What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-12-05 compared with 2023-12-01 · 134 added, 159 removed, 323 unchanged (48% of the section changed)

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

Concord Career Colleges Acquisition

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

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

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

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

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

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

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

Our reporting structure includes two reportable segments as follows:

Universal Technical Institute (“UTI”):

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

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

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

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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.

On December 1, 2022, we acquired Concorde which 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Concorde’s new short courses are starting three to five times a year, depending on the campus.

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

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

The UTI segment implemented average tuition rate increases of up to 3.0%, 6.0% and 2.5% for each of the years ended September 30, 2024, 2023 and 2022, respectively, and the Concorde segment implemented average tuition rate increases of approximately 2.5% and 3.0% for the years ended September 30, 2024 and 2023, respectively.

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

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Most students at our campuses rely on funds received under various government-sponsored student financial aid programs, predominantly Title IV Programs and various veterans' benefits programs, to pay a substantial portion of their tuition and other education-related expenses.

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.

Approximately 78% of our revenues, on a cash basis, were collected from funds distributed under Title IV Programs and various veterans' benefits programs for the year ended September 30, 2024 as calculated under the 90/10 rule.

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

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professional services;

bad debt expense;

provision for credit losses;

costs associated with the implementation and operation of our student management and reporting system;

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Student Metrics

September 30, 2023 September 30, 2022 % Change

September 30, 2024 September 30, 2023 (1)

Total new student starts 15,138 14,181 6.7 %

Average undergraduate full-time active students 12,614 12,838 (1.7) %

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

Average full-time active students 13,810 12,614 9.5 %

End of period full-time active students 15,873 14,833 7.0 %

Total new student starts 11,747 8,432 39.3 %

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

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

Average full-time active students 8,475 7,654 10.7 %

End of period full-time active students 9,747 8,369 16.5 %

Total new student starts 26,885 22,613 18.9 %

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

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

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

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

Average full-time active students 22,285 20,268 10.0 %

End of period full-time active students 25,620 23,202 10.4 %

(1) New student starts and average student data for Concorde presented in the year ended September 30, 2023 column represents the period of UTI’s ownership, or December 1, 2022 through September 30, 2023.

The increase in consolidated total and segment new student starts, average full-time active students and end of period full-time active students was primarily due to new program rollouts and increased student demand for existing programs across both segments.

In the UTI segment, our student population was positively impacted during the current year by the successful launch of 14 new programs across nine campuses during fiscal 2023, and three new HVAC and refrigeration programs launched in the back half of 2024.

The Concorde segment benefited from the roll out seven new programs at three campuses during the current and prior year, and also introduced new cash pay “short programs” at a number of campuses.

Concorde’s short programs offer an affordable, fast-track pathway into the workforce and provide essential foundational skills that prepare students for entry-level roles in healthcare.

Additionally, Concorde benefited from two additional months during fiscal 2024 due the December 1, 2022 close of the acquisition.

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

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adverse media coverage;

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

legislative, or regulatory actions and investigations by attorneys general and various agencies related to allegations of wrongdoing on the part of other companies

within the education and training services industry, which can cast the aggregate “for-profit” education industry in a negative light;

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

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Our revenues for the year ended September 30, 2024 were $732.7 million, an increase of $125.3 million, or 20.6%, from the prior year.

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

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

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

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

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

UTI revenues increased by $57.1 million, or 13.3%, driven primarily by the higher average full-time active students compared to the prior year.

Concorde revenues increased by $68.2 million, or 38.3%, primarily due to the inclusion of two extra months of revenue compared to the prior year period, along with higher average full-time active students.

Our operating expenses for fiscal 2024 were $673.8 million, a 15.0% increase over the prior year .

In fiscal 2024, we had operating income of $58.9 million, a 175.2% increase when compared to $21.4 million in the prior year.

This increase in operating income was primarily driven by productivity improvements and proactive cost reductions, which have been a key part of our operating model for the past several years.

Net income for the year ended September 30, 2024 was $42.0 million compared to $12.3 million in the prior year.

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During the year ended September 30, 2024, we executed the following as part of our growth, diversification and optimization strategy:

Acquisition and Optimization

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

The acquisition aligns with our growth and diversification strategy, which is focused on offering a broader array of high-quality, in-demand workforce education solutions which both prepare students for a variety of careers in fast-growing fields and help close the country's skills gap by leveraging key industry partnerships.

