UNIVERSAL TECHNICAL INSTITUTE INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES 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, 2023. 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 57 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 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, and are hereby incorporated by reference. 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 errors 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks that internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures. Management’s Certifications The Company has filed as exhibits to its Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC, the certifications of the Chief Executive Officer and the Chief Financial Officer of the Company required by Section 302 of the Sarbanes-Oxley Act of 2002. The Company has submitted to the NYSE the most recent Annual Chief Executive Officer Certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. ITEM 9B. 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. 58 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 59 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Below is a list of our Executive Officers and Board of Directors as of September 30, 2023: Executive Officer Position Jerome A. Grant Chief Executive Officer Troy R. Anderson Executive Vice President and Chief Financial Officer Sherrell E. Smith Executive Vice President, Campus Operations & Services Todd A. Hitchcock Senior Vice President, Chief Strategy and Transformation Officer Christopher E. Kevane Senior Vice President, Chief Legal Officer Tracy K. Lorenz Senior Vice President, UTI Division President Lori B. Smith Senior Vice President, Chief Information Officer Director Position Robert T. DeVincenzi Chairman of the Board, Universal Technical Institute, Inc.; Principal Partner, Lupine Venture Group David A. Blaszkiewicz President and Chief Executive Officer, Invest Detroit George W. Brochick Executive Vice President - Strategic Development, Penske Automotive Group, Inc. Jerome A. Grant Chief Executive Officer, Universal Technical Institute, Inc. LTG (R) William J. Lennox Former Superintendent of the United States Military Academy at West Point; Chief Executive Officer, Lennox Strategies, LLC Shannon L. Okinaka Executive Vice President, Chief Financial Officer and Treasurer of Hawaiian Holdings, Inc. Loretta L. Sanchez Former U.S. Congresswoman; Chief Executive Officer, Datamatica, LLC Christopher S. Shackelton Managing Partner, Coliseum Capital Management, LLC Michael A. Slubowski President, Chief Executive Officer, and Board Member of Trinity Health Linda J. Srere Former President, Young and Rubicam Advertising Kenneth R. Trammell Former Executive Vice President and Chief Financial Officer, Tenneco Inc. The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2023. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2023. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2023. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2023. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2023. 60 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this Annual Report on Form 10-K: (1) The financial statements required to be included in this Annual Report on Form 10-K are included in Item 8 of this Report. (2) All other schedules have been omitted because they are not required, are not applicable, or the required information is shown on the financial statements or the notes thereto. (3) Exhibits: Exhibit Number Description 2.1# Stock Purchase Agreement by and among HCP ED Holdings, LLC, HCP ED Holdings, Inc., Michigan Institute of Aeronautics, Inc. D/B/A MIAT College of Technology, and Universal Technical Institute, Inc. dated March 29, 2021. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q dated May 7, 2021.) 2.2 Purchase and Sale Contract dated February 4, 2022, by and among Universal Technical Institute, Inc., Universal Technical Institute Ventures, LLC, and iStar Net Lease I LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q dated May 5, 2022). 2.3 Purchase and Sale Contract dated February 11, 2022, by and among Universal Technical Institute, Inc., Universal Technical Institute Ventures, LLC, and iStar Net Lease Member I LLC (incorporated by reference to Exhibit 2.2 to the Registrant’s Quarterly Report on Form 10-Q dated May 5, 2022). 2.4 Stock Purchase Agreement, dated May 3, 2022, by and among Universal Technical Institute, Inc., Concorde Career Colleges, Inc., Liberty Partners Holdings 28, L.L.C., Liberty Investment IIC, LLC, and Liberty Partners L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 3, 2022). 3.1 Fifth Amended and Restated Certificate of Incorporation of Universal Technical Institute, Inc. dated February 26, 2021. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q dated May 7, 2021.) 3.2 Fourth Amended and Restated Bylaws of Universal Technical Institute, Inc., a Delaware Corporation (as amended on February 26, 2021). (Incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q dated May 7, 2021.) 3.3 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant on June 24, 2016.) 3.4 Certificate of Designation, Preferences and Rights of Series E Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant on June 30, 2016.) 4.1 Specimen Certificate evidencing shares of common stock. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 dated October 3, 2003, or an amendment thereto (No. 333-109430).) 4.2 Registration Rights Agreement, dated December 16, 2003, between the Registrant and certain stockholders signatory thereto. (Incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 dated October 3, 2003, or an amendment thereto (No. 333-109430).) 4.3 Registration Rights Agreement dated June 24, 2016 by and between the Registrant and Coliseum Holdings I, LLC. (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant on June 24, 2016.) 4.4 Rights Agreement, dated as of June 29, 2016, by and between the Registrant and Computershare Inc., as Rights Agent. (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant on June 30, 2016.) 4.5 Amendment to Rights Agreement, dated as of February 21, 2017, by and between the Registrant and Computershare Inc., as Rights Agent. (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant on February 21, 2017.) 61 Exhibit Number Description 4.6+ Description of Securities. 10.1* Universal Technical Institute Executive Benefit Plan, effective March 1, 1997. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 dated October 3, 2003, or an amendment thereto (No. 333-109430).) 10.2* Management 2002 Option Program. (Incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 dated October 3, 2003, or an amendment thereto (No. 333-109430).) 10.3* Universal Technical Institute, Inc. 2003 Incentive Compensation Plan (as amended March 1, 2017). (Formerly known as the 2003 Stock Incentive Plan). (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on March 3, 2017.) 10.4.1* Form of Restricted Stock Unit Agreement. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on September 11, 2013.) 10.4.2* Form of Restricted Stock Unit Agreement. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on September 10, 2014.) 10.4.3* Form of Performance Unit Award Agreement. (Incorporated by reference to Exhibit 10.4.3 to the Annual Report on Form 10-K filed by the Registrant on December 1, 2017.) 10.4.4* Form of Performance Unit Award Agreement. (Incorporated by reference to Exhibit 10.4.4 to the Annual Report on Form 10-K filed by the Registrant on December 1, 2017.) 10.4.5* Form of Performance Cash Award Agreement. (Incorporated by reference to Exhibit 10.4.5 to the Annual Report on Form 10-K filed by the Registrant on December 1, 2017.) 10.4.6* Form of Performance Cash Award Agreement. (Incorporated by reference to Exhibit 10.4.6 to the Annual Report on Form 10-K filed by the Registrant on December 1, 2017.) 10.5 Lease Agreement, dated July 2, 2001, as amended February 27, 2015, between Delegates LLC, as landlord, and The Clinton Harley Corporation, as tenant. (Incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 dated October 3, 2003, or an amendment thereto (No. 333-109430), and Exhibit 10.1 to the Form 10-Q filed by the Registrant on May 1, 2015.) 10.6 Form of Indemnification Agreement by and between the Registrant and its directors and officers. (Incorporated by reference to Exhibit 10.7 to the Form 8-K filed by the Registrant on August 6, 2014.) 10.7* Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on April 6, 2010.) 10.8.1* Offer Letter, dated as of August 2, 2012, between the Registrant and Sherrell E. Smith. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on August 21, 2012.) 10.8.2* Addendum Letter, dated as of August 7, 2012, between the Registrant and Sherrell E. Smith. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Registrant on August 21, 2012.) 10.9* Form of Retention/Recognition Bonus Agreement. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on June 13, 2011.) 10.10* Universal Technical Institute, Inc. Severance Plan, as amended October 1, 2019, (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on September 24, 2019.) 10.11 Securities Purchase Agreement dated June 24, 2016, between the Registrant and Coliseum Holdings I, LLC. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on June 24, 2016.) 10.12* Employment Agreement, dated November 1, 2019, by and between the Registrant and Jerome A. Grant. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Registrant on October 21, 2019.) 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.) 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). 10.16 Deed of Trust, Security Agreement and Fixture Filing dated May 12, 2021 (incorporated herein by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on May 12, 2021). 