UNIVERSAL TECHNICAL INSTITUTE INC

Previous wording

Overview of the Three Months Ended December 31, 2023

Current wording

Overview of the Three and Six Months Ended March 31, 2024

Previous wording

(1) New student starts and average student data for Concorde presented in the three months ended December 31, 2022 column represents the period of UTI’s ownership, or December 1, 2022 through December 31, 2022.

Current wording

(1) New student starts and average student data for Concorde presented in the six months ended March 31, 2023 column represents the period of UTI’s ownership, or December 1, 2022 through March 31, 2023.

Previous wording

For three months ended December 31, 2023, the increase in UTI new student starts was primarily due to the successful rollout of 13 new programs across eight campuses during the fiscal 2023 fourth quarter and increased student demand at a majority of the remaining UTI campuses. Concorde had a strong quarter with an increase in end of period students compared to the prior year. On a consolidated basis, the acquisition of Concorde increased our new student starts and our average and end of period undergraduate full-time active students.

Current wording

For three and six months ended March 31, 2024, the increase in UTI new student starts, average undergraduate full-time active students and end of period students was primarily due to the successful rollout of 14 new programs across nine campuses during the fiscal 2023 fourth quarter and fiscal 2024 first quarter, and increased student demand at a majority of the remaining UTI campuses. Concorde rolled out four new programs at three campuses during the same time period, and also rolled out new cash pay “short courses” at a number of campuses. These program rollouts, along with high demand for its existing programs resulted in increases in new student starts, average undergraduate full-time active students and end of period students compared to the prior year.

Previous wording

Revenues for the three months ended December 31, 2023 were $174.7 million, an increase of $54.7 million, or 45.6%, from the comparable period in the prior year. Concorde contributed $59.3 million of revenue during the three months ended December 31, 2023 compared to $14.4 million during the one month ended December 31, 2022. UTI revenues increased by approximately $9.8 million, or 9.2%, driven by the higher starts and average students previously noted.

Current wording

Revenues for the three months ended March 31, 2024 were $184.2 million, an increase of $20.4 million, or 12.4%, from the comparable period in the prior year. UTI revenues increased by approximately $15.8 million, or 14.7%, and Concorde revenues increased by approximately $4.6 million, or 8.2%. Both segment increases were driven by the higher student starts and average undergraduate full-time active students as previously noted.

Previous wording

Total income from operations was $14.2 million during the three months ended December 31, 2023, compared to $4.4 million for the three months ended December 31, 2022. The increase in our income from operations was primarily driven by a full quarter of Concorde operations in fiscal year 2024 and the increased UTI revenue. Additionally, 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.

Current wording

The increase for the three-month period was primarily driven by the increased revenues from the larger student population. The increase for the six-month period was due to the inclusion of two additional months of revenue for Concorde as compared to the prior year period. Additionally, 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 optimization opportunities throughout our operations in both segments.

Previous wording

During the three months ended December 31, 2023, we executed the following as part of our business strategy:

Current wording

During the six months ended March 31, 2024, we executed the following as part of our business strategy:

Previous wording

Revenues for the three months ended December 31, 2023 were $174.7 million, an increase of $54.7 million, or 45.6%, as compared to revenues of $120.0 million for the three months ended December 31, 2022.

Current wording

Revenues for the three months ended March 31, 2024 were $184.2 million, an increase of $20.4 million, or 12.4%, as compared to revenues of $163.8 million for the three months ended March 31, 2023.

Previous wording

Revenues for UTI for the three months ended December 31, 2023 were $115.4 million. Revenue increased primarily due to a 6.0% increase in average students during the quarter and 17.2% increase in student starts from the prior year.

Current wording

Revenues for UTI for the three months ended March 31, 2024 were $123.3 million compared to $107.6 million in the prior period. Revenue increased primarily due to a 10.3% increase in average undergraduate full-time active students during the quarter and 19.6% increase in new student starts from the prior year.