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

Program Expansion and New Industry Partnerships

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

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

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

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

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

and Welding at the UTI Sacramento, California campus.

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

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

• Concorde announced the launch of additional dental hygiene program offerings in Jacksonville, Florida, Miramar, Florida, and Portland, Oregon and sonography program offerings in Orlando, Florida and San Bernardino, California.

• UTI announced additional HVAC and refrigeration program expansions in Avondale, Arizona, Bloomfield, New Jersey, Long Beach, California and Sacramento, California.

Avondale, Bloomfield and Long Beach first launched in the third quarter of 2024, with Sacramento expected to launch in the first half of fiscal 2025.

• UTI announced plans to consolidate the two Houston, Texas campuses to align the curriculum, student facing systems, and support services to better serve students.

As part of the transition, the MIAT Houston campus, acquired in November 2021, began operating under the UTI brand and implemented a phased teach-out agreement starting in May 2024.

Both facilities will remain in use post-consolidation.

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

• UTI obtained Federal Aviation Administration approval for the Airframe and Powerplant Technician program at the Miramar, Florida campus and started the first cohort of students during the first quarter of 2024, which completed the rollout of the 14 new programs announced in fiscal 2023.

• UTI Wind Turbine Technician programs were the first in the United States to earn Certified Training Center status from the Global Wind Organisation.

• UTI announced new partnerships with United Service Organization, Hawaiian Airlines, iRacing, Crown Equipment, The Associated company and several other companies for early employment programs.

These partnerships will provide additional career transition and placement opportunities for UTI students.

• UTI announced the integration of Electric Vehicle curriculum into BMW’s manufacturer specific advanced training program in the fourth quarter of fiscal 2024.

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

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

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

UTI Concorde Consolidated UTI Concorde Consolidated

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

Year over Year % Change 2.5 % 100.0 % 45.0 %

Year ended September 30, 2024 Year ended September 30, 2023 Year over Year % Change

UTI $ 486,376 $ 429,317 13.3 %

Concorde 246,311 178,091 38.3 %

Consolidated 732,687 607,408 20.6 %

Our revenues for the year ended September 30, 2024 were $732.7 million, an increase of $125.3 million, or 20.6%, as compared to revenues of $607.4 million for the year ended September 30, 2023.

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

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

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

Revenues for UTI for the year ended September 30, 2024 were $486.4 million, an increase of $57.1 million, or 13.3%, versus the prior year.

Revenue increased primarily due to a 9.5% increase in overall average full-time active students and an overall increase in average revenue per student.

We recognized $12.0 million on an accrual basis related to revenues and interest under the proprietary loan program for the year ended September 30, 2024, as compared to $8.8 million recognized for the year ended September 30, 2023.

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

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

Revenues for Concorde for the year ended September 30, 2024 were $246.3 million, an increase of $68.2 million, or 38.3%, versus the prior period.

The primary drivers of the increase for Concorde were the inclusion of two additional months of revenue during the current year and a 10.7% increase in overall average full-time active students.

Educational services and facilities expenses

Our educational services and facilities expenses for the year ended September 30, 2024 were $384.5 million, representing an increase of $54.6 million, or 16.6%, as compared to $329.9 million for the year ended September 30, 2023.

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

This increase was primarily due to the increase in student volumes during the current period and the inclusion of Concorde results for two additional months in the current year.

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

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

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

Occupancy costs decreased $4.6 million during fiscal year 2023.

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

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

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

Compensation and related costs increased $7.8 million for the year ended September 30, 2024 primarily due to additional instructors and other personnel hired to support the new programs added in fiscal 2023 and 2024.

Supplies, maintenance and student expense increased by $5.8 million primarily due to approximately $6.5 million in additional grants for student housing during the current year.

This increase was offset by a decrease of approximately $0.6 million in expenses for student laptops.

Depreciation and amortization expense increased $2.7 million during the year ended September 30, 2024 primarily due to the purchase of the three primary buildings at our UTI Orlando, Florida campus in March 2023 and increased capital expenditures related to the new program launches during fiscal 2023 and 2024.

Other educational services and facilities expense increased by $1.5 million.

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

The increase is primarily due to a higher Snap-on tool voucher expense of $1.8 million.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the year ended September 30, 2024 were $289.3 million, representing an increase of $33.2 million, or 12.9%, as compared to $256.1 million for the year ended September 30, 2023.