10.17 Universal Technical Institute, Inc. 2021 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on February 26, 2021). 62 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. 23.1+ Consent of Deloitte & Touche LLP. 24.1 Power of Attorney. (Included on signature page.) 31.1+ Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2+ Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1+ Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2+ Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Indicates a contract with management or compensatory plan or arrangement. + Filed herewith. # Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. ITEM 16. FORM 10-K SUMMARY Not applicable. 63 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: December 1, 2023 UNIVERSAL TECHNICAL INSTITUTE, INC. By: /s/ Jerome A. Grant Jerome A. Grant, Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jerome A. Grant and Troy R. Anderson, or either of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report and filed pursuant to the Securities Exchange Act of 1934, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Jerome A. Grant Chief Executive Officer (Principal Executive Officer) December 1, 2023 Jerome A. Grant /s/ Troy R. Anderson Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) December 1, 2023 Troy R. Anderson /s/ Robert T. DeVincenzi Chairman of the Board November 30, 2023 Robert T. DeVincenzi /s/ David A. Blaszkiewicz Director November 30, 2023 David A. Blaszkiewicz /s/ George W. Brochick Director November 30, 2023 George W. Brochick /s/ William J. Lennox, Jr. Director November 30, 2023 William J. Lennox, Jr. /s/ Shannon L. Okinaka Director November 30, 2023 Shannon L. Okinaka 64 /s/ Loretta L. Sanchez Director November 30, 2023 Loretta L. Sanchez /s/ Christopher S. Shackelton Director November 30, 2023 Christopher S. Shackelton /s/ Michael A. Slubowski Director November 30, 2023 Michael A. Slubowski /s/ Linda J. Srere Director November 30, 2023 Linda J. Srere /s/ Kenneth R. Trammell Director November 30, 2023 Kenneth R. Trammell 65 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Number Management’s Report on Internal Control Over Financial Reporting F- 2 Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) F- 3 Consolidated Balance Sheets as of September 30, 2023 and 2022 F- 6 Consolidated Statements of Operations for the years ended September 30, 2023, 2022 and 2021 F- 7 Consolidated Statements of Other Comprehensive Income for the years ended September 30, 2023, 2022 and 2021 F- 8 Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2023, 2022 and 2021 F- 9 Consolidated Statements of Cash Flows for the years ended September 30, 2023, 2022 and 2021 F- 10 Notes to Consolidated Financial Statements F- 12 F-1 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company and for assessing the effectiveness of internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes policies and procedures that pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the company’s assets; providing reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management and director authorization; and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2023. The effectiveness of the Company’s internal control over financial reporting as of September 30, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein. F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Universal Technical Institute, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Universal Technical Institute, Inc. 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 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 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Tempe, Arizona December 1, 2023 F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Universal Technical Institute, Inc. Opinion on 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting 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 and our report dated December 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenues - Proprietary Loan Program Revenue Recognition - Refer to Note 2 in the FY 2023 Form 10K Critical Audit Matter Description The portion of tuition revenue related to the Company’s proprietary loan program is considered a form of variable consideration, in accordance with ASC 606, Revenue from Contracts with Customers. 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. 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. F-4 The key judgment made by management is the length of historical collection experience used to calculate the expected collection rate and requires a high degree of auditor judgement in determining the reasonableness of the period of time used by management to estimate the expected collection rate. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the expected collection rate for the proprietary loan program included the following, among others: • 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 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. • Evaluated the underlying historical loan data by making selections of loans included in the data population and traced to source documentation, and recalculated the amount of the loan due as of the reporting date. • Agreed monthly loan collection amounts for selected months to bank statements. • Tested completeness of the loan data population by tracing a selection of students from historical accounting records to the underlying population used to calculate the expected collection rate. /s/ DELOITTE & TOUCHE LLP Tempe, Arizona December 1, 2023 We have served as the Company's auditor since 2015. F-5 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except par value and per share amounts) September 30, 2023 September 30, 2022 Assets Cash and cash equivalents $ 151,547 $ 66,452 Restricted cash 5,377 3,544 Held-to-maturity investments — 28,918 Receivables, net 25,161 16,450 Notes receivable, current portion 5,991 5,641 Prepaid expenses 9,412 6,139 Other current assets 7,497 8,809 Total current assets 204,985 135,953 Property and equipment, net 266,346 214,292 Goodwill 28,459 16,859 Intangible assets, net 18,975 14,215 Notes receivable, less current portion 30,672 30,231 Right-of-use assets for operating leases 176,657 132,038 Deferred tax assets 3,768 3,365 Other assets 10,823 5,958 Total assets $ 740,685 $ 552,911 Liabilities and Shareholders’ Equity Accounts payable and accrued expenses $ 69,941 $ 66,680 Deferred revenue 85,738 54,223 Operating lease liability, current portion 22,481 12,959 Long-term debt, current portion 2,517 1,115 Other current liabilities 4,023 2,745 Total current liabilities 184,700 137,722 Deferred tax liabilities 663 — Operating lease liability 165,026 129,302 Long-term debt 159,600 66,423 Other liabilities 4,729 4,067 Total liabilities 514,718 337,514 Commitments and contingencies (Note 17) Shareholders’ equity: Common stock, $ 0.0001 par value, 100,000 shares authorized, 34,157 and 33,857 shares issued, and 34,075 and 33,775 shares outstanding as of September 30, 2023 and 2022, respectively 3 3 Preferred stock, $ 0.0001 par value, 10,000 shares authorized; 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 Paid-in capital - preferred 66,481 66,481 Treasury stock, at cost, 82 shares as of September 30, 2023 and 2022, respectively ( 365 ) ( 365 ) Retained earnings (deficit) 5,946 ( 1,307 ) Accumulated other comprehensive income 2,463 2,213 Total shareholders’ equity 225,967 215,397 Total liabilities and shareholders’ equity $ 740,685 $ 552,911 The accompanying notes are an integral part of these consolidated financial statements. F-6 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended September 30, 2023 2022 2021 Revenues $ 607,408 $ 418,765 $ 335,083 Operating expenses: Educational services and facilities 329,870 207,233 166,818 Selling, general and administrative 256,139 189,158 153,318 Total operating expenses 586,009 396,391 320,136 Income from operations 21,399 22,374 14,947 Other (expense) income: Interest income 5,861 507 83 Interest expense ( 9,656 ) ( 2,002 ) ( 365 ) Other income (expense) 483 ( 438 ) 518 Total other (expense) income, net ( 3,312 ) ( 1,933 ) 236 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 Preferred stock dividends ( 5,069 ) ( 5,159 ) ( 5,250 ) Income available for distribution 7,253 20,689 9,331 Income allocated to participating securities ( 2,712 ) ( 7,847 ) ( 3,647 ) Net income available to common shareholders $ 4,541 $ 12,842 $ 5,684 Earnings per share (See Note 20): Net income per share - basic $ 0.13 $ 0.39 $ 0.17 Net income per share - diluted $ 0.13 $ 0.38 $ 0.17 Weighted average number of shares outstanding: Basic 33,985 33,218 32,766 Diluted 34,479 33,743 33,123 The accompanying notes are an integral part of these consolidated financial statements. F-7 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (In thousands) Year Ended September 30, 2023 2022 2021 Net income $ 12,322 $ 25,848 $ 14,581 Other comprehensive income (loss): Unrealized gain (loss) on interest rate swaps, net of taxes 250 2,492 ( 279 ) Comprehensive income $ 12,572 $ 28,340 $ 14,302 The accompanying notes are an integral part of these consolidated financial statements. F-8 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Common Stock Preferred Stock Paid-in Capital - Common Paid-in Capital - Preferred Treasury Stock Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount Shares Amount Shares Amount Balance as of September 30, 2020 32,730 $ 3 700 $ — $ 141,002 $ 68,853 ( 82 ) $ ( 365 ) $ ( 32,971 ) $ — $ 176,522 Net income — — — — — — — — 14,581 — 14,581 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 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 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 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 stock-based compensation plans 410 — — — — — — — — — — Shares withheld for payroll taxes ( 110 ) — — — ( 