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Earnings call: UTI sees strong growth, plans expansion in fiscal 2025

Published 22/11/2024, 13:20
UTI
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Universal Technical Institute (UTI) reported a robust fiscal year 2024, with a 21% increase in revenue to $733 million and a net income of $42 million. The company also saw a 10% growth in average full-time active students and a 60% improvement in adjusted EBITDA, which reached $103 million. Entering Phase 2 of its North Star strategy, UTI is focusing on campus expansion, new program offerings, and operational optimization. For fiscal 2025, UTI projects revenue in the range of $800-$815 million and plans to introduce new programs and campuses.

Key Takeaways

  • UTI's revenue increased by 21% to $733 million in fiscal year 2024.
  • Net income for the period was $42 million.
  • Adjusted EBITDA improved significantly by 60% to $103 million.
  • The company witnessed a 10% rise in average full-time active students.
  • UTI anticipates revenue between $800-$815 million for fiscal 2025.
  • Plans include launching 9 full-length programs and 10 short courses, along with 3 new campuses in 2026.

Company Outlook

  • UTI expects to continue its growth trajectory in fiscal 2025 with revenue projections of $800-$815 million.
  • The company aims to launch 9 full-length programs and 10 short courses across its campuses.
  • Three new campuses are slated to open in 2026, with a focus on expanding the Concord-Heartland co-branded campus.
  • New programs will be added in skilled trades, aviation, and healthcare sectors.

Bearish Highlights

  • The company did not discuss any bearish aspects during the call.

Bullish Highlights

  • UTI is optimistic about the growing demand for "skilled collar" professionals.
  • Positive macro trends and student interest in post-high school practical education are seen as strong tailwinds for the company.

Misses

  • There were no reported misses in the earnings call.

Q&A highlights

  • CEO Jerome Grant emphasized the robust and growing need for skilled collar professionals.
  • UTI is exploring additional program areas at Concord, particularly those that complement existing Allied Health and dental focuses.
  • Grant underscored the company's focus on controlling operations on its campuses, rather than being influenced by Washington's political climate.

Universal Technical Institute's ticker is UTI, and the company's strong fiscal performance, coupled with its strategic expansion plans, indicates a positive outlook for the upcoming year. The company's leadership is confident in UTI's ability to lead in training the next generation of skilled professionals, as evidenced by the CEO's remarks during the earnings call.

Full transcript - Universal Technical Institute Inc (NYSE:UTI) Q4 2024:

Operator: Please note this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President and Corporate Finance.

Please go ahead.

Matt Kempton, Vice President and Corporate Finance, Universal Technical Institute: Hello, and welcome to Universal Technical Institute's fiscal Q4 and full year 2024 earnings call. Joining me today are our CEO, Jerome Grant and Interim CFO, Christine Klein. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor. Uti.edu, along with our earnings release issued earlier today and furnished to the SEC.

During this call, we may make comments that contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995, which by their nature address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We do not intend to update these forward looking statements as a result of new information or future developments except as required by law.

Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2023. The information presented today also includes non GAAP financial measures. These should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with U. S. GAAP.

All non GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non GAAP measures, please see our earnings release, financial supplement and investor presentation. With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks. Jerome?

Jerome Grant, CEO, Universal Technical Institute: Thank you, Matt. Good afternoon, everyone. We had a very strong year, which was in no small part motivated by our relentless dedication to building a future ready workforce solutions provider and enhancing our program offerings to meet the demand in critical industries. As we continue to execute on our growth, diversification and optimization strategy, we delivered improvements across all key metrics in our fiscal 2024 and continue to meet or exceed our expectations. For that accomplishment, I'd like to take a moment to sincerely thank our divisional and corporate teams along with our partners and students for their exceptional efforts and their dedication to delivering strong results time and time again.

Momentum continues to build as revenues for the fiscal year grew roughly 21% year over year to $733,000,000 Average full time active students increased 10% year over year for the fiscal year. Net income increased to $42,000,000 with diluted earnings per share of $0.75 Adjusted EBITDA improved an impressive 60% to $103,000,000 Total (EPA:TTEF) new student starts increased year over year by roughly 19% for the fiscal year. These start results exceeded the upper end of our guidance for the year and were driven by strong year over year start growth for both the Concord and UTI divisions. Our ability to achieve this growth in 2024 was largely due to our ongoing commitment to 3 core expansion initiatives, which include the following. Number 1, increasing the capacity of our current programs on campuses, such as adding dental hygiene operatories at Concord and additional welding booths at UTI.

Number 2, adding programs from our current portfolio to more of our existing campus locations. 2 great examples of this were the addition of the aviation program at Long Beach and HVACR at Avondale this past year. And number 3, launching brand new in demand programs that we do not currently offer. In addition, we're focused on optimizing our workforce and facilities to support both future program and margin growth and to improve the efficiency of our operations. We also adjusted our marketing and admissions investments to accelerate lead generation and convert inquiries.