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

This increase was primarily due to the increase in student volumes during the current period and the inclusion of Concorde results for two additional months in the current year.

During fiscal 2023, in coordination with the integration of Concorde, we began to reassess our operating model to determine the organizational structure that would best help the Company achieve future growth goals and optimally support the business.

Beginning in fiscal 2024, we have executed an internal reorganization to fully transition our operating and reporting model to support a multi-divisional business.

As part of the internal reorganization, each of the reportable segments now have dedicated accounting, finance, information technology, and human resources teams.

Additionally, human resources and information technology costs that benefit the entire organization are now allocated across UTI, Concorde and Corporate each period based upon relative headcount.

As a result, additional costs have moved from Corporate into the UTI segment and to a lesser extent the Concorde segment as resources were redirected to support the segment’s objectives.

Due to these changes in allocation methodology, the prior year amounts for selling, general and administrative expenses have been recast for comparability to the current year presentation.

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

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Professional and contract services expense 6,810 7,557 11,861 26,228

Intangible asset impairment expense — — — —

Other selling, general and administrative expenses 25,500 11,446 130 37,076

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Professional and contract services expense 8,093 4,537 9,110 21,740

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

Other selling, general and administrative expenses 24,371 6,369 1,089 31,829

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Advertising and marketing expense decreased by $0.9 million for the year ended September 30, 2024, as compared to the prior year.

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

We continue to fine tune our marketing strategy by selecting cost-effective marketing options.

Advertising expense as a percentage of revenues decreased to 10.7% for the year ended September 30, 2024 as compared to 12.3% in the prior year.

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

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

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

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

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

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

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

Professional and contract services decreased by $1.3 million for the year ended September 30, 2024.

The decreases were primarily due to one-time costs incurred in the prior year related to our business strategies.

Other selling, general and administrative expenses increased by $1.1 million for the year ended September 30, 2024, as compared to the prior year.

This increase is in line with the growth in headcount to support the UTI segment and our business strategies.

Compensation and related costs increased by $6.3 million for the year ended September 30, 2024 as compared to the prior year, primarily due to the inclusion of two additional months of expense in the current year and an increase in headcount to support our growth, diversification and optimization initiatives.

Advertising and marketing expense increased by $6.4 million for the year ended September 30, 2024, as compared to the prior year primarily due to the inclusion of two additional months of expense in the current year and to support overall growth in the student population.

Advertising expense as a percentage of revenues decreased to 10.5% for the year ended September 30, 2024 as compared to 10.9% in the prior year.

Other selling, general and administrative expenses for Concorde for the year ended September 30, 2024 increased across all categories as the current year period includes two additional months of expenses compared to the prior year.

This increase was also partially due to the continued integration of Concorde during 2024.

Corporate compensation and related costs increased by $5.4 million for the year ended September 30, 2024 as compared to the prior year, primarily due to additional headcount hired to support our business strategies and higher expected achievement on our performance stock-based compensation awards.

Professional and contract services expense increased by $2.8 million for the year ended September 30, 2024 as compared to the prior year, due to an increase of $2.3 million in contract services primarily related to optimization and integration projects and an increase of $0.4 million in accounting and legal fees.

Other selling, general and administrative expenses decreased by $1.0 million for the year ended September 30, 2024 as compared to the prior year, primarily due to the completion of integration projects.

Other (expense) income, net

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

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

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

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

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

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

Other expense for the year ended September 30, 2024 was $2.7 million, compared to $3.3 million for the year ended September 30, 2023.

The $2.7 million of other expense in fiscal 2024 is primarily comprised of $9.5 million of interest expense from our revolving credit facility and term loans, partially offset by interest income of $6.3 million.

Our income tax expense for the year ended September 30, 2024 was $14.2 million, or 25.3% of pre-tax income, compared to $5.8 million, or 31.9% of pre-tax income, for the year ended September 30, 2023.

The effective income tax rate for the year ended September 30, 2024 differed from the federal statutory tax rate of 21% primarily due to non-deductible executive compensation, stock compensation, change in valuation allowance, federal research and development tax credits and state and local income and franchise taxes.

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

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

Preferred stock dividends

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

As of September 30, 2024, no shares of the Series A Preferred Stock remained outstanding and all rights of the holders to receive future dividends have been terminated due to the combination of the repurchase and conversion of all outstanding preferred shares as of December 18, 2023.