781 ) — — — — — ( 781 ) Stock-based compensation — — — — 3,848 — — — — — 3,848 Preferred stock cash dividends declared — — — — — — — — ( 5,069 ) — ( 5,069 ) Unrealized gain on interest rate swap, net of taxes — — — — — — — — — 250 250 Balance as of September 30, 2023 34,157 $ 3 676 $ — $ 151,439 $ 66,481 ( 82 ) $ ( 365 ) $ 5,946 $ 2,463 $ 225,967 The accompanying notes are an integral part of these consolidated financial statements. F-9 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended September 30, 2023 2022 2021 Cash flows from operating activities: Net income $ 12,322 $ 25,848 $ 14,581 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,215 16,884 14,027 Amortization of right-of-use assets for operating leases 20,604 15,893 15,605 Intangible asset impairment expense — 2,000 — Bad debt expense 3,319 2,510 1,718 Stock-based compensation 3,848 4,337 1,733 Deferred income taxes 4,636 ( 6,014 ) — Training equipment credits earned, net 1,375 180 364 Unrealized gain (loss) on interest rate swaps, net of taxes 250 2,492 ( 279 ) Other losses (gains), net 276 663 ( 13 ) Changes in assets and liabilities: Receivables ( 4,935 ) 564 8,483 Notes receivable ( 791 ) 252 ( 1,687 ) Prepaid expenses and other current assets ( 2,013 ) ( 1,737 ) ( 4,391 ) Other assets 740 ( 1,673 ) ( 768 ) 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 Operating lease liability ( 20,474 ) ( 13,952 ) ( 20,469 ) Other liabilities ( 709 ) ( 4,285 ) ( 1,633 ) Net cash provided by operating activities 49,148 46,031 55,185 Cash flows from investing activities: Purchase of property and equipment ( 56,685 ) ( 79,450 ) ( 61,306 ) Purchase of held-to-maturity investments — ( 28,821 ) — Proceeds received upon maturity of investments 29,000 — 37,651 Proceeds from insurance policy — — 427 Cash paid for acquisitions, net of cash acquired ( 16,381 ) ( 26,514 ) — Return of capital contribution from unconsolidated affiliate — 188 277 Net cash used in investing activities ( 44,066 ) ( 134,597 ) ( 22,951 ) Cash flows from financing activities: 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 ) Payment of term loans and finance leases ( 1,788 ) ( 19,227 ) ( 383 ) Payment of payroll taxes on stock-based compensation through shares withheld ( 781 ) ( 651 ) ( 421 ) Net cash provided by financing activities 81,846 12,585 24,824 Change in cash, cash equivalents and restricted cash 86,928 ( 75,981 ) 57,058 Cash and cash equivalents, beginning of period 66,452 133,721 76,803 Restricted cash, beginning of period 3,544 12,256 12,116 Cash, cash equivalents and restricted cash, beginning of period 69,996 145,977 88,919 Cash and cash equivalents, end of period 151,547 66,452 133,721 Restricted cash, end of period 5,377 3,544 12,256 Cash, cash equivalents and restricted cash, end of period $ 156,924 $ 69,996 $ 145,977 F-10 UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In thousands) Year Ended September 30, 2023 2022 2021 Supplemental disclosure of cash flow information: Taxes paid (refunded) $ 658 $ 859 $ ( 6,712 ) Interest paid 9,069 1,937 349 Training equipment obtained in exchange for services 1,082 1,454 679 Depreciation of training equipment obtained in exchange for services 692 918 1,174 Change in accrued capital expenditures during the period 3,621 ( 2,592 ) ( 1,203 ) CARES Act funds received for student emergency grants (See Note 24) — 6,689 20,039 CARES Act funds disbursed for student emergency grants (See Note 24) — ( 6,919 ) ( 19,745 ) CARES Act funds received for institutional costs (See Note 24) — — 2,677 The accompanying notes are an integral part of these consolidated financial statements. F-11 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Note 1 - Business Description 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. 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. For further discussion, see Note 2 on “Summary of Significant Accounting Policies - Concentration of Risk” and Note 23 on “Government Regulation and Financial Aid.” Note 2 - Summary of Significant Accounting Policies Principles of Consolidation 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. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, the proprietary loan program, allowance for uncollectible accounts, investments, property and equipment, goodwill recoverability, self-insurance claim liabilities, income taxes, contingencies and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. 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. F-12 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. 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. Accordingly, we recognize tuition and loan origination fees financed by the loan and any related interest revenue under the effective interest method required under the loan based on this collection rate. 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. The loans bear interest at market rates ranging from approximately 6 % to 10 %; however, principal and interest payments are not required until six months after the student completes or withdraws from his or her program. After the deferral period, monthly principal and interest payments are required over the related term of the loan. The repayment term is up to 10 years. The bank provides these services in exchange for a fee at a percentage of the principal balance of each loan and related fees. 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 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. Upon adoption of ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) as of October 1, 2020, we revised our estimated collection rate to only include historical collections from the past ten years as we determined that such population better represents our current expected collections and aligns with the typical term of the loan. The estimated amount is determined at the inception of the contract, and we recognize the related revenue as the student progresses through school. Each reporting period, we update our assessment of the variable collection rate associated with the proprietary loan program. F-13 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. 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 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. Property and Equipment Property, equipment and leasehold improvements are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization expense are calculated using the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is calculated using the straight-line method over the remaining useful life of the asset or term of lease, whichever is shorter. Costs relating to software developed for internal use and curriculum development are capitalized and amortized using the straight-line method over the related estimated useful lives. Such costs include direct costs of materials and services, as well as payroll and related costs for employees who are directly associated with the projects. Maintenance and repairs are expensed as incurred. We review the carrying value of our property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We evaluate our long-lived assets for impairment by examining estimated future cash flows. These cash flows are evaluated by using probability weighting techniques as well as comparisons of past performance against projections. 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 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 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. F-14 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. 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. 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. Self-Insurance Plans We are self-insured for claims related to employee health and dental care and claims related to workers’ compensation. Liabilities associated with these plans are estimated by management with consideration of our historical loss experience, severity factors and independent actuarial analysis. Our claim liabilities are based on estimates, and while we believe the amounts accrued are adequate, the ultimate losses may differ from the amounts provided. Our recorded net liability related to self-insurance plans was $ 4.9 million as of September 30, 2023. Leases We lease the majority of our administrative and educational facilities under operating lease agreements. 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. 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. If we determine a contract is, or contains, a lease, we assess whether the contract contains multiple lease components. We consider a lease component to be separate from other lease components in the contract if (a) we can benefit from the right of use either on its own or together with other resources that are readily available to us and (b) the right of use is neither highly dependent on nor highly interrelated with the other right(s) to use underlying assets in the contract. In contracts involving the use of real estate, we separate the right to use land from other underlying assets unless the effect of separating the land is insignificant to the resulting lease accounting. We have elected to account for the lease and non-lease components as a single lease component. 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. F-15 Table of Contents 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 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 (“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 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. We did not grant any stock options during the years ended September 30, 2023, 2022 and 2021. 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. F-16 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. We use a risk-free rate of return that is equal to the yield of a zero-coupon U.S. Treasury bill that is commensurate with each measurement period, and we assume that any dividends paid were reinvested. Actual results against the performance condition are measured at the end of the performance period, which typically coincides with the vesting period. 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. The estimated fair value is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables, including, but not limited to, our expected stock price volatility, the expected term of the awards and actual and projected employee stock exercise behaviors. We evaluate our assumptions on the date of each grant. Stock-based compensation expense of $ 3.8 million, $ 4.4 million and $ 1.8 million was recorded for the years ended September 30, 2023, 2022 and 2021, respectively. The tax benefit related to stock-based compensation recognized was $ 1.0 million, $ 1.1 million, and $ 0.5 million for the years ended September 30, 2023, 2022 and 2021, respectively. See Note 19 for further discussion. Income Taxes We recognize deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We also recognize deferred tax assets for net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. Deferred tax assets are reduced through a valuation allowance if it is more likely than not that the deferred tax assets will not be realized. See Note 16 for additional details. Concentration of Risk 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. We mitigate the risk associated with our investment in corporate bonds by requiring a minimum credit rating of A. 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 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. Additionally, approximately 10 % of our revenues, on a cash basis, were collected from funds distributed under various veterans’ benefits programs for the year ended September 30, 2023. The financial aid and veterans’ benefits programs are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations govern the financial assistance programs in which our students participate. 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 F-17 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. If any of our institutions were to lose its eligibility to participate in federal student financial aid programs, the students at that institution would lose access to funds derived from those programs and would have to seek alternative sources of funds to pay their tuition and fees. Students obtain access to federal student financial aid through an ED prescribed application and eligibility certification process. Student financial aid funds are generally made available to students at prescribed intervals throughout their predetermined expected length of study. Students typically apply the funds received from the federal financial aid programs to pay their tuition and fees. The transfer of funds is from the financial aid program to the student, who then uses those funds to pay for a portion of the cost of their education. 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. Reclassifications 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 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. This new guidance only applies to contracts and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The amendments in ASU 2020-04 do not apply to contract modifications made after December 31, 2022. 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. F-18 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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 Prepaid expenses 2,957 Other current assets 827 Property and equipment 23,950 Right-of-use assets for operating leases 71,153 Goodwill 11,600 Intangible assets 5,400 Deferred tax assets 4,460 Other assets 4,997 Total assets acquired $ 163,837 F-19 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Less: Liabilities assumed Accounts payable and accrued expenses $ 15,482 Deferred revenue 20,145 Operating lease liability, current portion 10,011 Long-term debt, current portion (1) 807 Other current liabilities 208 Long-term debt (1) 5,468 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. F-20 Table of Contents 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. 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, and welding disciplines. F-21 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. 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 Less: 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 Operating lease liability 14,216 Other liabilities 93 Total liabilities assumed 20,664 Net assets acquired $ 28,815 The goodwill of $ 8.6 million arising from the acquisition consists largely of the growth and operating synergies expected from integrating MIAT into UTI. The total amount of goodwill expected to be deductible for tax purposes is approximately $ 0.6 million. See Note 10 for additional details on goodwill. 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 curriculum was valued using the cost approach. 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 F-22 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. 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. 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. 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. 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. Contract Balances Contract assets primarily relate to our rights to consideration for a student’s progress through our training program in relation to our services performed but not billed at the reporting date. The contract assets are transferred to the receivables when the rights become unconditional. Currently, we do not have any contract assets that have not transferred to a receivable. Our deferred revenue is considered a contract liability and primarily relates to our enrollment agreements where we received payments for tuition but we have not yet delivered the related training programs to satisfying the related performance obligations. The advance consideration received from students or Title IV funding is deferred revenue until the training program has been delivered to the students. F-23 Table of Contents 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, 2023 2022 Receivables (1) $ 59,863 $ 46,826 Deferred revenue $ 85,738 $ 54,223 (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 Receivables, net consist of the following: September 30, 2023 2022 Tuition and fees receivables $ 29,616 $ 18,931 Tax receivables 740 — Other receivables 3,858 3,153 Total receivables 34,214 22,084 Less: allowance for uncollectible accounts ( 9,053 ) ( 5,634 ) Receivables, net $ 25,161 $ 16,450 The allowance for uncollectible accounts is estimated using our historical write-off experience applied to the receivable balances for students who are no longer attending school due to graduation or withdrawal or who are in school and have receivable balances in excess of financial aid available to them. We write off receivable balances against the allowance for uncollectible accounts at the time we transfer the balance to a third-party collection agency. The following table summarizes the activity for our allowance for uncollectible accounts for the years ended September 30, 2023, 2022 and 2021: Year Ended September 30, 2023 2022 2021 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 — Additions to bad debt expense 3,319 2,510 1,718 Write-offs of uncollectible accounts ( 6,640 ) ( 1,345 ) ( 724 ) Balance at end of period $ 9,053 $ 5,634 $ 2,787 Note 7 - Investments 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 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. F-24 Table of Contents 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 Gross Unrealized Estimated Fair Due in less than 1 year: Amortized Cost Gains Losses Market Value Corporate, municipal bonds and other $ 28,918 $ — $ ( 19 ) $ 28,899 Investments are exposed to various risks, including interest rate, market and credit risk. As a result, it is possible that changes in the values of these investments may occur and that such changes could affect the amounts reported in the consolidated financial statements. Note 8 - Fair Value Measurements The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers: Level 1: Defined as quoted market prices in active markets for identical assets or liabilities. Level 2: Defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Defined as unobservable inputs that are not corroborated by market data. Any transfers of investments between levels occurs at the end of the reporting period. Assets measured or disclosed at fair value on a recurring basis consisted of the following: Fair Value Measurements Using September 30, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Money market funds (1) $ 29,687 $ 29,687 $ — $ — Notes receivable (2) 36,663 — — 36,663 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 $ — F-25 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Fair Value Measurements Using September 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Money market funds (1) $ 23,439 $ 23,439 $ — $ — Notes receivable (2) 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 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 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: Depreciable Lives (in years) September 30, 2023 2022 Land — $ 25,601 $ 16,603 Building and building improvements 3 - 30 160,920 126,244 Leasehold improvements 1 - 20 87,525 86,751 Training equipment 3 - 10 110,292 96,907 Office and computer equipment 3 - 10 37,251 31,900 Curriculum development 3 - 5 2,478 20,130 Software developed for internal use 1 - 5 12,573 12,150 Vehicles 5 1,406 1,458 Right-of-use assets for finance leases 2 - 15 5,603 215 Construction in progress — 9,061 16,359 452,710 408,717 Less: accumulated depreciation and amortization ( 186,364 ) ( 194,425 ) 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. F-26 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Note 10 - Goodwill Our goodwill balance of $ 28.5 million as of September 30, 2023 represents the excess of the cost of an acquired business over the estimated fair values of the assets acquired and liabilities assumed. The changes in the carrying value of goodwill for the years ended September 30, 2023 and 2022 are presented in the table below. Year ended September 30, 2023 2022 Balance at beginning of period $ 16,859 $ 8,222 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 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 The following table provides the gross carrying value, accumulated amortization, net book value and remaining useful life for intangible assets subject to amortization as of September 30, 2023: Gross Carrying Value Accumulated Amortization Net Book Value Weighted Average Remaining Useful Life (Years) 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 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. F-27 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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, 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. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. We sublease certain portions of unused building space to third parties, which as of September 30, 2023, resulted in minimal income. 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. Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. 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 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. The operating lease expense excludes expense for short-term leases not accounted for under ASC 842, which was not significant for the years ended September 30, 2023, 2022, or 2021. Year ended September 30, Lease Expense 2023 2022 2021 Operating lease expense $ 29,450 $ 22,424 $ 22,623 Finance lease expense: Amortization of leased assets 779 72 123 Interest on lease liabilities 296 2 6 Variable lease expense 8,725 5,469 3,682 Sublease income ( 114 ) ( 155 ) ( 444 ) Total net lease expense $ 39,136 $ 27,812 $ 25,990 F-28 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Supplemental balance sheet, cash flow and other information related to our leases was as follows: September 30, Leases Classification 2023 2022 Assets: Operating lease assets Right-of-use assets for operating leases (1) $ 176,657 $ 132,038 Finance lease assets Property and equipment, net (2) 4,846 22 Total leased assets $ 181,503 $ 132,060 Liabilities: Current Operating lease liabilities Operating lease liability, current portion (1) $ 22,481 $ 12,959 Finance lease liabilities Long-term debt, current portion 844 23 Noncurrent 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. September 30, Lease Term and Discount Rate 2023 2022 Weighted-average remaining lease term (in years): Operating leases 7.91 8.92 Finance leases 5.33 0.33 Weighted average discount rate: Operating leases 4.76 % 3.91 % Finance leases 6.02 % 3.08 % F-29 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Year ended September 30, Supplemental Disclosure of Cash Flow Information and Other Information 2023 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 20,474 $ 13,952 $ 20,469 Financing cash flows from finance leases 696 73 119 Non-cash activity related to lease liabilities: Lease assets obtained in exchange for new operating lease liabilities (1) $ 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: As of September 30, 2023 Years ending September 30, Operating Leases Finance Leases 2024 $ 29,271 $ 1,159 2025 30,598 1,193 2026 29,565 1,229 2027 27,944 1,266 2028 25,796 1,304 2029 and thereafter 81,311 438 Total future minimum lease payments 224,485 6,589 Less: interest ( 36,978 ) ( 988 ) Present value of lease liabilities 187,507 5,601 Less: current lease liabilities ( 22,481 ) ( 844 ) Long-term lease liabilities $ 165,026 $ 4,757 Note 13 - Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following: September 30, 2023 2022 Accounts payable $ 14,438 $ 21,746 Accrued compensation and benefits 36,332 28,430 Other accrued expenses 15,075 13,328 Accrued tool sets $ 4,096 $ 3,176 Accounts payable and accrued expenses $ 69,941 $ 66,680 F-30 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Note 14 - Debt September 30, 2023 September 30, 2022 Interest Rate Maturity Date Carrying Value of Debt (6) 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 (3) 7.33 % Apr 2029 37,740 38,000 Finance lease (4) 6.02 % Various 5,601 23 Total debt 162,592 68,106 Debt issuance costs presented with debt (5) ( 475 ) ( 568 ) Total debt, net 162,117 67,538 Less: current portion of long-term debt ( 2,517 ) ( 1,115 ) Long-term debt $ 159,600 $ 66,423 (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, 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. F-31 Table of Contents 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 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 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. We are subject to customary affirmative and negative covenants under the Credit Agreement, including, without limitation, certain reporting obligations and certain limitations on restricted payments, and limitations on liens, encumbrances and indebtedness. 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. 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. Events of default under the Credit 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 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, 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. F-32 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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 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, 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 Revolving Credit Facility & Term Loans Finance Leases Total 2024 $ 1,673 $ 844 $ 2,517 2025 1,763 932 2,695 2026 91,836 1,027 92,863 2027 1,909 1,128 3,037 2028 26,610 1,237 27,847 Thereafter 33,200 433 33,633 Subtotal 156,991 5,601 162,592 Debt issuance costs presented with debt ( 475 ) — ( 475 ) Total $ 156,516 $ 5,601 $ 162,117 Note 15 - Derivative Financial Instruments In the normal course of business, our operations are exposed to market risks, including the effect of changes in interest rates. We may enter into derivative financial instruments to offset these underlying market risks. See Note 2 for our derivative financial instruments policy. 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. 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 and the Avondale Swap is still designated as an effective cash flow hedge for accounting and tax purposes. F-33 Table of Contents 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. 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, 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 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, Interest Rate Swaps 2023 2022 Other current assets $ 957 $ 632 Other assets 2,075 2,067 Total fair value of assets designated as hedging instruments $ 3,032 $ 2,699 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 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 ) F-34 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Note 16 - Income Taxes The components of income tax (expense) benefit for the years ended September 30, 2023, 2022 and 2021 are as follows: Year Ended September 30, 2023 2022 2021 Current (expense) benefit: United States federal $ ( 97 ) $ ( 17 ) $ 5 State ( 1,032 ) ( 1,065 ) ( 607 ) Total current (expense) benefit ( 1,129 ) ( 1,082 ) ( 602 ) Deferred (expense) benefit: United States federal ( 4,190 ) 2,380 — State ( 446 ) 4,109 — 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. The reasons for the differences are as follows: Year Ended September 30, 2023 2022 2021 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 Other, net ( 373 ) ( 398 ) 40 Total income tax (expense) benefit $ ( 5,765 ) $ 5,407 $ ( 602 ) F-35 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) The components of the deferred tax assets (liabilities) recorded in the accompanying consolidated balance sheets were as follows: September 30, 2023 2022 Gross deferred tax assets: Operating lease liability $ 47,349 $ 36,212 Deferred compensation 558 542 Accrued compensation 2,636 2,217 Accrued tool sets 1,069 823 Other reserves and accruals 4,464 3,826 Deferred revenue 4,733 5,178 Net operating losses 9,232 5,406 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 84 84 Valuation allowance ( 3,192 ) ( 1,200 ) Total gross deferred tax assets 72,199 54,754 Gross deferred tax liabilities: Right of use assets for operating leases ( 44,726 ) ( 33,655 ) Amortization of goodwill and intangibles ( 5,540 ) ( 4,666 ) Depreciation and amortization of property and equipment ( 16,829 ) ( 11,673 ) Prepaid and other expenses deductible for tax ( 1,241 ) ( 720 ) Other comprehensive income ( 758 ) ( 675 ) Total gross deferred tax liabilities ( 69,094 ) ( 51,389 ) 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: Year Ended September 30, 2023 2022 2021 Balance at beginning of period $ 1,200 $ 13,492 $ 17,449 Reductions to income tax ( 236 ) ( 12,075 ) ( 3,957 ) Write-offs/Adjustments (1) 2,228 ( 217 ) — Balance at end of period $ 3,192 $ 1,200 $ 13,492 (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. F-36 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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 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. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. 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 gross unrecognized tax benefits for the fiscal years ended September 30, 2023 and 2022: Year Ended September 30, 2023 2022 Balance at beginning of period $ 387 $ — Increases relates to current year tax positions 109 Increases related to acquisitions — 387 Balance at end of period $ 496 $ 387 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. No interest or penalties were accrued as of September 30, 2023. We do not expect a significant decrease in our liability for unrecognized tax benefits in the next 12 months. We file income tax returns for federal purposes and in many states. 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 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. Note 17 - Commitments and Contingencies Licensing Agreements We have entered into various licensing agreements with varying expiration dates that give us the right to use certain materials, trademarks, trade names, trade dress, and other intellectual property in connection with the operation of our campuses and the development of our courses. 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 F-37 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. Surety Bonds 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. Our campuses are subject to extensive, ongoing regulation by each of these states. Additionally, our campuses are required to be authorized by the applicable state education agencies of certain other states in which our campuses recruit students. Our insurers issue surety bonds for us on behalf of our campuses and admissions representatives with multiple states to maintain authorization to conduct our business. We are obligated to reimburse our insurers for any surety bonds that are paid by the insurers. As of September 30, 2023, the total face amount of these surety bonds was approximately $ 22.3 million. Legal In the ordinary conduct of our business, we are periodically subject to lawsuits, demands in arbitration, investigations, regulatory proceedings or other claims, including, but not limited to, claims involving current or former students, routine employment matters, business disputes and regulatory demands. 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 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 claims. 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. Note 18 - Shareholders’ Equity Common Stock Holders of our common stock are entitled to receive dividends when and as declared by our Board of Directors and have the right to one vote per share on all matters requiring shareholder approval. On June 9, 2016, our Board of Directors voted to eliminate the quarterly cash dividend on our common stock. Any future common stock dividends require the approval of a majority of the voting power of the Series A Preferred Stock. Preferred Stock Preferred Stock consists of 10,000,000 authorized preferred shares of $ 0.0001 par value each. On June 24, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Coliseum Holdings I, LLC (“Purchaser”) to sell to the Purchaser 700,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) for a total purchase price of $ 70.0 million. The Series A Preferred Stock is perpetual, and therefore does not have a maturity date. F-38 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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. The description below provides a summary of certain material terms of the Certificate of Designations of the Series A Preferred Stock. Rank The Series A Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding up or dissolution, rank senior to our common stock and each other junior class or series of shares that we may issue in the future. The Series A Preferred Stock will also rank junior to any future indebtedness. Dividends We may pay a cash dividend on each share of the Series A Preferred Stock at a rate of 7.5 % per year on the liquidation preference then in effect (“Cash Dividend”). The Cash Dividend is payable before any dividends would be declared or paid to common stockholders or other junior stockholders. If we do not pay a Cash Dividend, the liquidation preference shall be increased to an amount equal to the current liquidation preference in effect plus an amount reflecting that liquidation preference multiplied by the Cash Dividend rate then in effect plus 2.0 % per year (“Accrued Dividend”). Cash Dividends are payable semi-annually in arrears on September 30 and March 31 of each year, and will begin to accrue on the first day of the applicable dividend period. We paid Cash Dividends of $ 5.1 million and $ 5.2 million during the years ended September 30, 2023 and 2022 . The Series A Preferred Stock includes participation rights such that, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay to each holder of the Series A Preferred Stock a dividend on an as converted basis. If we are required to or elect to obtain stockholder and regulatory approval and if such approval is not obtained within the time periods set forth in the Certificate, the dividend rates with respect to the Cash Dividend and Accrued Dividend will be increased by 5.0 % per year, not to exceed a maximum of 14.5 % per year, subject to downward adjustment on obtaining the foregoing approvals. Liquidation Preference In the event of voluntary or involuntary liquidation, dissolution or winding up of our company, holders of the Series A Preferred Stock are entitled to receive, before any distribution or payment to the holders of any common or junior stock, an amount per share of Series A Preferred Stock equal to the liquidation preference then in effect, which would include any Accrued Dividends. 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. Voting 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. F-39 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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; the repurchase, redemption or acquisition of our common stock; the incurrence of debt; the consummation of certain acquisitions, mergers or other such transactions; and the sale of material assets. The Certificate of Designations includes a Conversion Cap and an Investor Voting Cap (each as defined in the Certificate of Designations), which generally prohibit: (i) the conversion of Series A Preferred Stock into common stock; and (ii) the voting of common stock issuable upon conversion of the Series A Preferred Stock, to the extent that such conversion results in the issuance of a number of shares of common stock exceeding 4.99 % of our outstanding shares of common stock as of June 24, 2016 or that has voting power that exceeds 4.99 % of the voting power of our outstanding shares of common stock as of June 24, 2016. The Certificate of Designations provides that the Conversion Cap and the Investor Voting Cap may only be removed upon our receipt of: (i) certain stockholder approvals required by Section 312.03 of the New York Stock Exchange Listed Company Manual (“NYSE Rule 312”); and (ii) either (A) Education Regulatory Approval (as defined in the Certificate of Designations), or (B) a good faith determination by our board of directors that Education Regulatory Approval is not required. Our stockholders approved a proposal at the annual meeting of stockholders on February 27, 2020 , in accordance with the listing standards of the NYSE, that satisfied NYSE Rule 312. In August 2020, the Purchaser notified us that it intended to distribute all 700,000 Series A Preferred Stock to its members, and that certain of its members would subsequently distribute their Series A Preferred Stock to (i) limited partners affiliated with the Purchaser and certain other entities for whom Coliseum Capital Management, LLC (an affiliate of the Purchaser) holds voting and dispositive power with respect to the Series A Preferred Stock (the “Affiliated Holders”), which six Affiliated Holders, following such distribution, will own Series A Preferred Stock that would represent, on an as converted basis, approximately 24.9 % of our outstanding shares of common stock and voting power, and (ii) limited partners unaffiliated with the Purchaser (the “Unaffiliated Holders”), which 12 Unaffiliated Holders, following such distribution, each will own Series A Preferred Stock that would represent, on an as converted basis, 9.9 % or less of our outstanding shares of common stock and voting power (collectively, the “Distributions”). In connection with the Distributions, our board of directors, based on advice of legal counsel, determined that: (i) no Education Regulatory Approval would be required for the Unaffiliated Holders to remove the Conversion Cap and the Investor Voting Cap with respect to the Series A Preferred Stock acquired in the Distributions; and (ii) as to the Series A Preferred Stock held by the Affiliated Holders, no Education Regulatory Approval is required prior to the Affiliated Holders (A) converting a number of Series A Preferred Stock into common stock provided that the number of shares of common stock issued pursuant to such conversion, in the aggregate, is less than or equal to 9.9 % of the number of shares of common stock outstanding on an as converted basis as of the date of the Distributions, and (B) voting a number of Series A Preferred Stock provided that the voting power of such Series A Preferred Stock and any shares of common stock issued upon conversion of such Series A Preferred Stock is less than or equal to 9.9 % of the voting power of the common stock outstanding as of the date of the Distributions (the foregoing limitations, the “Continuing Caps”). 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. 