Universal Technical Institute Inc

Good afternoon and welcome to the Universal Technical Institute Fiscal Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal Conference Specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Kempton. VP Corporate Finance. Please go ahead.

Hello, and thank you for joining us. With me today are our CEO, Jerome Grant, and CFO, Troy Anderson. During the call today, we'll update you on our second quarter fiscal year 2023 business highlights, financial results, and vision for the future. Then we will open the call for your questions. Before we begin, we want to remind everyone that today's call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Please carefully review today's press release for additional information and important disclosures about forward-looking statements. Because forward-looking statements relate to the future, they're subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. As a reminder, relevant factors that could cause actual results to differ materially from the forward-looking statements are listed in the press release and our SEC filings. And the section entitled forward-looking statements in today's press release also applies to everything discussed during this conference call. During today's call, we will refer to adjusted net income or loss, adjusted EBITDA, and adjusted free cash flow, which are non-GAAP financial measures. Adjusted net income or loss is net income or loss adjusted for items that affect trends and underlying performance from year to year and are not considered as part of the company's normal recurring operations, including the income tax effect on the adjustments utilizing the effective tax rate. Adjusted EBITDA is net income or loss before interest expense, interest income, income taxes, depreciation, and amortization adjusted for items not considered as part of the company's normal recurring operations. along with non-cash stock-based compensation expense. Adjusted free cash flow is net cash provided by or used in operating activities, less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations. Management internally uses net income or loss, adjusted EBITDA, and adjusted free cash flow as performance measures, and those figures will be discussed on today's call. As a reminder, we have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures in today's press release. We encourage you to carefully review those reconciliations. It is now my pleasure to turn the call to our CEO, Jerome Graham.