Overall, we're proud of the meaningful growth we delivered across the board and our ability to consistently achieve or outperform our guidance. We're also pleased with the continued positive recognition for both our industry and company in national media outlets. For example, CNBC recently published 2 articles highlighting the increasing number of individuals who are choosing blue collar for what we call skilled collar jobs over traditional college paths. Both stories emphasize the financial stability and fulfilling careers these trades offer. This is a trend that appears to be accelerating in pace.

Several of our UTI and Concord graduates were featured in these articles, showcasing their success in our role as a vital resource for equipping students with the necessary skills to thrive in in demand industries. There is certainly a positive and growing sentiment for schools like UTI and Concord across the macro environment. This demand for skilled college workers and the promise of a balanced playing field for our industry in Washington combined with our excellent student outcomes gives us added confidence to reach our long term targets. Turning to our division specific highlights for 2024, our Concord division continues to deliver strong results with robust year over year growth. In the division's 1st full fiscal year under our ownership, Concord has certainly surpassed our overall growth expectations.

We saw strong growth across all Concord's programs, including clinical, core and our new shorter cash pay programs as they continue to ramp. This growth is resulting from our increase in marketing investments throughout the year and effectiveness of our admissions team. As far as Concord's program expansion strategies, the Dallas Nursing program capacity increase is still anticipated to begin in fiscal 2025. This effort will increase our capacity by an additional 60 students. Increasing the capacity of our dental hygiene program in San Diego is also progressing well.

And finally, our new nursing program in Jacksonville, Florida also remains on track to launch in mid fiscal 2025. Turning now to partnerships. As we mentioned last quarter, we expanded Concord's long standing partnership with Heartland Dental with the plan to construct a new co branded campus. This campus, which will initially be launched on a non Title IV cash pay basis, will serve as a training center for dental assistants and dental hygienists and will feed directly into more than 1700 Heartland locations nationwide. When Concord's growth restrictions are lifted, which is targeted for mid-twenty 26, we will transition to also offering Title IV funding as well.

This partnership not only helps satisfy the significant and increasing demand for trained dental hygienists and dental assistants, it also further optimizes our cost because Heartland is funding the construction of the campus, including initial supplies and durable equipment, as well as providing students with financial support. To reiterate, we anticipate this campus will add more than $4,000,000 in run rate revenue, as well as contribute to Concord's EBITDA margin expansion as it ramps. We look forward to keeping you updated as this partnership progresses and as we are able to launch additional campuses together over the next 5 years. Now on to our UTI division. The UTI division also continued to deliver consistent year over year growth driven by expanded programs and increasing market demand for skilled collar workers.

Reflective of this market traction and our growth strategy, UTI generated a double digit year over year revenue increase in 2024. UTI starts have steadily increased throughout the year and we expect this momentum to continue in 2025. With the first two large UTI starts in this new fiscal year performing quite well. Our HVACR programs continue to ramp nicely across campuses in Avondale, Long Beach and now Bloomfield, with the program in Sacramento set to begin in the coming months, pending regulatory approvals. The 14 programs we launched in 2023 as part of synthesizing and expanding the MIT sourced aviation, skilled trades and energy programs across the UTI campuses are continuing to perform well.

And the unification of the MIT Houston and UTI operations are on track to be finalized this quarter. As we previously stated, by mid-twenty 25, our MIT Canton and Houston campuses, the Motorcycle Mechanics Institute, Marine Mechanics Institute and NASCAR Technical Institute campuses will all be known as UTI. These brand consolidations will help us enhance our operational efficiencies as well as leverage the renowned Universal Technical Institute name to further our outreach to potential students and industry partners. As part of our commitment to prepare graduates for industry with ever changing technology requirements, we recently added our EV programs to our Avondale and Orlando campuses. These new courses are the same EV and hybrid training that are already available in our 3 California campuses.

The enhanced curriculum is now part of the core automotive program on 5 UTI campuses with further rollouts planned. Additionally, with respect to our EV strategy, we updated our Ford (NYSE:F) FACT and BMW (ETR:BMWG) Fast Track manufacturer specific advanced training program instances or MSATs to include the EV curriculum. All 7 UTI campuses offering BMW Fast Track and all 9 campuses offering the Ford FACT program are now teaching the new EV curriculum using the latest EV vehicles provided to us by BMW and Ford. Collectively, our relationships with both BMW and Ford are decades long. In fact, we recently celebrated 25 years of our Ford program, which graduated more than 29,000 students since its inception.