Previous wording

Supplies, maintenance and student expense increased by $5.8 million primarily due to the increased cost of student housing of $5.3 million in support of relocating students.

Current wording

Supplies, maintenance and student expense increased by $3.0 million primarily due to the increased cost of student housing in support of relocating students.

Previous wording

Selling, general and administrative expenses for the three months ended December 31, 2023 were $68.1 million. This represents an increase of $13.9 million, as compared to $54.1 million for the three months ended December 31, 2022, which is primarily due to the acquisition of Concorde on December 1, 2022 and both ongoing and one-time costs associated with our business strategies.

Current wording

Selling, general and administrative expenses for the three months ended March 31, 2024 were $75.5 million, as compared to $70.9 million for the three months ended March 31, 2023. This increase was primarily due to costs associated with our business strategies.

Previous wording

Compensation and related costs increased by $2.0 million for the three months ended December 31, 2023 primarily due to additional headcount hired to support the UTI segment.

Current wording

Compensation and related costs increased by $0.8 million for the three months ended March 31, 2024 primarily due to additional headcount hired to support the UTI segment and our business strategies.

Previous wording

Advertising and marketing expense remained flat year over year. UTI continues to target cost-efficient marketing with an increased focus on digital media. UTI advertising and marketing expense as a percentage of revenues decreased to 11.6% for the three months ended December 31, 2023 as compared to 12.6% in the prior year.

Current wording

Advertising and marketing expense remained relatively flat year over year. UTI continues to target cost-efficient marketing with an increased focus on digital media. UTI advertising and marketing expense as a percentage of revenues decreased to 11.3% for the three months ended March 31, 2024 as compared to 13.2% in the prior year.

Previous wording

Selling, general and administrative expenses for Corporate decreased slightly for the three months ended December 31, 2023 primarily due to a $0.3 million decrease in compensation related costs, partially offset by a $0.3 million increase in professional fees and contract services.

Current wording

Selling, general and administrative expenses for Corporate increased slightly for the three months ended March 31, 2024 primarily due to a $0.7 million increase in compensation related costs, largely offset by a decrease in other selling, general and administrative expenses.

Previous wording

Income tax expense for the three months ended December 31, 2023 was $3.2 million, or 23.3% of pre-tax income, compared to $1.5 million, or 36.5% of pre-tax income, for the three months ended December 31, 2022. The effective income tax rate for the three months ended December 31, 2023 differed from the federal statutory rate of 21% primarily due to non-deductible executive compensation, federal research and development tax credits and state and local income and franchise taxes. The effective income tax rate for the three months ended December 31, 2022 differed from the federal statutory rate of 21% primarily due to non-deductible executive compensation, transaction costs and state and local income and franchise taxes. See Note 14 of the notes to the condensed consolidated financial statements herein for additional details.

Current wording

Income tax expense for the three months ended March 31, 2024 was $2.8 million, or 26.2% of pre-tax income, compared to $1.8 million, or 33.6% of pre-tax income, for the three months ended March 31, 2023. The effective income tax rate for the three months ended March 31, 2024 differed from the federal statutory rate of 21% primarily due to non-deductible executive compensation, federal research and development tax credits and state and local income and franchise taxes. The effective income tax rate for the three months ended March 31, 2023 differed from the federal statutory rate of 21% primarily due to non-deductible executive compensation, transaction costs and state and local income and franchise taxes. See Note 14 of the notes to the condensed consolidated financial statements herein for additional details.

Previous wording

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 (the “CoD”), we recorded a preferred stock cash dividend of $1.3 million for the three months ended December 31, 2022.

Current wording

Pursuant to the Certificate of Designations of the Series A Preferred Stock (the “CoD”), we recorded a preferred stock cash dividend of $1.3 million for the three months ended March 31, 2023.