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

Pursuant to the Certificate of Designations of the Series A Preferred Stock, we paid preferred stock cash dividends of $1.1 million and $5.1 million during the years ended September 30, 2024 and 2023, respectively.

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

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

Income available for distribution

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

Under this method,

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

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

As noted above, no shares of the Series A Preferred Stock remain outstanding and all rights of the holders to receive future dividends have been terminated as of the December 18, 2023 conversion date.

The amount of income allocated to the participating securities for the years ended September 30, 2024 and 2023 was $2.9 million and $2.7 million, respectively.

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Our earnings before interest, tax, depreciation and amortization (“EBITDA”) for the years ended September 30, 2024, 2023 and 2022 were $88.7 million, $47.1 million and $38.8 million, respectively.

We define EBITDA as net income (loss) for the year, before interest (income) expense, income tax (benefit) expense, and depreciation and amortization.

We define EBITDA as net income (loss) for the year, before interest (income) expense, income tax expense (benefit), and depreciation and amortization.

EBITDA is a non-GAAP financial measure which is provided to supplement, but not substitute for, the most directly comparable GAAP measure.

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Overview of Liquidity

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

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

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

Our cash position is available to fund strategic long-term growth initiatives, including opening additional campuses in new markets and the creation and expansion of new programs in existing markets where we continue to optimize utilization of our campus facilities.

Our aggregate liquidity as of September 30, 2024 totaled $230.9 million and was comprised of cash and cash equivalents of $161.9 million and undrawn revolving credit facility capacity of $69.0 million.

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Strategic Uses of Cash

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

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

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

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

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

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

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

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

Long-term Debt

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

As of September 30, 2024, we had $126.1 million of long-term debt outstanding, which is comprised of two term loans, a finance lease and our revolving credit facility.

Of the $126.1 million outstanding, $28.4 million relates to a term loan that bears interest at the rate of Term SOFR plus 2.0% and a tranche rate adjustment of 0.046% over the seven-year term secured in connection with the UTI Avondale, Arizona campus property purchased in December 2020.

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Approximately $4.8 million relates to a finance lease for a campus within our Concorde segment.

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

The remaining $56.0 million relates to funds drawn from the revolving credit facility that was secured in connection with the Concorde acquisition.

During the fourth quarter of 2024, we increased the capacity of our revolving credit facility by $25.0 million to $125.0 million, adding an additional accordion feature.

See Note 13 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the term loans and the revolving credit facility.

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For our outstanding Series A preferred shares, we paid preferred stock cash dividends of $1.1 million and $5.1 million during the years ended September 30, 2024 and 2023, respectively.

The preferred stock dividends are subject to adjustment for any preferred stock conversions that occur during the year.

With the Series A Preferred Stock repurchase and subsequent conversion of remaining shares to common stock in December 2023, there will be no further dividend payments related to the Series A Preferred Stock going forward.

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

Principal Sources of Liquidity

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

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

Similarly, we bear all credit and collection risk for students paying through cash payment plans and those under retail installment contracts.

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

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

We are obligated to

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

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

As of September 30, 2024, the total face amount of these surety bonds was approximately $22.9 million.

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Net income, after adjustments for non-cash items, provided cash of $114.2 million for the year ended September 30, 2024.

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

The non-cash items included $29.3 million for depreciation and amortization expense, $21.9 million for amortization of right-of-use assets for operating leases, $8.6 million for stock-based compensation expense, $7.5 million for provision for credit losses and $4.4 million of deferred taxes.

Changes in operating assets and liabilities for the year ended September 30, 2024 used cash of $28.3 million primarily due to the following:

• Changes in our operating lease liability as a result of rent payments used cash of $22.4 million.

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

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

• The increase in receivables used cash of $12.1 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

• Changes in our accounts payable and accrued expenses due to the timing of payments provided cash of $13.2 million.

• The change in deferred revenue provided cash of $6.8 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at September 30, 2024 as compared to September 30, 2023.

• The increase in notes receivable used cash of $5.8 million and was primarily due to higher utilization of UTI’s proprietary loan program.

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

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

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

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

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

• Changes in our accounts payable and accrued expenses due to the timing of payments provided cash of $5.7 million.

• The decrease in deferred revenue used cash of $5.3 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at September 30, 2022 as compared to September 30, 2021.

