Universal Technical Institute Q4 2023 Earnings Call Transcript

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Provided by Quartr
November 15, 2023

There are 7 speakers on the call.

Operator

Good day, and welcome to the Universal Technical Institute Q4 and Full Year 2023 Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance. Please go ahead.

Speaker 1

Hello, and welcome to Universal Technical Institute's fiscal 4th quarter and full year 2023 earnings call. Joining me today are our CEO, Jerome Grant and CFO, Troy Anderson. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor 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.

Speaker 1

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 the SEC filings. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We do not intend to These forward looking statements as a result of new information or future developments except as required by law.

Speaker 1

Please note, unless otherwise stated, All comparisons in this call will be against our results for the comparable period of fiscal 2022. 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.

Speaker 1

All non GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks. Jerome?

Speaker 2

Thank you, Matt. Good afternoon, everyone. Fiscal 2023 was a very strong year for the company. We're grateful that you are able to take the time out of your afternoon so that we can share several highlights with you. First, I'll briefly go over our results for the year and comment on the progress of our multiyear growth and diversification strategy.

Speaker 2

Following that, I'll share highlights of our Concord and UTI divisional performance and focus in 2023. Next, Since superior student and employment outcomes are central to everything we do, I'll spend a few moments sharing some of the accomplishments and recognitions we achieved this past year. From there, we'll look ahead to 2024. I will both share our formal guidance for the year and outline our areas of focus. At the conclusion of my comments, I'll turn the call over to Troy Anderson, our CFO, to dig in a bit deeper on both numbers and metrics.

Speaker 2

With that, let's begin with the 2023 results. We outperformed expectations throughout the fiscal year, demonstrating the strength of our ongoing growth and diversification strategy, The effectiveness of our operating model, our team's ability to execute and the flexibility we now have as a multi divisional company. I'd like to thank our faculty, staff and students for their ongoing dedication and hard work and for delivering this fine performance in fiscal 2023. For the full year, we exceeded the high end of our guidance across all key financial metrics, delivering 607,400,000 in revenue and $64,200,000 in adjusted EBITDA. And we performed in line with our ambitious expectations as far as new student starts reaching 22,613 for the year.

Speaker 2

Over the past several years, We've consistently delivered on the financial goals we established for our diversified workforce solutions platform. As we emerge from the pandemic in 2021, we hit the accelerator on our multiyear growth and diversification goals. As outlined, when we first announced our acquisition of MiAT 2 years ago and then again when we shared the news about the Concord acquisition last May, Broadening our transportation and skilled trades offering and entering the healthcare space will significantly propel our growth and diversification efforts forward, as well as our overall financial trajectory, all while maintaining our core focus on supporting strong student and employment outcomes in high demand areas. With our performance this year and with the initiatives already underway, we believe we are well positioned to maintain our momentum into fiscal year 2024. I'd like to commend both our Concord and UTI divisional leadership teams for their execution and collaboration over the past year in achieving the results and in building robust and efficient foundation for future growth.

Speaker 2

Let's now turn to a few highlights from each of the divisions in 2023. Starting with Concord, we've seamlessly integrated all critical supporting functions and those related to key public company requirements. With the majority of this process behind us, we'll continue to optimize the organizational model and execute on additional integration and synergy opportunities in the years ahead. It's important to underscore that all of this fine work occurred while ensuring the business continues to grow. Demand for Concord's programs has remained strong throughout the year.

Speaker 2

And in September, we began starting students in one of Concord's new programs, a cardiovascular Expand the division's online programming. Concord's other planned new program launches are on track for the fiscal year 2024 with 3 new programs launching in November. These include diagnostic medical sonography program and another cardiovascular sonography program, as well as the first of 3 planned dental hygiene programs. We're working diligently to launch the remaining dental hygiene programs during the fiscal year and are making very good progress towards completing the respective regulatory approvals. As a quick update, entering fiscal year 2024, We had a change in Concord's leadership.

Speaker 2

I've appointed Concord's Chief Operating Officer, Kevin Prenn to the Interim Divisional President role. I'd like to thank Conker's former CEO, Jamie Fraser, for her efforts and support in leading the Conker team through the closing of the acquisition and the initial integration efforts. We sincerely wish you well. We have tremendous confidence in Kevin and the Concord leadership team, Their ability to capitalize on the momentum they have established and their ability to achieve the divisional's financial and operational goals for fiscal 2024 and beyond. Moving to the UTI division, we experienced accelerating year over year start growth throughout the year, culminating in 9% growth in the 4th quarter.

Speaker 2

We expect that trend to continue for at least the first half of twenty twenty four, if not beyond. This performance reflects the fact that we delivered on our 2 main growth drivers for the year, our planned new program launches and scaling our 2 newest campus in Austin, Texas and Miramar, Florida. We launched 13 of the 14 plan new UTI programs across 8 campuses in 2023. We expect to launch the remaining aviation airframe and power plant Technician program at the UTI Miramar campus very soon following the completion of the Federal Aviation Administration certification process, which unfortunately has been delayed beyond our control. We have seen strong demand for these programs as well as Continued high demand overall across the program portfolio.

Speaker 2

We started approximately 230 students across these programs in the 4th quarter and believe we will see 1,000 or more new student starts in fiscal 2024. As we have outlined during past calls, These initial program launches are merely the first wave of bringing these in demand aviation, skilled trades and energy programs that came to us through the MiAT acquisition to the UTI footprint. We have initiated efforts to launch 3 more heating, Turning to the Austin and Miramar campuses, which launched in 2022, the 2 campuses now have nearly 1100 students combined and they are continuing to ramp nicely. Based on this trajectory, we remain highly confident that both campuses will continue to perform in line or above our long Extremely strong attendance from both students and employers alike. This signals that the local job market is quite robust and values our graduates.

Speaker 2

We will continue scaling these campuses and identify future expansion opportunities, leveraging capacity available in each location as well as considering new locations to offer our in demand programs. Now superior outcomes are at the center of our school's missions. As a great example of the quality of our programs and partnerships, Concord Schools and Employment Partners recently received top industry distinction in 2 states. First, Concord was named School of the Year by the California Association of Private Postsecondary Schools in early October. And in Texas, Concord's Dallas campus received the same distinction from the 200 member Career Colleges and Schools of Texas Association or CCST.

Speaker 2

Further, the CCST also awarded the Innovator of the Year Award To one of Concord's Dallas online success coaches, Connie Tifido. Congratulations, Connie. We're very proud of these awards And they recognize Concord's commitment to excellence in student training and outcomes. Now alongside these recognitions, 2 of Concord's longtime dental employment partners, Pacific Dental Services and Heartland Dental received employer of the year awards from the same California and Texas associations respectively. Both Pacific Dental Services and Heartland Dental, as part of their ongoing partnerships with Concord, have worked closely with us to offer scholarships and various on the job opportunities designed to help students achieve careers as dental professionals.

Speaker 2

These innovative collaborations mirror the partnerships we have historically leveraged in our UTI division and we will continue expanding these relationships and our network of health Our industry partners over time. Moving to 2024, our strong execution throughout the fiscal year 2023 has allowed us to enter 2024 on confident footing. As we look to the fiscal year ahead, we're pleased to share with you today our formal full year guidance targets. Revenue will be between $705,000,000 $715,000,000 We expect adjusted EBITDA to be between $98,000,000 $102,000,000 And new student starts will be between 24,525,500, which represents an impressive growth rate of between 8% 13 As we introduce these ranges, I'd like to reemphasize that much of the foundation required to achieve these targets has been laid over the past 2 years. Our work in the year ahead of us involves continued execution, delivering against these objectives and building upon the sustainable strategic progress we've made.

Speaker 2

Our key focus areas for 2024 all support our broader revenue, profitability and cash generation objectives, while also continuing to support strong student outcomes. These include further ramping our newest UTI campuses to help them reach their fullest potential, driving greater enrollment, revenue and profit growth from both our 2023 2024 new program launches in both divisions, Enhancing the yield of our marketing and admissions investment to continue optimizing lead generation and inquiry conversion And continuing to optimize our workforce strategies, hiring practices and facilities utilization to maximize operating costs and capital efficiencies, which in turn will drive continued program and margin expansion. I'm proud of our execution over the past and our positioning for greater growth in the year ahead. I'd now like to turn the call over to Troy to review our 4th quarter and full year 2023 financial results, as well as provide additional detail on our 2024 expectations. Troy?

