Universal Technical Institute Inc

Good day and welcome to the Universal Technical Institute third quarter 2026 earnings conference call. Today, all participants will be in a listen-only mode. Should you need any assistance during today's call, please signal for a 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 telephone keypad. To withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Hello and welcome to Universal Technical Institute's fiscal third quarter 2026 earnings call. Joining me today are CEO Jerome Grant and CFO Bruce Schuman. 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 2025. 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 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?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. The third quarter was another strong quarter for Universal Technical Institute and reinforces our confidence in both the environment for job demand for our students as well as student interest in our program offerings. Despite some shorter-term challenges we will discuss, we remain extremely confident in the strength of our long-term North Star strategy. Driven by the strength of our new campuses and programs, as well as stronger than expected interest in our skilled trade programs, we exceeded expectations for new student starts this quarter, generating 11% year-over-year growth. With a particularly strong contribution from UTI Division, which increased 23% year-over-year. Average full-time active students increased 6% reflecting continual enrollment growth across both UTI and Concord divisions. Revenue grew 7% year-over-year to $219 million. Baseline adjusted EBITDA for the third quarter was $27 million. Our SEC reported adjusted EBITDA for the quarter was $18 million These results continue to validate the strategy we've been executing over the past several years and reinforce that the underlying demand environment remains exceptionally healthy. Across the industries we serve, employers continue to face significant shortages of skilled workers. Whether we're speaking with automotive dealers, manufacturers, healthcare systems, electrical contractors, or industrial employers, the message is consistent. Demand for qualified skilled graduates continues to far exceed the available supply. That sustained supply and demand imbalance has created a durable and attractive backdrop for our business. We are seeing particularly strong momentum across skilled trades, where infrastructure investment, domestic manufacturer, Energy projects and data center construction continue to drive demand for electricians, HVACR techs, welders, industrial maintenance professionals, and other skilled workers. Nearly every week you will read articles in major print and digital publications such as the Wall Street Journal, New York Times, Forbes, and Bloomberg Businessweek about both the increasing demand for and accelerating interest in the trades. These trends further reinforce that the investments we've made to expand our skilled trades offerings were the right strategic decision. The demand for skilled healthcare workers also remains quite strong, with providers continuing to face staffing shortages across many of the disciplines we serve. We're seeing particularly strong momentum in our radiology technician programs, where enrollment and demand have ramped rapidly. Now, at the same time, employer demand for transportation technicians remains exceptionally robust. For example, there are more than twice as many open positions on our campus job boards than the number of automotive or diesel graduates we produce. And the Bureau of Labor Statistics is projecting tens of thousands of job openings in this space. Several years ago, we made the decision to expand beyond transportation because we believed that the long-term workforce education opportunity was much broader. Today, we have the programs, campuses, and employer relationships in place to meet that evolving student demand. As students increasingly gravitate towards our skilled trades offering, our newer campuses, capacity expansions of skilled trades offering, and recently launched programs continue to outperform both our plan and market expectations. These results further validate the diversification strategy we've been executing throughout NorthStar. And because we move aggressively and invested ahead of where the student demand is moving, we are well positioned to capture those opportunities while continuing to support the needs of our employer partners in all industries we serve. While we've had strong year-to-date results and the overall demand environment remains exceptionally healthy, we have, unfortunately, seen some near-term softness in our UTI division's high school channel relative to our original expectations. Specifically, fourth quarter UTI high school starts, which are primarily weighted towards auto and diesel programs, are tracking below our initial outlook. This year's UTI division lead flow is up over 15%, and candidly, we simply did not get to all the prospective students who expressed interest. But we view this as a near-term opportunity to improve execution, especially within this channel. We are proactively taking steps to strengthen our engagement with prospective students and improve conversion through the enrollment process. To address this, this summer we are increasing our admissions staffing dedicated to the high school channel by approximately 20%. We've largely completed this initiative, putting us on strong footing heading into fiscal 2027. These staffing additions will improve our conversion and better serve the needs of our employer partners. As previously noted, we also experienced stronger than expected student interest in our skilled trades offerings. As a result, we saw more enrollment growth than originally anticipated in these programs, which are shorter in duration, delivering marginally less revenue and profit than some of our other offerings like automotive and diesel. We are continuously refining our pricing strategies and strengthening the value proposition across our portfolio to ensure our programs remain aligned with employer needs, evolving student demand, and long-term market opportunities. Collectively, these actions position us to more optimally balance enrollment opportunities across the portfolio, improve execution, and enhance profitability over time. Although these efforts won't materially change the financial outcome for fiscal 2026, they reinforce our confidence in the opportunities ahead and strengthen our outlook as we enter fiscal 2027. With that backdrop, let me provide some additional context on our full year outlook. Entering 2026, and as we communicated with you throughout the year, we expected a strong fourth quarter contribution from the UTI high school channel. But as I mentioned, those new student starts are coming in softer than anticipated. As a result, this and to a smaller degree, the faster than expected increase in student interest in our skilled trades programs over transportation offering are impacting our fiscal 2026 expectations. And let me make this clear, this is only about our near-term financial outlook. While we are updating our fiscal 2026 financial guidance, we're really adjusting expectations for Q4 2026. We now anticipate generating consolidated revenue between $893 million and $900 million, reflecting approximately 7% year-over-year growth. Baseline adjusted EBITDA is now expected to exceed $135 million and reported adjusted EBITDA to between $100 and $103 million due to approximately $35 million of growth investments. We're also tightening the range of our new student starts, which are now expected to be between $31,900 and $32,300. I want to emphasize that these fiscal 2026 adjustments in no way whatsoever alter our confidence in the result of the financial targets we've outlined for phase two of our North Star strategy. We remain confident in both our medium and long-term projections, which means we are still firmly on track to exceed $1.2 billion in revenue and approached $220 million in adjusted EBITDA in 2029. Bruce will walk through our updated guidance in more detail, but we remain confident in North Star financial targets and the significant long-term opportunity in front of us. The objective of the second phase of our North Star strategy was to build a larger, more diversified workforce education platform with a durable growth engine. This quarter is another proof point that that strategy is working. Our new campuses continue to outpace expectations. For example, the first start at our newly launched UTI Atlanta campus in July performed exceptionally well, tracking 30% ahead of expectations. Additionally, the strength of UTI San Antonio, which opened in the spring, has not slowed. To date, new student starts are tracking roughly 40% ahead of the launch model. The early strong performance of both UTI San Antonio and UTI Atlanta gives us confidence these vocations have the potential to ramp to scale faster and perhaps above their projected mature run rates of approximately 800 and more than 1500 students annually, respectively. Looking ahead, we continue to make excellent progress on our fiscal 2027 campus pipeline. Construction and planning activities are advancing as expected, and we recently announced the campus precedence for our new UTI campus in Salt Lake City and our new Concord campuses in both Houston and the Phoenix metropolitan areas. These new locations represent another significant opportunity to expand REACH into attractive and underserved markets. Our comprehensive UTI campus in Salt Lake City, like Atlanta, is designed to support approximately 1,500 students, while each of the new Concord campuses to open in Houston, Atlanta and Glendale, Arizona are expected to serve roughly 600 students each. With all three of our new fiscal 2026 campuses now open and four campuses getting ready to launch in fiscal 2027, we remain firmly on track with our North Star operational targets. To reiterate, we plan to open a minimum of two and up to five new campuses annually, while replicating 12 to 20 new programs annually across the legacy UTI and Concord campuses each fiscal year. With respect to program replications, this year we're on track to launch more than 20 new programs across UTI in Concord, making fiscal 2026 one of the most active years for program replications in our history. At the UTI division, we've continued to build on the red hot demand for our skilled trades offerings while strengthening our position in aviation with 12 new programs on existing UTI campuses across HVACR, our electrical suite, and Aviation Maintenance in 2026. Most recently, we completed the nationwide rollout of our electric vehicle and hybrid curriculum and added HVACR to the UTI Lyle campus. On the Concord side, we set out to launch 10 program replications this year and as of today, we've actually successfully launched 12 programs across the healthcare campuses. These programs include dental assistant, diagnostic medical sonography, pharmacy technician, radiology technician and surgical technician. Over the last several years, we have successfully executed the first two pillars of the North Star Strategy, growth and diversification. We've fundamentally transformed Universal Technical Institute from a primarily transportation-focused education company into a diversified workforce education platform serving transportation, the skilled trades, healthcare, and the dental markets. A major catalyst in that transformation was our acquisition of Concord Career Colleges, which unlock an entirely new market as we made our entrance into healthcare and broaden our addressable market. From the beginning, we took a deliberate approach to integration, preserving the strength and brands of both organizations while creating infrastructure needed to support a larger, more diversified company. That approach has worked brilliantly and has enabled us to expand our campus footprint launched dozens of new programs, increased student capacity, and established a stronger enterprise. As we continue to scale, we've reached the important inflection point where we believe we can better leverage the capabilities we've built across the organization. As I mentioned last quarter, we're increasingly operating as one enterprise with two highly respected brands serving distinct markets. The North Star Strategy, as we've repeatedly shared with you, has three components, growth, to date, the third leg of the North Star has been focused on optimizing how we operate behind the scenes by unifying supporting capabilities and simplifying operations. In the culmination of a year-long strategic initiative, as of the end of July, we are now operating all of our programs within both of our brands under one enterprise operating model. This is an important planned step in the evolution of our company. By unifying the capabilities we've developed across both UTI and Concord brands, we can simplify how we operate, improve student