Finally, underscoring our commitment to the highest standards of quality, I'd like to mention that both Dallas and Sacramento campuses were named Schools of Excellence by the Accrediting Commission of Career Schools and Colleges. This is ACCSC's highest honor and only 19 schools earned this award for the 2023 2024 accrediting period. These accolades reinforce our dedication to excellence in education and our positive impact on the communities we serve. Building on this great work being done by both of our divisions, I'll now introduce our fiscal 2025 guidance, which Christine will discuss in more detail in just a bit. Revenue is expected to be between $800,000,000 $815,000,000 reflecting 10% year over year growth.

We now anticipate adjusted EBITDA to be between $120,000,000 $124,000,000 and we expect new student starts to be ranging from 28,000 to 29,000. With fiscal 2024 now concluded, we are officially entering Phase 2 of our multiyear North Star strategy. I'd like to take a moment to reiterate what this entails. Starting in fiscal 2025, we previously announced that we plan to launch a minimum of 6 new programs each year on Concord and or UTI campuses, subject to the required regulatory approvals. We also outlined our plan to open at least 2 new campuses annually beginning in fiscal 2026.

To that point, I'm pleased to announce that we are finalizing our next 3 planned campus locations targeted for launch in 2026. 1 will be our 1st Concord Heartland campus in Fort Myers, Florida. The second is a skilled trade and aviation campus in a Greenfield City. And the 3rd will be an optimized UTI campus with a comprehensive set of program offerings in a state that is new to UTI. We are also happy to announce that we plan to launch 9 full length program expansions across our existing campus footprint and 10 cash paid short courses are lined up to launch on the Concord campuses in 2025.

We look forward to sharing more precise details on these campuses and programs in the very near future. We expect these initiatives will serve as the fuel for our previously announced compound annual revenue growth rate target of approximately 10% between 2024 and fiscal 2029 with an adjusted EBITDA margin for the company approaching 20% by the end of fiscal 2029 as our optimization efforts mature further. You can find more information on this strategy in our investor deck and on our website. We're also continuing to opportunistically evaluate and pursue strategic acquisitions. We would of course adjust these longer term targets as appropriate if the transaction is completed.

With that, I'll turn the call over to Christine Klein, our Interim CFO, to review our fiscal 2024 financials. Christine?

Christine Klein, Interim CFO, Universal Technical Institute: Thank you, Jerome. I'm pleased to share that we delivered another strong quarter and year, meeting or exceeding our expectations across all guidance metrics for fiscal 2024. To summarize our operational performance, we recorded 26,885 total new student starts for fiscal 2024 exceeding our expectations with 11,492 starts coming from the 4th quarter. As we've mentioned previously, Q4 is a seasonally high start quarter across both of our divisions and each delivered solid outcomes. In the 4th quarter, total average full time active students grew 11% year over year, while total new student starts increased 10.6%.

For the full year, average full time active students increased 10% and new student starts increased 18.9% compared to the prior year. The year over year growth for both the quarter and full year were driven by increased yield from the tuning of our marketing and admission spend as well as new program expansion initiatives reaching steady state and strong contributions from Concord. The Concord division drove a 13.8% and 10.7% increase in average full time active students for the Q4 and full year respectively. New student starts increased 13.7% in Q4 and 39.3% for the full year. These increases are a result of double digit growth in shorter cash pay programs like sterile processing and phlebotomy as well as growth across core and clinical programs, which benefited from 2 large starts in Q4.

The UTI division generated a 9.2% increase year over year in average full time active students for the quarter and a 9.5% increase for fiscal 2024. New student starts grew 8.7% year over year in the 4th quarter and 6.7% for the full year. Notable contributions to this growth were the skilled collared programs added to UTI campuses in the current and prior year as well as the ongoing optimization of existing programs throughout our portfolio. Turning to our financial performance. 4th quarter revenue on a consolidated basis increased 15.3 percent to $196,400,000 Concord contributed $65,800,000 increase of 19.7 percent over the prior year quarter, while the UTI division contributed $130,500,000 an increase of 13.2% over the prior year quarter.

For the full year, consolidated revenue grew 20.6 percent to $732,700,000 above the upper end of our guidance range. Concord contributed $246,300,000 an increase of 38.3 percent over the prior year, while the UTI division contributed $486,400,000 representing a 13.3% increase over the prior year. Concord benefited from the inclusion of 2 additional months of revenue during 2024 compared to 2023 given our December 1, 2022 acquisition date. From a profitability standpoint, consolidated net income for the Q4 was $18,800,000 or $0.34 per diluted share and $42,000,000 or $0.75 per diluted share for the full year. Adjusted EBITDA for the Q4 was $37,300,000 $102,900,000 for the full year.

Both net income and EPS exceeded the upper end of our guidance range and adjusted EBITDA was in the middle of our projected range. At the end of the year, we had 53,800,000 shares outstanding. Total available liquidity at the end of the quarter was $230,900,000 including $69,000,000 of remaining capacity on our revolving credit facility. We also paid down an additional $11,000,000 on our revolver in Q4 and ended the year with positive net working capital of $17,000,000 Note, as previously filed in an 8 ks, in September, we increased the capacity of our revolving credit facility by $25,000,000 to $125,000,000 with an additional accordion feature, which provides us with greater financial flexibility as we lean into Phase 2 of the North Star strategy in fiscal 2025. Fiscal 2024 operating cash flow was $85,900,000 and adjusted free cash flow was $73,500,000 which significantly exceeded our full year guidance range of $62,000,000 to $66,000,000 due to outperformance of net income and lower capital spend than projected.

Year to date capital expenditures were $24,300,000 slightly below earlier projections for the year, primarily due to project timing and improved procurement savings. As we've previously stated, CapEx includes investments for our program expansion initiatives across both divisions as well as spending associated with curriculum and equipment refresh and upgrades, facility and leasehold improvements and IT investments. Given our consistent execution throughout fiscal 2024 and in conjunction with our detailed organic growth strategy and the momentum we are carrying into this new year, we are confident in the formal guidance ranges we are providing for fiscal 2025. Starting with revenue, we expect to generate between $800,000,000 $815,000,000 for fiscal 2025 or approximately 10% year over year growth at the midpoint. This reflects a strong increase in average full time active students from the program additions across both divisions with total new student starts expected to range between 20,8,021,000.

For the Q1, we expect high single to low double digit revenue growth with mid single up to double digit growth in the remaining quarters with Q2 being the lowest growth period and Q4 expected to be the highest. For starts, we anticipate mid single digit start growth each quarter throughout the year, though Q2 should be somewhat higher. For fiscal 2025 net income, we expect a range of $52,000,000 to $56,000,000 and diluted earnings per share ranging between $0.93 to 1.01 dollars Net income growth will be in the low to mid double digits in the 1st two quarters with outsized growth coming in Q3 and Q4. We expect 2025 full year adjusted EBITDA to range between and $20,000,000 or around a 19% year over year increase at the midpoint. We anticipate generating modest growth in the Q1 with double digit increases each quarter thereafter and the largest growth in profitability occurring in the second half of the year.

The increase is driven by the significant growth in revenue, optimized operations as well as the launch and maturity of additional programs in each division. An important item to highlight is that beginning in fiscal year 2025, we will start the 1st wave of growth investments for our new programs and campuses as Phase 2 of our North Star strategy gets underway. Given the projected ongoing nature of these investments, we will no longer report them as one time adjustments in our non GAAP adjusted EBITDA calculation. We expect to incur approximately $8,000,000 in growth investments related to our North Star strategy during fiscal 2025. We anticipate 2025 full year adjusted free cash flow to range between $58,000,000 $62,000,000 which assumes approximately $55,000,000 in CapEx spend.

This is reflective of the increasing growth investments required to fund incremental programs and campuses as part of our North Star roadmap. As with adjusted EBITDA, given the continuous and ongoing nature of these growth investments going forward, we will no longer report them as one time adjustments for our non GAAP and adjusted free cash flow calculation. We expect the bulk of our cash generation and year over year growth to materialize in the Q4 consistent with our historical cadence. As always, in addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement and investor presentation as well as the 10 ks once it is filed as these materials include the most current information on our consolidated and segment actual results, our strategic roadmap and our guidance. Thank you to our students, team, partners and investors for their ongoing support.

I'll now turn the call back over to Jerome for closing remarks. Jerome?

Jerome Grant, CEO, Universal Technical Institute: Thank you, Christine. The Universal Technical Institute and Concord Career College divisions are both uniquely positioned and already have capitalized well on the increasing demand for skilled trades and healthcare education. Our results this past year demonstrate both the effectiveness and the successful conclusion of our first phase of our North Star strategy, which revolved around our core tenants of growth, diversification and optimization. As we look ahead, we're excited to begin the next phase of our journey. Our focus remains on expanding our reach to meet growing student demands in new geographies, broadening the scope of our programs to include more high demand fields and optimizing our operations to drive efficiency and enhance outcomes.

Entering fiscal 2025, our organic initiatives continue to revolve around 1, working towards expanding our campus footprint into greenfield geographies in a variety of ways such as piloting our 1st skilled trades and aviation campus and launching an innovative co branded campus. 2, broadening the reach of existing programs and a new in demand offering. As noted in my earlier remarks, we have at least 19 more programs we are currently preparing to launch in 2025 across 2 divisions. And 3, growing our partner network and deepening industry relationships as modeled by our co branded Heartland campus. Inorganically, our efforts remain focused on opportunistically exploring strategic acquisition opportunities with an emphasis on enhancing our presence in healthcare with program offerings that will complement Concord.