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. The Affiliated Holders may, at any time, request that we seek Education Regulatory Approval or make a good faith determination that such approval is not required. Optional Conversion by Purchaser The Series A Preferred Stock are convertible to common stock at any time at the option of the holder. Following the Distributions, the Conversion Cap currently applies to the Affiliated Holders. F-40 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Optional Conversion by Our Company If at any time following the third anniversary of the issuance of the Series A Preferred Stock, the volume weighted average price of our common stock equals or exceeds 2.5 times the conversion price of the Series A Preferred Stock, or $ 8.33 as of September 30, 2023, for a period of 20 consecutive trading days during an open trading window (“Conversion Trigger”), we may, at our option and subject to obtaining any required stockholder and regulatory approvals, require that any or all of the then outstanding Series A Preferred Stock be automatically converted into our common stock at the conversion rate. We may not elect such conversion during the closed trading window periods in which any director or executive officer of our company is prohibited by us to, directly or indirectly, purchase, sell or otherwise acquire or transfer any equity security of our company. If we are unable to obtain the necessary regulatory approvals to remove the Conversion Cap within 120 days of giving our notice of intent to convert, we will have the option to redeem all of the Series A Preferred Stock at a premium. Conversion Rate and Conversion Price The conversion rate for the Series A Preferred Stock will be calculated by dividing the current liquidation preference by the conversion price then in effect. The initial and current conversion price for the Series A Preferred Stock is $ 3.33 per share. The conversion price is subject to adjustment upon the occurrence of certain common stock events, as defined in the Purchase Agreement, including stock splits, reverse stock splits or the issuance of common stock dividends. Optional Special Dividend and Conversion on Certain Change of Control Upon a change of control, at the written election by holders of a majority of the then outstanding shares of Series A Preferred Stock, we shall declare and pay a special cash dividend in the amount equal to either 1.5 or 2.0 times the Cash Dividend rate, depending on the type of change in control, multiplied by the liquidation preference per share then in effect. Redemption at the Option of Our Company We have the ability to redeem the Series A Preferred Stock at any time after the third anniversary of the issue date, provided that the Conversion Trigger has not been met on the date of the redemption notice. Holders of the Series A Preferred Stock will be able to convert their shares into common stock if neither the Investor Voting Cap nor Conversion Cap is in effect. If they do not provide notice of conversion within 10 days of receipt of the redemption notice, the redemption will proceed at a price per share equal to the product of the current conversion rate and 2.5 times the conversion price. 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. After the tenth anniversary of the issue date, we have the ability to redeem the Series A Preferred Stock in whole or in part at any time. Holders of the Series A Preferred Stock will then be able to convert their shares into common stock if neither the Investor Voting Cap nor Conversion Cap is in effect. If they do not provide notice of conversion within 10 days of receipt of the redemption notice, the redemption will proceed at a price per share equal to the current liquidation preference. 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. Anti-dilution The conversion price of the Series A Preferred Stock is subject to certain customary anti-dilution protections should we effect certain common stock events, such as stock splits, stock dividends or subdivisions, reclassifications or combinations of our common stock. In such events, the conversion price will be adjusted in a proportionate manner to the change in outstanding share of common stock immediately preceding and immediately after the event. Reservation of Shares Issuable upon Conversion We are required, at all times, to reserve and keep available out of our authorized and unissued shares of common stock the number of shares that would be issuable upon conversion of all Series A Preferred Stock, assuming that the Conversion Cap does not apply. 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. F-41 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Under the Securities Act, we were not required to register the offer or sale of the Series A Preferred Stock to the Purchaser. In conjunction with the Purchase Agreement, the parties entered into a Registration Rights Agreement in order to grant the Purchaser certain demand and piggyback registration rights covering the purchased shares. In the event that the Purchaser requests such registration of the Series A Preferred Stock, the Registration Rights agreement provides that we shall bear all expenses associated with the registration, with the exception of underwriting discounts and commissions and brokerage fees. On October 18, 2019, we filed a Form S-3 with the Securities and Exchange Commission to register shares of common stock currently held by selling stockholders as well as shares of common stock issuable upon the optional conversion of Series A Convertible Preferred Stock held by the selling stockholders. That registration statement became effective on October 30, 2019. Share Repurchase Program On December 10, 2020, our Board of Directors authorized a new share repurchase plan that would allow for the repurchase of up to $ 35.0 million of our common stock in the open market or through privately negotiated transactions. This new share repurchase plan replaced the previously authorized plan from fiscal 2012. Any repurchases under this new stock repurchase program require the approval of a majority of the voting power of our Series A Preferred Stock. We did not repurchase any shares during the years ended September 30, 2023, 2022 and 2021. Note 19 - Stock-Based Compensation Our stock-based compensation is governed by the 2021 Equity Incentive Compensation Plan (“2021 Plan”). The 2021 Plan was adopted by our Board of Directors in January 2021 and approved by our shareholders at the February 2021 annual meeting. 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 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. As of September 30, 2023, 1.1 million shares remained available for future grants under the 2021 Plan. Stock-Based Compensation Expense As previously discussed in Note 2, compensation expense associated with RSUs, PSUs or stock options is measured based on the grant date fair value of our common stock. The fair value of the RSUs is amortized on a straight-line basis over the requisite service period. 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 quarterly for the anticipated or actual achievement against the established performance condition. For all stock-based compensation expense, we account for forfeitures as they occur. The following table summarizes the operating expense line in which stock-based compensation expense has been recorded and the impact on net income in the consolidated statements of operations for the years ended September 30, 2023, 2022 and 2021: Year Ended September 30, 2023 2022 2021 Educational services and facilities $ 192 $ 240 $ 60 Selling, general and administrative 3,656 4,172 1,748 Total stock-based compensation expense $ 3,848 $ 4,412 $ 1,808 Income tax benefit $ 962 $ 1,103 $ 452 F-42 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Stock Options We have not issued stock options since fiscal 2019. 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: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value (In thousands) (per Share) (Years) (In thousands) Outstanding as of September 30, 2021 210 $ 3.14 4.18 $ 760 Outstanding as of September 30, 2022 210 $ 3.14 3.18 $ 483 Outstanding as of September 30, 2023 210 $ 3.14 2.18 $ 1,100 Stock options exercisable as of September 30, 2023 210 $ 3.14 2.18 $ 1,100 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 common stock on the grant date. RSUs generally vest ratably over a three-year service period from the date of grant. As of September 30, 2023, unrecognized stock compensation expense related to RSUs was $ 4.0 million which is expected to be recognized over a weighted average period of 1.9 years. Performance Share Units Our outstanding PSUs vest over a three-year service period from the date of the grant and are based upon a mix of certain pre-established targets for revenue, compounded annual total shareholder return for the measurement period and net income. On the settlement date for each measurement period, participants will receive shares of our common stock equal to 0 % to 187.5 % of the PSUs originally granted depending on the actual achievement against the performance metrics for that measurement period. The PSUs vest subject to a market condition and on the settlement date which is expected to be no later than two and a half months after the end of each measurement period. 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. F-43 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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: RSUs PSUs Number of Shares (In thousands) Weighted Average Grant Date Fair Value per Share Number of Shares (In thousands) Weighted Average Grant Date Fair Value per Share Outstanding as of September 30, 2020 338 $ 7.01 341 $ 7.30 Granted 376 6.11 371 6.37 Adjustment to grant based on achieved attainment level — — 11 — Vested ( 130 ) 6.31 ( 39 ) 2.48 Forfeited ( 36 ) 6.90 ( 42 ) 7.30 Outstanding as of September 30, 2021 548 $ 6.56 642 $ 6.97 Granted 377 8.34 377 8.75 Adjustment to grant based on achieved attainment level — — ( 256 ) — Vested ( 209 ) 6.69 ( 24 ) 7.73 Forfeited ( 21 ) 7.21 ( 23 ) 7.14 Outstanding as of September 30, 2022 695 $ 7.47 716 $ 7.60 Granted 596 7.17 475 7.49 Adjustment to grant based on achieved attainment level — — ( 304 ) — Vested ( 325 ) 7.31 — — Forfeited ( 121 ) 7.37 ( 144 ) 7.65 Outstanding as of September 30, 2023 845 $ 7.33 743 $ 7.55 Note 20 - Earnings per Share We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Series A Preferred Stock on June 24, 2016. Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis. The two-class method is an earnings allocation formula that determines EPS for common stock and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends. The Series A Preferred Stock is not included in the computation of basic EPS in periods in which we have a net loss, as the Series A Preferred Stock is not contractually obligated to share in our net losses. Diluted earnings per common share is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net income and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested restricted stock units, unvested performance units and convertible preferred stock. F-44 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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: Year Ended September 30, 2023 2022 2021 Basic earnings per common share: Net income $ 12,322 $ 25,848 $ 14,581 Less: Preferred stock dividend declared ( 5,069 ) ( 5,159 ) ( 5,250 ) Income available for distribution 7,253 20,689 9,331 Income allocated to participating securities ( 2,712 ) ( 7,847 ) ( 3,647 ) Net income available to common shareholders $ 4,541 $ 12,842 $ 5,684 Weighted average basic shares outstanding 33,985 33,218 32,766 Basic income per common share $ 0.13 $ 0.39 $ 0.17 Diluted earnings per common share: Method used: Two-class Two-class Two-class Net income available to common shareholders $ 4,541 $ 12,842 $ 5,684 Weighted average basic shares outstanding 33,985 33,218 32,766 Dilutive effect related to employee stock plans 494 525 357 Weighted average diluted shares outstanding 34,479 33,743 33,123 Diluted income per common share $ 0.13 $ 0.38 $ 0.17 Anti-dilutive shares excluded: Outstanding stock-based grants 180 9 186 Convertible preferred stock 20,297 20,297 21,021 Total anti-dilutive shares excluded 20,477 20,306 21,207 Dilutive shares under the as-converted method (1) 54,776 54,040 54,144 (1) The dilutive shares under the as-converted method assume conversion of the Series A Preferred Stock and are presented here merely for reference. In a net income position, diluted earnings per share is determined by the more dilutive of the two-class method or the as-converted method. Note 21 - Employee Benefit Plans We sponsor a defined contribution 401(k) plan, under which our employees elect to withhold specified amounts from their wages to contribute to the plan and we have a fiduciary responsibility with respect to the plan. The plan provides for matching a portion of employees’ contributions at management’s discretion. We made matching contributions of approximately $ 1.7 million, $ 1.5 million, and $ 1.1 million to the 401(k) plan for the years ended September 30, 2023, 2022 and 2021, respectively. 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 F-45 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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 $ 2.2 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 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: 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. 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. Concorde: 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: UTI Concorde Corporate Consolidated Year Ended September 30, 2023 Revenues $ 429,317 $ 178,091 $ — $ 607,408 Income (loss) from operations 55,679 10,533 ( 44,813 ) 21,399 Depreciation and amortization 21,113 4,077 25 25,215 Net income (loss) 51,241 10,700 ( 49,619 ) 12,322 Year Ended September 30, 2022 Revenues $ 418,765 $ — $ — $ 418,765 Income (loss) from operations 64,371 — ( 41,997 ) 22,374 Depreciation and amortization 16,822 — 62 16,884 Net income (loss) 62,459 — ( 36,611 ) 25,848 F-46 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) UTI Concorde Corporate Consolidated Year Ended September 30, 2021 Revenues $ 335,083 $ — $ — $ 335,083 Income (loss) from operations 46,529 — ( 31,582 ) 14,947 Depreciation and amortization 13,965 — 62 14,027 Net income (loss) 46,199 — ( 31,618 ) 14,581 As of September 30, 2023 Total assets $ 442,507 $ 130,813 $ 167,365 $ 740,685 As of September 30, 2022 Total assets $ 434,706 $ — $ 118,205 $ 552,911 Note 23 - Government Regulation and Financial Aid Our institutions are subject to extensive regulatory requirements imposed by a wide range of federal and state agencies, as well as by institutional and programmatic accreditors. These requirements, which are frequently being revisited, revised, and expanded, cover virtually every aspect of our schools’ operations, and our institutions are subject to periodic audits and program compliance reviews by various external agencies for compliance with these requirements. Each of our institutions’ administration of the federal programs of student financial assistance under Title IV of the HEA (“Title IV Programs”) also must be audited annually by independent accountants and the resulting audit report submitted to ED for review. The approvals granted by these regulatory entities permit our schools to operate and to participate in a variety of government-sponsored financial aid programs, including Title IV Programs. If our institutions fail to comply with any of these regulatory requirements, our regulators could take an array of adverse actions, up to and including revocation of the approval granted by the agency. Such adverse actions could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition. Below, we discuss certain, specific elements of this regulatory environment. State Authorization To operate and offer postsecondary programs, and to be certified to participate in Title IV Programs, each of our institutions must obtain and maintain authorization from the state in which it is physically located (“Home State”). To engage in educational or recruiting activities outside of its Home State, each institution also may be required to obtain and maintain authorization from the states in which it is educating or recruiting students. The level of regulatory oversight varies substantially from state to state and is extensive in some states. State laws may establish standards for instruction, qualifications of faculty, location and nature of facilities and equipment, administrative procedures, marketing, recruiting, student outcomes reporting, disclosure obligations to students, limitations on mandatory arbitration clauses in enrollment agreements, financial operations, and other operational matters. Some states prescribe standards of financial responsibility and mandate that institutions post surety bonds. Many states have requirements for institutions to disclose institutional data to current and prospective students, as well as to the public, and some states require that our schools meet prescribed performance standards as a condition of continued approval. States can and often do revisit, revise, and expand their regulations governing postsecondary education and recruiting. 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. F-47 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) 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 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 The federal government provides a substantial part of its support for postsecondary education through Title IV Programs in the form of grants and loans to students who can use those funds at any institution that has been certified as eligible to participate by ED. All of our institutions are certified to participate in Title IV Programs. Significant factors relating to Title IV Programs that could adversely affect us include: • The 90/10 Rule . As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to comply with the 90/10 rule. Under the 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.” F-48 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) • 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 its 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. ED’s administrative capability standards also include thresholds and expectations for federal student loan cohort default rates (discussed below), satisfactory academic progress, and loan counseling. Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV Programs, require the institution to repay Title IV Program funds, change the method of payment of Title IV Program funds, place the institution on provisional certification as a condition of its continued participation in Title IV Programs, or take other actions against the institution. • Three-Year Student Loan Default Rates. 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, 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 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; (2) the primary reserve ratio which measures the institution’s ability to support current operations from expendable resources; and (3) the net income ratio which measures the institution’s ability to operate at a profit. 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. F-49 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) • 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. 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. ◦ 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. To continue participation in veterans’ benefits programs, an institution must comply with certain requirements established by the VA. F-50 Table of Contents UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) Additionally, some states provide financial aid to our students in the form of grants, loans or scholarships. 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 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. 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”). 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. F-51