Previous wording

Income available for distribution refers to net income reduced by dividends on our Series A Preferred Stock. As a result of the foregoing, we reported income available for distribution of $9.3 million and $1.4 million for the three months ended December 31, 2023 and 2022, respectively.

Current wording

Income available for distribution refers to net income reduced by dividends on our Series A Preferred Stock. As a result of the foregoing, we reported income available for distribution of $7.8 million and $2.2 million for the three months ended March 31, 2024 and 2023, respectively.

Previous wording

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. As such, the final amount of income allocated to participating securities is $2.9 million for the three months ended December 31, 2023. The income allocated to participating securities for the three months ended December 31, 2022 was $0.5 million.

Current wording

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. As such, there is no income allocated to participating securities for the three months ended March 31, 2024. The income allocated to participating securities for the three months ended March 31, 2023 was $0.8 million.

Previous wording

We had $6.4 million and $0.9 million of net income available to common shareholders for the three months ended December 31, 2023 and 2022, respectively.

Current wording

We had $7.8 million and $1.4 million of net income available to common shareholders for the three months ended March 31, 2024 and 2023, respectively.

Previous wording

Depreciation expense increased by $1.0 million for the three months ended December 31, 2023 primarily due to purchasing the three primary buildings at the Orlando, Florida campus along with the capital expenditures related to construction and new equipment costs for the Austin, Texas and Miramar, Florida campuses, and the thirteen program expansions that occurred during fiscal 2023.

Current wording

Depreciation and amortization expense increased by $1.8 million for the six months ended March 31, 2024 primarily due to the purchase of the three primary buildings at the Orlando, Florida campus in March 2023 and increased capital expenditures related to the new program launches.

Previous wording

Educational services and facilities expenses were $92.4 million for the three months ended December 31, 2023, which represents an increase of $31.0 million as compared to $61.4 million for the three months ended December 31, 2022, which is primarily due to the acquisition of Concorde on December 1, 2022 and both ongoing and one-time costs associated with our business strategies.

Current wording

Selling, general and administrative expenses for the six months ended March 31, 2024 were $143.6 million. This represents an increase of $18.5 million, as compared to $125.1 million for the six months ended March 31, 2023, which is primarily due to the inclusion of two additional months of results for Concorde in the current year and costs associated with our growth and diversification strategy.

Previous wording

As of December 31, 2023, no shares of the Series A Preferred Stock remain 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. A final dividend payment of $1.1 million was paid to preferred shareholders of record as of December 18, 2023. See Note 17 of the notes to the condensed consolidated financial statements herein for additional details on the conversion of our Series A Preferred Stock.

Current wording

As of March 31, 2024, no shares of the Series A Preferred Stock remain 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. See Note 17 of the notes to the condensed consolidated financial statements herein for additional details on the conversion of our Series A Preferred Stock.

Previous wording

Our earnings before interest income, income taxes, depreciation and amortization (“EBITDA”) for the three months ended December 31, 2023 and 2022 were $21.4 million and $10.0 million, respectively. We define EBITDA as net income, before interest (income) expense, income tax expense (benefit), and depreciation and amortization.

Current wording

Our earnings before interest income, income taxes, depreciation and amortization (“EBITDA”) for the three and six months ended March 31, 2024 were $18.5 million and $39.9 million, respectively, compared to $12.8 million and $22.8 million for the three and six months ended March 31, 2023, respectively. We define EBITDA as net income, before interest (income) expense, income tax expense (benefit), and depreciation and amortization.

Previous wording

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 program expansions over the next 12 months 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.

Current wording

Based on past performance and current expectations, we believe that our cash flows from operations, cash on hand and investments, and revolving credit facility will satisfy our working capital needs, capital expenditures, commitments and other liquidity requirements associated with our existing operations, as well as announced program expansions over the next 12 months 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.

Previous wording

Our aggregate cash and cash equivalents were $143.6 million as of December 31, 2023, a decrease of $8.0 million from September 30, 2023. We also had available liquidity under our revolving credit facility of $8.2 million, which was unchanged from September 30, 2023.

Current wording

Our aggregate cash and cash equivalents were $116.1 million as of March 31, 2024, a decrease of $35.4 million from September 30, 2023 due primarily to net repayments of $19.0 million to the revolving credit facility and the $11.3 million used to repurchase our Series A preferred shares. We also had available liquidity under our revolving credit facility of $29.0 million as of March 31, 2024.

Previous wording

As of December 31, 2023, we had $162.0 million of long-term debt outstanding, which is comprised of two term loans, a finance lease and a revolving credit facility. Of the $162.0 million outstanding, $29.0 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 Avondale, Arizona campus property purchased in December 2020. Approximately $37.5 million relates to a term loan that bears interest at the rate of Term SOFR plus 2.0% over the seven-year term, secured in connection with the Lisle, Illinois campus property. For each of the term loans, a derivative interest rate swap is in place that fixes the interest rate on 50% of the loan at a market rate at the time the derivative was initiated. Approximately $5.4 million relates to a finance lease for a campus within our Concorde segment. The remaining $90.0 million relates to funds drawn from the $100.0 million revolving credit facility that was secured in connection with the Concorde acquisition. See Note 12 of the notes to the condensed consolidated financial statements herein for additional details on the term loans and the revolving credit facility.

Current wording

As of March 31, 2024, we had $142.3 million of long-term debt outstanding, which is comprised of two term loans, a finance lease and a revolving credit facility. Of the $142.3 million outstanding, $28.8 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 Avondale, Arizona campus property purchased in December 2020. Approximately $37.3 million relates to a term loan that bears interest at the rate of Term SOFR plus 2.0% over the seven-year term, secured in connection with the Lisle, Illinois campus property. For each of the term loans, a derivative interest rate swap is in place that fixes the interest rate on

Previous wording

We currently do not pay a cash dividend on our common stock. A final cash dividend payment of $1.1 million was paid to Series A Preferred Stockholders of record as of December 18, 2023 during the three months ended December 31, 2023 as a result of the conversion of the Series A Preferred Stock. See Note 17 of the notes to the condensed consolidated financial statements herein for additional details on the conversion of our preferred stock.

Current wording

We currently do not pay a cash dividend on our common stock. A final cash dividend payment of $1.1 million was paid to Series A Preferred Stock holders of record as of December 18, 2023 during the three months ended December 31, 2023 as a result of the conversion of the Series A Preferred Stock. See Note 17 of the notes to the condensed consolidated financial statements herein for additional details on the conversion of our preferred stock.

Previous wording

Our net cash provided by operating activities was $10.8 million for the three months ended December 31, 2023, compared to $2.8 million for the three months ended December 31, 2022.

Current wording

Our net cash provided by operating activities was $8.3 million for the six months ended March 31, 2024, compared to net cash used of $4.3 million for the six months ended March 31, 2023.

Previous wording

Net income, after adjustments for non-cash items, for the three months ended December 31, 2023 provided cash of $25.0 million. The non-cash items included $7.0 million for depreciation and amortization expense, $5.5 million for amortization of right-of-use assets for operating leases, $1.5 million for stock-based compensation expense, and $1.5 million for bad debt expense.

Current wording

Net income, after adjustments for non-cash items, for the six months ended March 31, 2024 provided cash of $50.5 million. The non-cash items included $14.2 million for depreciation and amortization expense, $11.0 million for amortization of right-of-use assets for operating leases, $3.8 million for stock-based compensation expense, and $3.2 million for bad debt expense.

Previous wording

Changes in operating assets and liabilities used cash of $14.2 million primarily due to the following:

Current wording

Changes in operating assets and liabilities used cash of $42.2 million primarily due to the following:

Previous wording

•The change in deferred revenue used cash of $4.3 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 December 31, 2023 as compared to September 30, 2023.

Current wording

•The change in deferred revenue used cash of $18.1 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 March 31, 2024 as compared to September 30, 2023.

Previous wording

•Changes in our operating lease liability, primarily as a result of rent payments, used cash of $4.7 million.

Current wording

•Changes in our operating lease liability, primarily as a result of rent payments, used cash of $10.1 million.

Previous wording

•The increase in prepaid expenses and notes receivable used cash of $4.1 million and $2.7 million, respectively, primarily due to the timing of payments.

Current wording

•The increase in prepaid expenses used cash of $4.5 million primarily due to the timing of payments.

Previous wording

Net income, after adjustments for non-cash items, for the three months ended December 31, 2022 provided cash of $14.4 million. The non-cash items included $4.1 million for amortization of right-of-use assets for operating leases, $5.2 million for depreciation and amortization expense and $1.2 million for stock-based compensation expense, and a change in deferred tax assets of $1.1 million.

Current wording

Net income, after adjustments for non-cash items, for the six months ended March 31, 2023 provided cash of $35.2 million. The non-cash items included $12.0 million for depreciation and amortization expense, $10.1 million for amortization of right-of-use assets for operating leases, $3.3 million for stock-based compensation expense, $2.5 million related to changes in deferred tax assets, and $2.1 million for bad debt expense.

Previous wording

Changes in operating assets and liabilities used cash of $11.6 million primarily due to the following:

Current wording

Changes in operating assets and liabilities used cash of $39.5 million primarily due to the following:

Previous wording

•The decrease in accounts payable and accrued expenses used cash of $15.9 million primarily related to the timing of payments to vendors and for payroll and bonus accruals.

Current wording

•The decrease in accounts payable and accrued expenses used cash of $16.4 million primarily related to the timing of payments to vendors and for payroll and bonus accruals.

Previous wording

•Changes in our operating lease liability, primarily as a result of rent payments, used cash of $5.0 million.

Current wording

•Changes in our operating lease liability, primarily as a result of rent payments, used cash of $10.7 million.

Previous wording

•The increase in deferred revenue provided cash of $4.6 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 December 31, 2022 as compared to September 30, 2022.

Current wording

•The change in deferred revenue when excluding the initial purchase price allocation for Concorde used cash of $9.6 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 March 31, 2023 as compared to September 30, 2022.

Previous wording

•The decrease in receivables provided cash of $4.7 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

Current wording

•The change in receivables when excluding the initial purchase price allocation for Concorde used cash of $3.9 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

Previous wording

During the three months ended December 31, 2023, cash used in investing activities was $3.8 million. The cash outflow was related to the purchase of property and equipment of $3.8 million.

Current wording

During the six months ended March 31, 2024, cash used in investing activities was $9.8 million for the purchase of property and equipment to support new program expansion at both UTI and Concorde.

Previous wording

During the three months ended December 31, 2022, cash provided by investing activities was $5.2 million. The cash inflow was due to proceeds from maturities of held-to-maturity securities of $29.0 million, offset by cash outflow related to the purchase of Concorde for $17.0 million, net of cash consideration received. Additionally, we purchased property and equipment of $6.8 million which primarily related to capital expenditures for our new campuses in Austin, Texas and Miramar, Florida, and the rollout of new programs at our other campuses.

Current wording

During the six months ended March 31, 2023, cash used in investing activities was $26.6 million. The cash outflow was primarily related to the purchase of property and equipment of $38.6 million. During the six months ended March 31, 2023, we purchased three buildings and the associated land at our Orlando, Florida campus for $26.2 million, including closing costs and other fees. Additionally, we had continued capital expenditures for further construction at the UTI Austin, Texas and Miramar, Florida campuses, in addition to program expansion costs for both UTI and Concorde. Further, on December 1, 2022, we completed the acquisition of Concorde which resulted in $17.0 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.