Moving into our 60th year, the company stands stronger than ever. We are proud of our legacy and we are equally excited about the future. The need for skilled collar professionals is robust and growing. Our momentum is building and we are uniquely positioned to be a leader in training and supporting the next generation of skilled collar talents. With our consistent ability to meet or exceed expectations, a strong balance sheet and a clear roadmap for growth, we are confident in our ability to deliver lasting value for our shareholders, students and partners.

2024 was a strong year and 2025 will be a year marked by the reignition of our growth agenda. We appreciate your ongoing support and look forward to sharing more about our exciting progress in the quarters ahead. As always, we're happy to host campus tours and provide a closer look at the impactful initiatives we're pursuing. So please feel free to reach out if you'd like to visit. I'd now like to turn the call over to the operator for Q and A.

Operator?

Operator: We will now begin the question and answer session. Our first question comes from Mike Grondahl with Northland Securities. Please go ahead.

Mike Grondahl, Analyst, Northland Securities: Hey, guys. Congrats on a successful year. My first question just has to do, Jerome, you talked a little bit about macro tailwinds and those seem to have picked up. Is there any way you could kind of correlate the fall of 'twenty four to the fall of 'twenty 23 or the fall of 'twenty two, just so we can get a sense of the strengths there?

Raj Sharma, Analyst, B. Riley: Hello?

Jerome Grant, CEO, Universal Technical Institute: Mike?

Raj Sharma, Analyst, B. Riley: Yes.

Jerome Grant, CEO, Universal Technical Institute: Okay. Your line is now unmuted. Sorry. Thank you. I'm sorry.

Our line was muted still. So I heard your question. So correlating 2022, 2023 2024, if you remember back to 2022, we had just come through that big spike in inflation in April of 2022 and the fall of 2022 was somewhat of a disaster really. I think enrollments were down double digits in the fall of 2022. People were thinking very seriously about what they weren't going to invest in versus what they were.

The recovery period that went all the way through 2023 crescendoed in the fall of 2023 and we started to see things pick up. I think back then I was using the term the new normal. People knew that gas was $4 a gallon and rent had gone up and they were starting to move on and think about where life would lead. As we moved into 24, what we've seen and we've seen it in our leads and our conversion rates and our enrollments throughout the year as they continue to pick up is that we really are seeing people thinking about this area of the world, which is skilled collar workers, skilled trades workers as a viable profession and thinking more practically post high school about what they're going to do. I think you'll see that you saw the trends potentially if you saw labor statistics and some of the popular press out there that freshman enrollments as a whole, meaning those students who are coming straight out of high school were down this fall.

Yet certificate and short programs were up. And I think we benefited from that in the fall of this year. Will it continue? I'm not an economist, but we are seeing a more favorable environment.

Mike Grondahl, Analyst, Northland Securities: Got it. And then just a follow-up, you mentioned leads are up, conversions up. You said you accelerated some investment in lead generation. Any update on the marketing funnel? It seems like you're having a lot of success there too.

Jerome Grant, CEO, Universal Technical Institute: We are. And I think one of the things I've commented on throughout the year is that, this is the 1st year of really getting behind the wheel in terms of leading the Concord Group from where they were owned before to where they are now. And so we accelerated our investment into Concord Marketing and their admissions group in a sense to test the elasticity of what we've seen. And we've got some great results out of Concord. The numbers we shared with you for Concord were beyond our expectations.

And so we continue to invest throughout the year in marketing, actually adding a little more money in Q4 to pump ourselves into Q1 and Q2, and money that we hadn't initially thought that we were going to do. And we're already seeing some great results as I noted in my comments on both UTI and Concord in Q1.

Mike Grondahl, Analyst, Northland Securities: Got it. Hey, thanks a lot.

Jerome Grant, CEO, Universal Technical Institute: Sure.

Operator: And the next question comes from Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi, Analyst, Lake Street: Yes. The bump up to the 2025 guide taking that from I think it was nearly $800,000,000 up to a midpoint now of around $808,000,000 is that a result of this primarily the result of this Concord investment sort of in at the year end of FY 'twenty four? Or is it the rolling on of the incremental new programs that you talked about? What's driving that upside guide for 2025? Well, it's actually both, right, is that we are a bit more bullish on our ability

Jerome Grant, CEO, Universal Technical Institute: to bring Concord up further than initially in the year when we started looking at 2025. And then as you heard, is that 9 full length programs and 10 short courses our short programs that we're bringing in exceeded the sort of minimum 6 that we had laid out for that. So, if I were to cut the numbers in half, it's probably half and half, A few 100 more Concord starts than were anticipated earlier in the year, we think we can drive and then the same out of those new programs.

Jasper Bibb, Analyst, Truist: Got you.

Eric Martinuzzi, Analyst, Lake Street: Okay. And then I can definitely see a bump in your share price recently due to the results of the election. But what's your thinking on how quickly or maybe you don't think you benefit at all in the medium term here, but with the Republicans taking control here, is there a timeline in your mind for potential benefit in the fundamentals of UTI?

Jerome Grant, CEO, Universal Technical Institute: Yes. Well, first of all, I'll say what I always say in these situations, which is we don't control what goes on in Washington. We control what goes on, on our 30 some campuses around the country. And we're going to continue to focus on superior outcomes, graduating around 70% of our kids, getting 80% to 90% of them jobs in the 1st year. The things that keep us above the fray of any of the view of Washington.

Yes, there was bump in the stock. I think sentiment out there is that with the rhetoric of potentially dismantling the Department of Education and the like, I think there was some sentiment that moved the stock in that direction. Generally speaking, what we're really looking for is something that we've been talking about for quite a while, which is, I think we're moving into a phase where we'll see an even playing field, where the tax status of the educational institution isn't the primary issue, but the outcomes are. And if that shift in mindset materializes over the next year or so, we should continue to see favorable environment coming out of Washington.

Eric Martinuzzi, Analyst, Lake Street: Got it. Thank you for taking my questions.

Mike Grondahl, Analyst, Northland Securities: Sure. Thanks. And

Operator: the next question comes from Raj Sharma with B. Riley. Please go ahead.

Raj Sharma, Analyst, B. Riley: Yes. Thank you for taking my questions and congratulations on exceeding the guidance on the fiscal 2025. I wanted to follow on, on the earlier caller on the Trump administration, Trump win. Any change you expect as a corporate in your SG and A expenses, any change in lobbying efforts or do they get sort of pushed up more? And I know you already commented on do you expect any less headwinds or on any regulatory oversight?

But the SG and A question will push up your expenses?

Jerome Grant, CEO, Universal Technical Institute: Yes. I'm not anticipating nor have I budgeted for a significant change in our SG and A associated with this. One of the dynamics there, Raj, is that when the Department of Education is in the hands of the Democratic Party, there tends to be less action at the state level that goes on. And then when the Department of Education is in the hands of the Republican Party, there tends to be more action at the state level, especially the blue states, right? So California, Illinois, New Jersey.

And so it really just shifts the lobbying emphasis, I think, from central government to state.

Raj Sharma, Analyst, B. Riley: Got it. And then any other potential areas to add? Are you looking at I know that you had mentioned nursing in the past or to add to the Concord. Any thoughts around that?

Jerome Grant, CEO, Universal Technical Institute: Well, we're continuing to look at program areas at Concord. Yes, we have been talking about nursing. And in my comments, I said when we think about both organic and inorganic means, we are looking for programs that would complement what's already in the Allied Health

Jasper Bibb, Analyst, Truist: and excuse

Jerome Grant, CEO, Universal Technical Institute: me, and dental focus that is at Concord. And we're continuing to explore what might be there. The short course notion is born out of that. There is an opportunity for things like phlebotomy and sterile processing to have some quick certificate programs that get people out in the market working more quickly. We are looking at other healthcare areas that we may be able to enter, whether it's home health or even veterinarian things along those lines, we're studying them.

But we've got nothing planned for launches in 2025 outside of what's already on the docket.

Raj Sharma, Analyst, B. Riley: Got it. And then on the fiscal 'twenty five guidance, Jerome, the free cash flow guidance again seems sort of robust in the use of that cash. Earlier on, I think are you still at the same plan of adding 1 new campus a year and certain X number of programs? Is that plan?

Jerome Grant, CEO, Universal Technical Institute: No. As I outlined in the comments, we're actually going to launch 3 campuses in 2026. The previously announced, Concord, Heartland co branded campus in Fort Myers, We have 1 skilled trades aviation and energy campus that's going to open. And candidly, the only reason we didn't lay out cities yet is we like to get a lease sign in at least 1 or 2 of the regulatory hurdles. That's something that should happen in a matter of weeks really.

And therefore, we'll be able to get locations out of those. And the way to look at it is our plan is to on the UTI side, our plan is to basically open one campus every 6 months in 26. So one early in January and then one in the summer months to make sure that we're spreading out our work, our supply chain, our construction costs and things along those lines. And so we'll look at 20 27 soon. That's all we're going to do in 2026.

But what we've seen is pretty much equal opportunity on both the UTI and the Concord side for opening campuses.