Thank you, Matt. Good afternoon, everyone, and thank you all for joining us today. I'd also like to thank our faculty, staff, and students for their ongoing hard work and commitment. During the second quarter, we continued to build out the infrastructure of our combined company and execute on the actions we've already taken to realize the fullest potential of our growth and diversification strategy. We delivered strong performance across a number of our key metrics during the second quarter, with $163.8 million in revenue, $19.2 million in adjusted EBITDA, and 4,626 total student starts. Note that our second quarter financial results include the first full quarter of financial contribution from Concord since completing the acquisition in December of 2022. We strengthened our divisional model and leadership team through some key leadership appointments. For our two divisions, we now have established dedicated divisional presidents, with Jamie Frazier at the helm of Concord, as previously announced, and our newest leadership addition, Tracy Lorenz, serving as our new president of UTI. Tracy joined in April as a proven growth-oriented leader with over 20 years' experience in higher education. She most recently served as president and CEO of Triumph Education, and she previously spent nine years at Apollo Education Group. Tracy will be wholly focused on UTI's operational and strategic execution, and we're happy to welcome her to the team. Additionally, we've strengthened our board's healthcare representation through the appointment of Michael Slobowski, to the Board of Directors. Michael is the President and CEO of Trinity Health, a $21.5 billion national health system, and he brings 40 years of healthcare experience. We look forward to leveraging his insights as we further integrate and expand our Concord platform. With this multidivisional structure, we're building upon our strength as a workforce solution provider for an expanding range of in-demand fields. While current macroeconomic conditions have created a dynamic operating environment over the past year, as we'll discuss throughout the call, our diversified model gives us greater flexibility to navigate these conditions and optimally support our current and prospective students. Importantly, the fields and industry segments on which we are focused continue to have strong demand, which helps ensure that we're setting our students up for success through graduation and beyond. Now I'd like to provide an update on our key areas of focus for our two segments in 2023. Starting with the UTI division, there are two main drivers for growth in 2023. The scaling of the two new campuses and new program launches planned for this year. The two newest campuses in Austin, Texas and Miramar, Florida now have over 700 active students. We continue to expect both campuses to reach the benchmarks we set for them as they ramp further. These markets are showing impressive demand characteristics. One example of this, in the same day of the recent ribbon cutting in Austin, we held a job fair with 50 employers present and over 1,500 job openings that were immediately looking to be filled. This illustrates our success with targeting high demand fields and markets, as well as connecting students with a strong range of career opportunities. As for Miramar, this campus opened later than Austin in 2022, and did not benefit from a full high school start season last year and is now preparing for its first big summer and fall starts as new high school student graduates prepare to join us. The UTI team continues to work on launching 14 new programs across nine UTI campuses this year and into 2024, which primarily came to us by way of our MIAT acquisition. The programs they're planning to launch include wind and energy management, aviation, robotics, and HVACR. We're encouraged by the strong demand for these new programs, as evidenced by the inquiry flow we have seen as they increase our marketing efforts. UTI has now received all of the Department of Education approvals needed for their program launches in 2023, with just the three planned aviation programs still needing another approval. They are expecting the first new programs to launch in July. It should be noted that for a handful of programs, we experienced delays in regulatory approval process, which we understand to be an industry-wide dynamic as agencies work through broader certification backlogs. These have somewhat compressed these programs' launch timeline, yet interest is high, and these programs should ramp nicely in 2024 and beyond. As a reminder, our initial fiscal 2023 guidance for the planned program launches only included a modest benefit on student starts and revenue. with the primary benefits and higher growth expectations in fiscal 2024 and onward. Overall, demand for the UTI programs remain high, as exemplified by strong inquiry volume. While we have seen some improvement in the broader enrollment environment relative to the second half of fiscal 2022, it is important to note that the macroeconomic conditions have not yet normalized. Inflationary pressures have continued to impact some prospective students, most notably those who must relocate to attend classes. Yet, UTI remains focused on mitigating these impacts by implementing additional sources of support for students and families. For example, UTI has enhanced the grant programs to include additional relocation and housing cost support, as well as expanding family contribution eligibility. These enhancements come alongside the initiatives previously implemented, including establishing dedicated teams to support local and relocating adult students, a dedicated military financial aid team, as well as assisting prospective adult students through the enhanced call center team. The UTI team is also steadily working to enhance the yield on their investments in admissions resources to support broader recruitment efforts across our high school and military channels. Moving on to our Concord Career College division, we collectively continue to execute on critical integration items and have stayed on track with this process. As noted in prior quarters, we are maintaining our focus on facilitating a seamless and effective experience for the Concord team and their students, while keeping our integrations efforts focused on meeting public company requirements, including financial reporting, internal controls, compliance, and IT security. Throughout the process and over the past several months, we have visited all 17 Concord campuses. We remained encouraged by the high engagement and enthusiasm we've seen from Concord students, staff, and leadership, and it's been great working with the Concord team to support positive student outcomes across a variety of critical, growing healthcare professions. From a growth perspective, the Concord team has programmatic accreditor visits scheduled for the three dental hygiene programs they are planning to open. And we expect these programs to launch in 2024 once they've been successfully accredited. Historically, launching and scaling enrollment for Concord's dental hygiene programs has also provided a boost to their dental assistant programs on those respective campuses. And we expect this pattern to continue once the three newest programs are up and running. Our company as a whole has a strong commitment to robust student outcomes. These outcomes define our foundation and drive our future. With Concord, Our combined footprint spans two in-demand industry segments and 33 campuses. We significantly expanded how we reach and support our students and work collaboratively with the employment partners in rewarding, high-demand career paths. As a recent example of our track record and partnership impact, I'd like to share a success story from the annual Aerospace Maintenance Competition event held in conjunction with Aviation Week's MRO Americas. This flagship event recognizes and celebrates aviation and maintenance professionals and raises awareness of the knowledge and skills required to maintain safe and airworthy aircraft. We had two MIAT student teams compete from our Houston campus. Our Lady Mustangs team won first place overall in the Professionalism Award category, and Men's Mustangs team placed second in the same category. Opportunities like these demonstrate the benefits of our premier industry partnerships, and I want to thank our partners at United Airlines for making this event possible for our students. We remain on track to achieve the guidance targets for fiscal 2023 that we set at the beginning of the year. These include revenue ranging from between $595 million and $610 million, adjusted EBITDA between $58 million and $62 million, and new student starts between $22,000 and $23,500. In addition, we continue to believe that our ongoing work to drive growth to strengthen our operational infrastructure will position our company for further growth in fiscal 2024 and beyond. As such, we remain confident with our previous stated fiscal 2024 projections of revenue in excess of $700 million and adjusted EBITDA approaching $100 million. I'm proud of our execution and positive results through the first half of the year and our commitment to facilitating positive student and employment outcomes across a diversified, in-demand range of field. I'd now like to turn the call over to Troy to discuss our results from the quarter in greater detail. Troy?