acquisition, and better align our resources behind the highest return opportunities across our businesses. Many of these opportunities ahead are enterprise-wide. Whether it's adapting to change in the digital marketing landscape, leveraging the power of artificial intelligence to enhance student acquisition, Deepening employer partnerships or supporting future campus expansion, we believe a more unified approach will allow us to move faster and execute more effectively. What does not change in this unification is the strength of our customer-facing brands. UTI and Concord have tremendous brand equity in respective markets, and we will continue to preserve what makes each institution unique while leveraging the capabilities we've cultivated. One area where this is particularly relevant is student acquisition. Students are increasingly using AI tools earlier in their research process, which is changing where inquiries originate and how prospective students engage with our brands. Our acquisition strategy has never depended on a single source of lead. We have built a diversified model that spans paid search, social, organic discovery, admissions outreach, referrals, Nurture Campaigns, and other digital offline channels. That diversification has allowed us to adapt as search behaviors evolve. We're already seeing the resilience of our results. At Concord, total marketing leads increased 22% year over year, while UTI total increase increased 18%, demonstrating continued healthy demand across the portfolio, even as students increasingly discover us through different channels. We are also continuing to strengthen our position by creating more authoritative content, optimizing our media investments, expanding third-party validation through employer relationships and earned media, and enhancing how we measure performance as AI-driven discovery continues to evolve. We believe these efforts, combined with our strong brand in employer partnerships, position us well to efficiently continue attracting prospective students regardless of how they choose to begin their search. Another strong area of opportunity is expanding our B2B partnerships. While each employer has unique needs, employers across the industries we serve are facing common challenges. They need more qualified talent, and they need solutions that help them recruit, train, and retain talent more effectively. We believe our platform positions us to play even a larger role in how we can help employers address these workforce challenges. We continue to pursue opportunities to create customized workforce solutions that expand the talent pipeline for new employer partners while deepening our relationships with our existing partners. For example, we're working with several of our current transportation and skilled trades partners that need to hire hundreds of additional workers annually. A number of these partners are facing rising costs due to limited supply of qualified talent and are evaluating having UTI expand their bespoke training curriculum across additional campuses while supporting recruitment in student services. We're currently in conversation with a major electric vehicle manufacturer regarding this topic. Another potential partner, a leading multinational company focused on electrification and industrial automation, also has limited internal training capacity due to the number of facilities available to support its month-long onboarding process. This company is exploring a new, broader partnership with UTI to support recruitment, training, and onboarding while leveraging our campuses to create additional capacity. We're also evaluating similar opportunities with major airlines and defense contractors that are facing increasing pressure to attract and retain the talent necessary to fulfill contract obligations. And finally, We continue to work with Heartland to address the significant demand for dental hygienists. We're currently discussing three additional co-branded Concord campuses that would build on the success of Fort Myers location with Concord recruiting, training, and placing students into Heartland locations nationwide. While each of these opportunities is unique, they all reinforce the same point. Employers increasingly view Universal Technical Institute, as a trusted workforce partner capable of helping them solve critical talent challenges. We look forward to sharing more specific details on these opportunities as they continue to develop. As we look ahead, our confidence in the business continues to strengthen as our North Star strategy moves forward. As demonstrated by the performance of our new campuses and programs, we have built a durable and repeatable growth platform supported by strong demand, disciplined execution, a healthy balance sheet and meaningful long-term tailwinds across the workforce education. Moving forward, we will continue to optimize our existing campuses and program portfolio to further improve campus-level performance, enhance conversion and retention, and drive same-store growth. Leverage our proven campus launch model to expand into attractive new markets while adding high-demand programs and increasing capacity in areas where demand is strongest. and deepen and diversify our strategic partnerships with employers and industry leaders. Now, before I wrap up, I'd like to highlight the recognition our organization continues to receive. Earlier this year, we were added to the S&P Small Cap 600 Index, an important milestone that reflects the significant progress we've made scaling and diversifying the company. Additionally, this fall, three of our UTI campuses will once again be recognized as ACCSC School of Excellence. underscoring our continued commitment to educational quality, student outcomes, and operational excellence. These accomplishments reinforce the strength of our platform, the dedication of our people, the significant progress we've made, and most notably, the immense opportunity that remains ahead. I want to thank our students, instructors, campus team, and employees for their hard work and commitment. Their passion for serving students and supporting our employer partners is what makes these results possible. We're proud of our performance this quarter and remain focused on executing on our strategy and creating long-term value for our students, employer partners, and shareholders. With that, I'll turn the call over to Bruce, our CFO, to review our third quarter financials and provide you with additional details on our guidance.