Raj Sharma, Analyst, B. Riley: And I think you can expect a pattern

Jerome Grant, CEO, Universal Technical Institute: similar to what you see in expect a pattern similar to what you see in 2026 as we move forward.

Christine Klein, Interim CFO, Universal Technical Institute: And Raj, this is Christine. I think I would just reiterate, we've said in previous calls that it takes about 18 months to turn a warehouse into a campus. So you think about that, the spend would certainly have to start in 2025, which is where the $55,000,000 in CapEx comes from.

Raj Sharma, Analyst, B. Riley: Got it. And then just lastly on the starts guide, is that you had pretty robust starts growth in 2024, the 2025 guide seems a little conservative. Is there any change in that? Or are you seeing any change that's making you do that? Or is that just part for the quarter?

Well,

Jerome Grant, CEO, Universal Technical Institute: we don't like to overpromise right out of the gates. That's one thing. But there is sort of a dynamic shift between 2024 and 2025. One being in late 2023, we launched those 14 full length UTI programs and 4, Concord programs also at the time 6 actually. 3 smaller.

And so as those come to peak in 2025 and hit the pretty much run rate enrollments, you start to see a decrease in the increase factors of those programs we launched in 2023. We launched fewer programs in 2024 And as you can see, we're reigniting it in 2025 with the number of programs we're launching. But most of those won't come out until mid late in the year. So there'll only be a couple of 100 starts. And so there won't be as much previous year propellant in 2025 to fuel the upside, but then it launches again as we get into 2026 with 3 campuses and then equal number of programs that will be sort of boomeranging into 26.

Raj Sharma, Analyst, B. Riley: Got it. Thank you so much for taking my questions. I'll take it offline. Thank you again.

Jerome Grant, CEO, Universal Technical Institute: Great.

Operator: Our next question comes from Jasper Bibb with Truist. Please go ahead.

Jasper Bibb, Analyst, Truist: Hey, good afternoon. I wanted to ask about the EBITDA margin guidance. Should we think about the margin expansion in fiscal 2025 being fairly even across the UTI and Concord segments? Or do you think the weighting of growth investments might shift that balance at all? Thank you.

Jerome Grant, CEO, Universal Technical Institute: So I think it's a great question. I think the margin expansion you likely see a little stronger on the Concord side because we're not investing as much in new campuses for Concord. As you know, the Heartland campus is actually being funded by Heartland to move forward. Whereas we're going to start spending on 2 campuses on the UTI side, take the capital expenditure out of the way, we'll likely start hiring some people late in 2025 as well. And so probably see slightly stronger uptake on the Concord side.

Also being now the 2nd full year, we really started looking at where we could find margin expansion for Concord as well. As we said, when we acquired them, they were at about an 8% EBITDA margin when we acquired them. And we said, we think we can get them to somewhere in the mid teens within the 1st 36 months. Well, what you see in 2025 is we're approaching that there already. And so we did a lot of hard work and a lot of that's going to pay dividends also, as we go through the year and into Q4 of next year.

Jasper Bibb, Analyst, Truist: Thanks. And then just wanted to confirm how many new program launches were in the fiscal 2025 plans in the prepared remarks? And then I had a follow-up there.

Jerome Grant, CEO, Universal Technical Institute: So we've got 9, what we would call full length programs. And in the past, one of the things we've said is please look at the investor material. We've got some representation for sort of the average of what it costs to start one and what we get out of it, whether it's 150 to 200 students, etcetera, so that you can do some modeling around that. So we've got 9 of those that we're launching, 8 on the UTI side and 1 in Concord. The one is the Jacksonville Nursing program, which will launch sometime in the middle of this year.

And then on top of that, we're moving more aggressively to proliferate the short courses across the non Title IV short courses across the Concord campuses. And again, those are not big money, right? But I think one of the ways you want to look at those is, we're tracking very closely the number of students that may come into a short course in sterile processing and then go on to take a surgical tech long program, right? So we really see it as a gateway to getting into the field, getting working and then taking longer courses. Phlebotomy, people come in and take a short phlebotomy and they move on to the medical assisting or vocational nursing program.

And so, it's a great way for people to dip their toe in the water in terms of healthcare. What we're seeing is a significant portion that are now moving on into the longer courses. So it's going to help our recruiting efforts as well.

Jasper Bibb, Analyst, Truist: Right. I guess the 9 is like a little bit higher than the, guess, at least 6% that was in the Northstar targets and you haven't really even kind of gotten into Concorp expansions yet with some of the restrictions there. So would you characterize this as an investment year that's part of Northstar? Or you kind of view that 6 plus as a baseline and you potentially do quite a bit more than 6 annually, it depends there?

Alex Paris, Analyst, Barrington Research: Well,

Jerome Grant, CEO, Universal Technical Institute: this is the beginning of the investment at the next Northstar plan. I think generally speaking, you can count on a similar number of programs, at least 6 on the UTI side, pretty consistently over the period. And to your point, we haven't even gotten into because of the growth restrictions, we haven't even gotten into the Concord programs, which likely wouldn't start launching until late 'twenty six or into 'twenty seven, right? And so, from a program standpoint, I think you'll see a pretty even march from where we are in 2025 into 2026 and then we can accelerate in 20 27 and beyond when Concord comes to the party. And the same is so on campus launches, right, is that we'll continue to focus on working with Heartland to get more of the dental hygiene, dental assistant campuses up and running that they're funding.

But again, Concord won't come to the game likely until 20 27 with any of their full size campuses.

Jasper Bibb, Analyst, Truist: Makes sense. Thank you for taking the questions.

Operator: Our next question comes from Alex Paris with Barrington Research. Please go ahead.

Alex Paris, Analyst, Barrington Research: Hi, guys. Thanks for taking my question. Most have been asked and answered, but I just had a couple of follow ups. Marketing, it was increased and accelerated in the Q4, I think your prepared comments said. Just looking at the supplemental data, it was 9.3% of revenue in Q4 and 10.7% for the full year.

Is this the new run rate or does it peak and kind of come down a little bit? What can you say about marketing and admissions costs, which includes advertising going forward?

Jerome Grant, CEO, Universal Technical Institute: Well, we're continuing to get efficiencies, I think, out of our marketing and admissions spend. And so as we get bigger, I think you'll see that we get some leverage out of what we're doing. We're also getting leverage out of the fact that we're adding programs to the UTI campuses, right? So as we do local marketing for UTI, brand marketing in a market, now we have more opportunities to bring people into our campus in various areas, right? One of the things I think we've said in the past is, we talk to about a 5000000 kids a year and even with starting 28,000 to 29,000, there are still are significant numbers of them that are looking for more varied programs on the campuses and that'll get us more starts at a lower cost because we're already gathering those leads.

And so I think you'll continue to see some efficiency on the marketing and admission spend going

Alex Paris, Analyst, Barrington Research: forward. Great. That's helpful. Thank you. And then a couple of follow ups on regulatory.

I realized the election is a huge relief and win for the proprietary school industry. The idea of even handed a regulatory framework going forward, a level playing field as you put it. With regard to 90.10, I think 90.10 under the previous calculation in the UTI division was in the neighborhood of 67%. I'm wondering what percentage of UTI students are military or veteran?

Jerome Grant, CEO, Universal Technical Institute: About 15% are military and veteran population. And our in the old calculation, we were in the high 60s when it flips over when the military funding flips over into federal funding, we end up about 82%, 80 3, actually 78. Christine shot that in front of me right now. Thanks, Christine.

Raj Sharma, Analyst, B. Riley: Okay.

Jerome Grant, CEO, Universal Technical Institute: So frankly, it's not a lot that we talk about because we're safely under the radar and it's a pass fail test. We're safely under the radar and I don't think we get to any saturation point with the growth rates we're seeing in non military adult and high school where that becomes any of a concern.

Alex Paris, Analyst, Barrington Research: Absolutely. 78% is a really good number under the new calculation. And that was legislation, that was a law as opposed to regulatory. So I don't know that we'd have a lot of relief there under Trump, at least in short order. But again, that doesn't seem to be an issue for UTI either way.

On the gainful employment side, gainful employment was effective on July 1. There's been a couple of delays to October January. There's a couple of lawsuits out there and there's a new administration in town. So this might be a moot point. But I'm just wondering looking across the portfolio of programs at both UTI and Concord, were there any programs at risk if that regulation remains unchanged?

Jerome Grant, CEO, Universal Technical Institute: Nothing at risk. There are a couple of programs on the Concord side that are nudge close to the line. For instance, programs where because tips are not considered part of the earnings. And so we have a couple of small massage therapy programs, put I think around 100 students combined between the 2 of them where they still are above the line, but because they don't think about tip income in it, they got close to the line. But we really didn't have anything else that was anywhere near.

Alex Paris, Analyst, Barrington Research: That's great. I'll take my other questions offline. Thank you, Joe.

Jerome Grant, CEO, Universal Technical Institute: Great. Hey, thanks a lot for the call.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Jerome Grant for any closing remarks.

Jerome Grant, CEO, Universal Technical Institute: Thank you, operator. Well, first of all, I'd like to thank everyone for attending today. As always, Christine, Matt and I will be available for follow-up questions over the next few days into next week. And we always look forward to speaking to our investors and analysts and we look forward once again to doing so in February when we share our Q1 results. So until then, we'd all like to wish you all a very happy and healthy holiday season.

Thanks a lot for calling in.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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