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

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

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

Investing Activities

For the year ended September 30, 2024, net cash used in investing activities was $24.0 million.

The cash outflow was primarily related to the purchase of property and equipment of $24.3 million to support new program expansions at both UTI and Concorde.

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

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

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

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

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

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

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

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

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

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

programs at the UTI campuses.

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

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

Financing Activities

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

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

For the year ended September 30, 2024, net cash used by financing activities was $51.3 million which was primarily related to $34.0 million in net payments on the revolving credit facility, or $75.0 million in payments offset by $41.0 million in proceeds.

Additionally, $11.5 million was used to repurchase Series A Preferred Stock.

See Note 18 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K for additional details on the repurchase.

Other uses of cash included payroll taxes paid for stock-based compensation through shares withheld of $2.2 million, the payment of long-term debt of $2.5 million, and the payment of preferred stock dividends of $1.1 million.

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

For a discussion of our liquidity for the year ended September 30 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” of our 2023 Form 10-K filed with the SEC on December 1, 2023 which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

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.

On December 10, 2020, our board of directors authorized a 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.

We did not repurchase any shares under this plan during the years ended September 30, 2024, 2023, and 2022.

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

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Total fiscal year $ 732,687 100.0 % $ 607,408 100.0 % $ 418,765 100.0 %

The increase in revenues for each of the three months ended December 31, 2023, March 31, 2024, June 30, 2024 and September 30, 2024, as compared to the same periods in fiscal 2023, was due to an increase in student population during fiscal 2024.

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

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

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

Income (Loss) from Operations

Income from Operations

(Dollars shown in thousands) Year Ended September 30,

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Total fiscal year $ 58,891 100.0 % $ 21,399 100.0 % $ 22,374 100.0 %

The increase in income from operations for fiscal year 2024 was primarily due to increased revenues as a result of higher student population as well as continued execution of cost control measures.

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

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

Effect of Inflation

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During the preparation of these financial statements, we are required to make estimates and assumptions that 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, goodwill recoverability, self-insurance claim liabilities, income taxes and contingencies.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, the proprietary loan program, and allowance for credit losses.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances.

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Our significant accounting policies are discussed in Note 2 of the notes to our Consolidated Financial Statements within Part II, Item 8 of this Annual Report on Form 10-K.

We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties.

We believe that the following accounting estimates are the most critical to aid

in fully understanding and evaluating our reported financial results, and they require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties.

Revenue recognition

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Revenues are recognized as transfer of the services occurs.

The majority of Concorde’s core programs are

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

The majority of Concorde’s short and core programs are 8 to 36 weeks in duration, Concorde’s clinical programs are completed in 60 to 90 weeks.

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.

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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.

This program is currently offered to students at our UTI 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.

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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 repayment term is generally up to 10 years.

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

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Estimating the collection rate requires significant management judgment.

Upon adoption of Accounting Standards Update 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.

Our estimated collection rate includes 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 consideration associated with the proprietary loan program.

Allowance for uncollectible accounts

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

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

We use estimates that are subjective and require judgment in determining the allowance for doubtful accounts, which are principally based on 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.

Allowance for credit losses

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

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

We use estimates that are subjective and require judgment in determining the allowance for credit losses, which represent an estimate of the lifetime expected credit losses inherent in our receivables as of each balance sheet date.

We principally utilize

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

We also monitor and consider external factors such as changes in the economic and regulatory environment.

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

Goodwill and Intangible Assets

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

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

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

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

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

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

As a result, significant judgments and interpretations are required in determining our provision for income taxes.

Each reporting period, we estimate the likelihood that we will be able to recover our deferred tax assets, which represent timing differences in the recognition of revenue and certain tax deductions for accounting and tax purposes.

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

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

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

Such valuation allowance is maintained on our deferred tax assets until sufficient positive evidence exists to support its reversal in future periods.

The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.

Significant judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets.

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

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

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

We will continue to evaluate our valuation allowance in future periods for any change in circumstances that causes a change in judgment about the realizability of the deferred tax assets.

Although we believe that our estimates are reasonable, changes in tax laws or our interpretation of tax laws, and the outcome of future tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.

Additionally, actual operating results and the underlying amount and category of income in future years could render our current assessment of recoverable deferred tax assets inaccurate.

Recent Accounting Pronouncements

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

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

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis