licensure in a regulated profession require approval from, and are subject to, ongoing oversight by state agencies or boards.

For example, certain Concorde healthcare programs, such as the Vocational Nursing, Practical Nursing, Dental Assistant, Massage Therapy, Nursing Practice (RN) programs, require and have obtained state licensure.

Such programs are required to meet the standards of the state licensure agency or board and must periodically renew their licenses by completing a comprehensive license renewal process.

Institutional Accreditation

Institutional 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.

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.

All of the UTI institutions and 14 of the Concorde institutions are accredited by the ACCSC.

The remaining two Concorde institutions are accredited by the COE.

Both ACCSC and COE are accrediting agencies recognized by ED.

ACCSC and COE review 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 are subject to periodic review to confirm accreditation standards are met, and must submit annual reports, and at times, supplemental reports, to demonstrate ongoing compliance and improvement.

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

ACCSC and COE often revisit, revise, and expand their standards and policies.

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

Programmatic Accreditation

In addition to institutional accreditation, programmatic accreditation may be required for particular educational programs.

Programmatic accreditors review specialized and professional programs in a range of fields and disciplines within an institution to ensure the public that an academic program has undergone a rigorous review process and found to meet high standards for educational quality.

Certain Concorde healthcare programs, including the Physical Therapist Assistant, Dental Hygiene, Neurodiagnostic Technology, Polysomnographic Technology, Respiratory Therapy, Surgical Technology, Radiologic Technology, Diagnostic Medical Sonography, Cardiovascular Sonography, Occupational Therapy Assistant, Pharmacy Technician, and Occupational Therapy Assistant programs, have obtained programmatic accreditation.

Such programs are required to meet the standards of their programmatic accreditor and must periodically renew their accreditation by completing a comprehensive programmatic accreditation renewal process.

Title IV Programs

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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 must derive at least 10% of their revenues for each fiscal year from sources other than Title IV Program funds.

Under the American Rescue Plan Act of 2021 (“ARPA”), a proprietary institution must derive at least 10% of its revenue from sources other than “Federal education assistance funds.” Federal education assistance funds are defined as “federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution.” ED published a proposed 90/10 rule on July 28, 2022 and a final rule on October 28, 2022.

The new rule will take effect July 1, 2023 and will apply to any annual audit submission for a proprietary institutional fiscal year beginning on or after January 1, 2023.

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/Federal education assistance funds, as applicable, for two consecutive fiscal years.

We are currently reviewing the potential impact of the proposed 90/10 rule and will be monitoring any proposed or final regulations promulgated by ED to carry out this change.

• 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

Under the 90/10 rule, to remain eligible to participate in the federal student aid programs, a proprietary institution must derive at least 10% of their revenue from sources other than “Federal education assistance funds.” “Federal education assistance funds” are defined as “federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution.”

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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.

• Administrative Capability .

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.

• 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.

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.

None of our institutions had a three-year cohort default rate of 30% or greater for 2020, 2019 and 2018, 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.

As of September 30, 2023, MIAT and Concorde campuses in Grand Prairie, Texas, Kansas City, Missouri, Memphis, Tennessee, and Miramar, Florida 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 any 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:

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 measures an institution’s overall financial health.

The composite score utilizes information provided in the institutions’ annual audited financial statements and is based on three ratios:

(1) the equity ratio which measures the institution’s capital resources, ability to borrow and financial viability;

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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.

• Borrower Defense to Repayment.

Under the HEA and its implementing regulations, students may file a claim with ED to discharge their federal Direct Loans (or Direct Consolidated Loans) if, generally, their institution misled them or engaged in other misconduct related to the making of their federal loans or the provision of their educational services.

This is referred to as a “borrower defense to repayment” or “BDR” claim.

On November 1, 2022, the Biden administration promulgated a revised version of the BDR rule, which took effect on July 1, 2023.

On August 7, 2023, the U.S.

Court of Appeals for the Fifth Circuit issued a nationwide injunction, postponing the implementation of the borrower defense and closed school provisions of the new rule.

The stay on the borrower defense and closed school provisions will remain in effect at least until the Fifth Circuit issues an order as to the pending motions that are on appeal.

Until that time, the previous versions of the borrower defense and closed school provisions are in effect.

• 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.

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• 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 believe our compensation practices for our admissions representatives comply with the current regulations and ED’s guidance.

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

• Title IV Program Rulemaking.

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

ED is currently managing two significant rulemaking efforts.

First, between October and December 2021, ED held three rounds of negotiations as part of the Affordability and Student Loans rulemaking.

The negotiators considered nine issue areas, including the borrower defense to repayment rule, closed school loan discharges and loan repayment plans.

Second, between January and March of 2022, ED held three rounds of negotiations as part of the Institutional and Programmatic Eligibility rulemaking.

The negotiators considered seven issue areas, including administrative capability, financial responsibility, gainful employment, change of ownership and control, ability to benefit and the 90/10 rule.

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 has recently undertaken, or proposed to undertake, rulemakings on the following topics:

◦ 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.

Department of Veterans Affairs Benefit Programs

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

◦ On October 10, 2023, ED published a final rule related to financial value transparency and gainful employment, effective July 1, 2024.

On October 31, 2023, ED published final rules relating to (1) financial responsibility, (2) administrative capability, (3) certification procedures;

and (4) ability to benefit, effective July 1, 2024.

◦ ED has announced plans to convene another round of negotiated rulemaking in the coming months.

Potential topics for these rulemaking sessions include:

(1) accreditation and related issues;

(2) institutional eligibility, including State authorization;

(3) third-party servicers and related issues;

(4) distance learning;

(5) return of Title IV funds;

(6) cash management;

(7) the use of deferments and forbearances;

(8) the Federal TRIO programs;

and (9) student loan debt relief.

• Non-Discrimination Rulemakings .

On July 12, 2022, ED published a proposed rule to amend the regulations implementing Title IX of the Education Amendments of 1972 (“Title IX”).

The regulated community is awaiting a final Title IX rule, which is expected in late 2023.

ED also has indicated that it will be proposing a rule to amend regulations related to nondiscrimination on the basis of disability.

Other Benefit or Aid Programs

The Department of Veterans Affairs (“VA”), the Department of Defense, the Department of Labor, the Department of Education (through non-Title IV programs), and certain states provide support to postsecondary students through programs, grants, benefits, loans, or scholarships.

All of our institutions that engage in such programs must comply with the eligibility and participation requirements applicable to each of these funding programs, which vary by funding agency and program.

In 2023, we derived approximately 10 % 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.

4 unchanged sentences

(In thousands, except per share amounts)

Other Federal and State Student Aid Programs

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.

For example, the UTI campuses in Long Beach, Rancho Cucamonga and Sacramento, California, as well as the Concorde campuses in Garden Grove, North Hollywood, San Bernardino and San Diego, California, 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 Consumer Financial Protection Bureau (“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 UTI students;

As a postsecondary educational institution, we are subject to a broad range of consumer protection and other laws, such as those that relate to recruiting, marketing, the protection of personal information, student financing and payment servicing.

Such laws and regulations are enforced by federal agencies, including the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) and various state agencies and state attorneys general.

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 UTI 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.

The CARES Act, the CRRSAA, and the ARPA

Both UTI and Concorde, along with 68 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 institution’s 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.

We devote significant effort to complying with state and federal consumer protection laws and regulations.

Note 24 - Higher Education Emergency Relief Fund

During fiscal 2020 and 2021, various pieces of legislation were issued related to the COVID-19 pandemic, including the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”), the Coronavirus Response and Relief Supplemental Appropriations Act 2021 (“CRRSAA”) and the American Rescue Plan Act (“ARPA”).

This legislation created additional regulatory flexibilities for institutions of higher education and established the Higher Education Emergency Relief Fund to support institutions and eligible students impacted by the COVID-19 pandemic.

On March 31, 2021, ED published its Guide for Compliance Attestation Engagements of Proprietary Schools Expending Higher Education Emergency Relief Fund Grants (the “Guide”).

We completed the required audit of our participation in the HEERF grant program for the year ended September 30, 2020 which was filed with the ED on July 26, 2021.

We have reviewed and implemented many of the flexibilities created by Congress and ED’s guidance.

We continue to review new guidance from ED and to implement available legislative and regulatory relief as applicable.

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

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

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 by all state education authorizing agencies to offer blended format programs.

Note 25 - Higher Education Emergency Relief Fund under the CARES Act

Fiscal 2020 HEERF I Grants for Students and for Significant Changes to the Delivery of Instruction Due to the Coronavirus under the CARES Act

In 2020, the CARES Act established the HEERF.

The HEERF includes approximately $14.0 billion in relief funds to be distributed directly to institutions of higher education.

The most significant portion of that funding allocation provides that $12.56 billion will be distributed to institutions using a formula based on student enrollment.

Of the amount allocated to each institution under this formula, at least 50% must be reserved to provide students with emergency financial aid grants to help cover expenses related to the disruption of campus operations due to coronavirus.

The remaining funds must be used “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus.”

HEERF Funds for Student Grants

Per the HEERF Funding and Certification Agreements, at least 50% of HEERF funds received were to be used exclusively for emergency financial aid grants to students impacted by COVID-19, supporting their efforts to stay in school and continue their training toward graduation and future careers.

In May 2020, we received approximately $ 16.5 million designated for student grants and deposited these funds into a separate restricted cash account.

As of September 30, 2020, we had awarded all $ 16.5 million designated for student grants to approximately 9,000 students.

HEERF Funds for Significant Changes to the Delivery of Instruction Due to Coronavirus

In addition, in May of 2020 we were awarded approximately $ 16.5 million for the institutional portion of the HEERF funds.

Such funds may be used to provide additional emergency financial aid grants to students, to cover institutional costs associated with significant changes to the delivery of instruction due to coronavirus, or not used at all and returned to the government.

During the years ended September 30, 2020 and 2021, we drew down and utilized the HEERF Institutional funds granted to us as previously noted in our Supplemental Cash Flow disclosures.

Fiscal 2021 HEERF II Grant for Students under the CRRSAA and HEERF III Grant for Students under the ARPA

The CRRSAA includes HEERF II, which makes an additional $22.7 billion available to higher education institutions.

Of this amount, private, proprietary institutions are allocated approximately $681 million.

The statute permits proprietary institutions to use HEERF II funds to provide financial aid grants to students and requires that institutions prioritize the grants to students with exceptional need, such as students who receive Pell Grants.

In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $ 16.8 million for purposes of funding HEERF II student grants.

The ARPA includes almost $40 billion in funding available to higher education institutions under the HEERF III.

Of this amount, private, proprietary institutions are allocated approximately $396 million and may only use HEERF III funding to provide emergency financial aid grants to students.

In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $ 9.9 million for purposes of funding HEERF III student grants.

As of September 30, 2022 and 2021, we awarded approximately $ 7.0 million and $ 19.7 million, respectively, in HEERF II and HEERF III grants to over 15,500 students.

In 2020, the CARES Act established the Higher Education Emergency Relief Fund (“HEERF”) I, and in 2021 the CRRSAA established HEERF II and the ARPA established HEERF III, all of which included relief funds to be distributed directly to institutions of higher education.

The original HEERF I grants required that 50% be used to provide students with emergency financial aid grants to help cover expenses related to the disruption of campus operations due to COVID-19 with the remaining 50% to be used to cover any costs associated with significant changes to the delivery of instruction due to COVID-19 as institutional funds.

HEERF II and HEERF III grants were only to be used to provide financial aid grants to students for proprietary institutions.

As of September 30, 2020, UTI had awarded all funds designated for students under the HEERF I program.

During the years ended September 30, 2020 and 2021, UTI drew down and utilized the HEERF I institutional funds granted as previously noted in the Supplemental Cash Flow disclosures.

In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, UTI institutions were granted approximately $ 16.8 million for purposes of funding HEERF II student grants and $ 9.9 million for purposes of funding HEERF III student grants.

During the years ended September 30, 2022 and 2021, UTI awarded approximately $ 7.0 million and $ 19.7 million, respectively, in HEERF II and HEERF III grants to over 15,500 students.

The HEERF II and HEERF III funds were drawn down as student grants were distributed.

As the HEERF II and III programs ended in July 2022, there are no further funds to be awarded.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 26 - Subsequent Events

Revolving Credit Facility

On November 18, 2022, we entered into a $ 100.0 million senior secured revolving credit facility with Fifth Third Bank, a national banking association (the “Credit Facility”), which includes a $ 20.0 million sub facility that is available for letters of credit.

The Credit Facility has a term of three years , unless earlier terminated pursuant to the terms and conditions set forth in the credit agreement.

This agreement provides that the revolver will amortize on an interest-only basis during its term with principal able to be borrowed, re-paid and re-borrowed throughout the term of the Facility and with the outstanding principal due and payable at maturity.

Advances made under the Credit Facility will bear interest at a floating rate equal to, at our option, either (a) a variable rate equal to the greater of:

(i) 3.5 %, or (ii) the rate that the lender publicly announces, publishes or designates from time to time as its index rate or prime rate, or any successor rate thereto, in effect at its principal office, or (b) a variable rate equal to the greater of (i) 0 %, or (ii) Term SOFR relating to quotations for one (1) or three (3) months, as selected by us or as otherwise set pursuant to the terms of the credit agreement, as applicable, plus, in the case of any Term SOFR loan, an adjustment equal to 0.10 % if the interest period is one (1) month and 0.15 % if the interest period is three (3) months.

Interest in the case of tranche rate loans will be increased by an applicable margin that varies from 1.75 % up to 2.25 % based on our then-current total leverage ratio.

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

We are also subject to certain customary affirmative and negative covenants under the credit agreement for financing generally and for the Credit Facility, including financial covenants such as total leverage ratio, a fixed charge coverage ratio, and a quick ratio.

Lastly, we are subject to a “clean off” provision, under which we will not permit the amount outstanding on the Credit Facility to exceed $ 20.0 million for a single thirty ( 30 ) consecutive day period, during the period commencing on the date of the initial draw under the Credit Facility and ending on the date which falls twenty ( 20 ) months thereafter.

Acquisition of Concorde Career Colleges, Inc.

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 UTI, 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.

Concorde is a leading provider of industry-aligned healthcare education programs in fields such as nursing, dental hygiene and medical diagnostics.

Concorde 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.

Under the terms of the Purchase Agreement, we acquired all of the issued and outstanding shares of capital stock of Concorde from the Seller for total consideration of $ 50.0 million in cash, subject to closing working capital adjustments.

As a result, Concorde is now a wholly-owned subsidiary of UTI.

The consideration paid was funded by the new Credit Facility established in November 2022.

In connection with this acquisition, we incurred transaction costs of $ 3.0 million during the year ended September 30, 2022, which are included in “Selling, general and administrative” expenses in the accompanying consolidated statements of operations.

As of the date of this filing, the initial accounting for the business combination, including the allocation of the purchase price to the identifiable assets acquired and the liabilities assumed, is incomplete.

We have engaged a third-party specialist to assist with the valuation of the property, plant and equipment and intangible assets.

We expect to disclose a preliminary allocation of the December 1, 2022 purchase price in our Form 10-Q for the three months ended December 31, 2022.

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What changed 10-K

Item 9A. Controls and Procedures