Speaker 3

Thank you, Jerome. I'm happy to report that our revenue, profitability and cash flow performance exceeded expectations for both the Q4 and full year. We saw positive contributions from a number of areas that drove the upside versus our expectation, including another strong performance in the quarter from the Concord team. As a reminder, our reported results include both consolidated and segment views as well as corporate unallocated costs. Please also note that unless stated otherwise, the year over year comparisons are on an as reported basis as contributions from Concord are only collected from the acquisition date of December 1, 2022 and forward.

Speaker 3

To summarize our operational performance, We recorded 10,368 total new student starts during the quarter and 22,613 total new student starts Full year, solidly in the middle of our guidance range. As we previously shared, Q4 is a seasonally high start quarter for both of our divisions. Concord has 2 large starts for their clinical programs versus 1 in the other quarters and the number of students starting in core programs is also higher. On the UTI side, the majority of the high school channel starts occur in the Q4 and high school overall contributed approximately 45 Within the UTI division's overall year over year start growth, we are pleased to have driven growth in every quarter during the year. In the 2nd consecutive quarter, same campus, same program start growth.

Speaker 3

For both divisions, we see this momentum continuing into Full year 2024 supported by our proactive grant programs, new program offerings and other initiatives designed to better support and engage with Moving to our financial performance, 4th quarter revenue on a consolidated basis increased 53.9 percent to $170,300,000 driven by the $55,000,000 contribution from Concord and 4.2% year over year growth for the UTI division. For the full year, consolidated revenue increased 45% to $607,400,000 which was above the high end of our previously revised guidance range. The UTI division contributed 429 point $3,000,000 and 2.5 percent year over year growth, while Concor contributed $178,100,000 for the 10 months following the closing of the acquisition. From a profitability standpoint, consolidated net income for the Q4 was 6,700,000 or $0.10 per diluted share and for the year was $12,300,000 or $0.13 per diluted share. At the end of the quarter, we had 34,100,000 shares outstanding.

Speaker 3

Adjusted net income for the Q4 was 8,400,000 For the year, it was $22,300,000 which was above the high end of our previously raised guidance range. Our 2023 net income performance reflects the higher effective tax rate that resulted from last year's valuation allowance reversal, along with the impact of certain discrete items during the year. We expect to see a similar effective tax rate in fiscal 2024. Adjusted EBITDA for the Q4 was $19,200,000 and was $64,200,000 for the full year, which exceeded the top end of our previously raised guidance range. On both the divisional and corporate levels, our focus on expense management and driving continuous operating efficiencies is reflected in our overall profitability performance.

Speaker 3

Total available liquidity at the end of the quarter was $159,700,000 including $8,200,000 of remaining revolver capacity. Total debt was approximately $162,000,000 while net debt was approximately 11,000,000 Our full year operating cash flow and adjusted free cash flow were both $49,100,000 representing year over year improvements of 3,100,000 and $14,200,000 respectively. The 4th quarter is a seasonally strong quarter for cash generation and we overachieved our expectations, which helped us exceed the high end of our previously raised adjusted free cash flow guidance for the year. Total capital expenditures for the year were $56,700,000 a 29% decrease relative to fiscal 2022. The primary drivers of our CapEx for the year include the $26,000,000 purchase of the 3 primary buildings and associated land at the UTI Orlando campus, The completion of the UTI Austin and the Miramar campus build outs, the UTI and Concord program expansion and maintenance CapEx associated with equipment, facilities, curriculum and other items.

Speaker 3

It is important to note we consistently manage our maintenance CapEx Approximately 2% of revenue, which is a relatively modest amount. Given the strength of our execution throughout fiscal 2023, as well as the current visibility and momentum we are carrying forward, we have a high degree of confidence in the formal guidance ranges we are providing for fiscal 2024. I'll highlight that the revenue and adjusted EBITDA ranges are consistent with, if not on the upside of, the 2024 projections we have previously communicated, underscoring the visibility and predictability we've been building into our business model over the past several years. For revenue, we expect to generate between $705,000,000 $715,000,000 for the fiscal year or 16% to 18% year over year growth. The growth is driven by the full year of contribution from Concord, along with greater contributions from recent and forthcoming program expansions, The strong new student start performance this past year and organic new student start growth during the year from both divisions.

Speaker 3

While we expect to generate strong revenue growth each quarter, we are anticipating particular year over year strength in the Q1 as we record a full quarter contribution from Concorde. For the remaining quarters, we expect revenue growth in the upper single digits to low double digits, driven by the ramping program expansion in the momentum in student start growth across both divisions throughout 2023 and continuing into 2024. We expect full year adjusted EBITDA to range between $98,000,000 $102,000,000 which is more than 50% year over year growth. The growth reflects the significant revenue increase, including the full year Concord contribution, increased yield from our new campus and program expansion investments, and overall improved operating leverage from our fixed and selling, general and administrative costs. With our current visibility, we anticipate generating solid growth each quarter, the strongest growth in profitability overall in the second half of the year.

Speaker 3

Note that since we first announced our acquisition of Concord, We have outlined the intent to expand their adjusted EBITDA margins ultimately into the mid teens. Following our initial focus Investment related to integration and public company readiness, we expect to approach double digit margins for the division in fiscal 2024 and drive additional margin expansion from there. For fiscal 2024, we are replacing adjusted net income as a guidance metric We are introducing GAAP net income and GAAP earnings per share guidance as we believe these metrics are better suited to our sustained and expanding profitability profile. For net income, we expect a range of $34,000,000 to $38,000,000 tripling our fiscal 2023 GAAP net income. And for diluted earnings per share, we expect a range of $0.53 to $0.58 per share.

Speaker 3

From a quarterly phasing perspective, we currently anticipate measurable year over year growth for both metrics every quarter and overall in the back half of the year, particularly in the Q4 driven by the seasonal strength in both divisions. We expect full year adjusted free cash flow to range between 62,000,000 $66,000,000 Consistent with our historical cadence, we expect the bulk of the cash generation in year over year growth to come in the 4th quarter. Though we expect fewer adjustments this year given the lower growth investment activity currently planned for the year, thus unadjusted free cash flow will also be very strong. Finally, alongside these financial expectations, we expect total new student starts to range between 24,500 to 25,500 or total year over year growth of approximately 8% to 13%. We expect robust start performance in Q1 as we benefit from Concord's full quarter contribution, complemented by continued strong start growth in UTI for both the program expansions and same campus same program growth.

Speaker 3

Thereafter, we expect continued double digit growth in the second quarter Amid stabilization in the low to mid single digits in the 3rd and 4th quarters as we complete the initial ramping of our prior program and campus growth investments, as well as mature the grants and other enhancements we have been implementing and refining over the past year or so. Included in these expectations is annual seasonality within the or clinical programs where certain programs have fewer start opportunities in fiscal 2024 than they did in fiscal 2023. To expand on Jerome's earlier comments, our performance on each of these fronts over the next year is largely built upon continuing our solid operational execution and ramping initiatives we already have in place. We expect to continue scaling the newest UTI division campuses and the newly launched programs in both divisions, driving greater growth as they reach maturity. Further,

Speaker 4

we aim

Speaker 3

to launch additional programs, rolling out expanded offerings within both divisions during the year. We are also targeting margin expansion through increasing our operating leverage with specific focus on optimizing our labor force and facilities utilization across both divisions. With the current strength of our balance sheet and the implementation of various growth investments over the past few years, we remain focused on ramping the yield of these investments We encourage everyone to review our press release, financial supplement and investor presentation as these materials include the most current information on our consolidated and segment results, our strategic roadmap and our guidance, including our non GAAP reconciliation tables and bridges between our 2023 performance and the 2024 guidance ranges we announced today. We very much appreciate the ongoing commitment and support from our team, students and partners as we continue executing on our growth and diversification strategy. I'll now turn the call back over to Jerome for closing remarks.

Speaker 2

Thank you, Troy. As we close today's call, I want to briefly review our progress against our growth and diversification strategy. But first, I'd be remiss if I didn't highlight that by achieving our fiscal 2024 guidance, we'll have more than doubled the revenue from fiscal 2021 and nearly tripled adjusted EBITDA. The 4 pillars of this successful strategy have included new campuses, program expansions, Inorganic growth and business model extensions. In the past fiscal year alone, we've swiftly ramped Our 2 newest UTI division campuses launched 13 new UTI division programs and 2 new healthcare programs and acquired and integrated Concord Career Colleges, which will serve as a cornerstone for our newly formed healthcare division.

Speaker 2

Our outperformance throughout 2023 demonstrates the consistency of our execution on our foundational strategy as well as delivery against the objectives we set for the company over the past several years. By exceeding our financial targets, Launching key program expansions and propelling new student growth across both divisions, we will have generated robust and strong momentum for 2024. In 2024, we will continue to execute on our strategy of growth and diversification along with a key focus on optimization by both UTI and Concord divisions. To drive greater margin expansion, we aim to optimize our workforce and facilities utilization to improve overall operating leverage. Our growth expectations will take full advantage of the platform we strengthened in 2023.

Speaker 2

We will continue ramping our 2 newest UTI division campuses in Austin and Miramar, as well as the start growth for our newly launched and forthcoming programs across the UTI and Conquer divisions. I'd like to conclude by emphasizing that our current position is not the endpoint of our company's growth strategy. As we've demonstrated through acquiring Concord, our entry into the healthcare program and corporate partnership network and our commitment to positive student outcomes gives us the flexibility to deepen our footprint and pursue further diversification pathways for growth. We'd like to thank our team and shareholders for their support And we look forward to executing on the next phases of our growth plans in fiscal 2024 and beyond. I'd now like to turn the call over to the operator for Q and A.

Speaker 2

Operator?

Operator

Our first question comes from Eric Martinuzzi with Lake Street. Please go ahead.

Speaker 4

Hey, congratulations on the terrific finish to a strong year. I wanted to ask about the outlook for 20 24 and just get a better understanding of the growth drivers there. It looks like in the slide deck, you outlined 4 different Drivers, the full year of Concord, kind of the program expansions, UTI organic and then Concord organic. Just is it kind of a parsing that $103,000,000 delta, what are the bigger driver If you could kind of stack rank them for me. Yes, sure, Eric.

Speaker 3

This is Troy. Thanks for the question and for joining the call. We've tried to make those proportional. Obviously, there's not numbers on the page. They're bridging to the midpoint.

Speaker 3

So they're approximate From a contribution perspective, but you nailed the 4 categories on the start side, certainly the full year of Concord, We only had the December month last year, so we get a clinical start, which we didn't get last year in November, plus we get 2 more core starts. So That's a pretty good size contributor there. And then the program expansions, the UTI organic are roughly equivalent And their contribution in the year, Jerome actually commented on that in his prepared remarks. We did approximately 2 30 starts on the UTI program expansions, a much smaller number on the Concord program expansions in 2023. And then we'll get we're expecting maybe around 1,000 or so plus or minus out of the UTI side.

Speaker 3

And again, the CONCORD programs That much more extended start dates between them and their smaller cohorts. So 50 to 100 Probably in those and then the organic is frankly pretty modest lowishlowtomidishsingledigit type growth Out of both UTI and Concord. From the start side and revenue, revenue kind of flows with that fairly consistently. And then EBITDA, you see some differentiation there, mainly because of the operating leverage that both Jerome and I commented As you know, coming out of 2022 into 2023, we had some pressure on our operating leverage given the 2022 start performance and we get a bit of the opposite impact plus We've been driving efficiencies in our operations this year, so we see much more leverage on the upside from the growth profile.

Speaker 4

Got it. Okay. And then on the macro environment, We're still not talking about, I guess, a supportive employment picture. It's still less than 4 On the unemployment numbers here, you guys are kind of not kind of, you are outperforming. So do you consider the macro kind of Returning to supportive or is it still neutral and you guys are kind of powering through despite inflation and interest rates?

Speaker 4

Well,

Speaker 2

the numbers that Troy just outlined for you, organic growth numbers, etcetera, really Point 2, a posture of saying, we're not looking for any big tailwinds yet from a macroeconomic standpoint. It's Too soon to predict anything along those lines. But I think as we've said in some of our last quarterly updates, we're not seeing as Strong headwinds as we've seen in the past, a combination of, I think, people settling into the new normal, as I've said it before, And really starting to think about what's a durable career path that may be In recession or inflation proof as they move forward. And so as we've also said, neither Troy or I are economists, Don't claim to be, but and the numbers that we put out, we think are Rational, but not overly exuberant about any big repair in the economy throughout the year.

Speaker 4

Thanks for taking my questions. Thanks, Eric.

Operator

The next question comes from Raj Sharma with B. Riley. Please go ahead.

Speaker 5

Yes. Thank you for taking the questions. Some of my questions were already answered. If you could give me give us a little bit more color On I know you've broken down the student starts in terms of young adults. Would you expect the same So the performance to continue in fiscal 2024, high schoolers versus young adults?

Speaker 2

Yes, I think, geographic programs. Yes. Troy can give you a little more color on some of the numbers, but I think Sort of thematically, as we came into the second half of twenty twenty three, the tight turn on Growth in the UTI side of the business, we've seen pretty steady growth on the Concord side, the demographic there being a 25 to 30 year old A person who's been out in the world, has made some decisions, is making a rational decision following through on those and also that The healthcare opportunities are extraordinary. So we saw a turn in the second half of twenty twenty three. We're into November on the Q1 and we're feeling very, very good about what we're seeing in the Q1 in terms of Continued steady growth, I think as I said to Eric on the last call, I don't see any Exponential tailwind that's behind us that would give us Something beyond what we put in the numbers right now, but we're very comfortable what we're seeing in the numbers based on what we saw in the Q3, the Q4 and now as we're projecting through the Q1 of 2024.

Speaker 3

Yes, Raj, this is Troy. The mix, I did comment on high school specifically 45% of the total this For UTI, military is always in that 15 ish 13 to 15 ish range And adult makes up the difference in any given year. We might have a plus minus few points of swing, frankly, mainly between School and adult, but we don't expect anything dramatic there. We talked throughout the year and coming out of last year about investments we've made In high school from a field rep resource perspective, we have some new leadership there as well. And so we are expecting Even stronger performance in high school in 'twenty four than we had in 'twenty three and we've been transforming the adult side as well.

Speaker 3

We've talked about Leveraging call center capabilities more, we talked about the local versus relo and the shorter start times. And so again, I We have different things going on in the different channels, net net, not a material change probably in the overall mix, but some good tailwinds From a capability and performance perspective coming out of 'twenty three into 'twenty four.

Speaker 5

Got it. Great. Thank you for that. And then just Moving on, could you comment on the regulatory impact and maybe the ninetyten, what numbers you're exiting with? And also any impact there would be on UTI or Concord of gainful employment update?

Speaker 3

Sure. Yes, this is Troy. The ninety-ten, again, we're in the high 60s on an aggregate basis, And it's measured at the OPEID or the school level, but when you aggregate it all up in the high 60s, we some of the Concord campuses are in the 80s, but they don't have a very high military percentage. So again, it's switching from 2023, The new rule goes into effect for us for fiscal 2024 where the military contribution will now count in the 90. But we don't expect any of our schools to touch the wire on 90 and only 1 or 2 again on Concord side even being in the upper 80s.

Speaker 3

So we're very comfortable in the ninetyten profile. The gainful, we've done Those rules have just been finalized. The first reporting period is will be next summer. We don't See any material risk or frankly really any risk at all. If there is, it's a very small Niche program probably mainly on the Concord side, but we're not concerned about anything we're seeing on the gainful side.

Speaker 3

And again, we continue to focus on graduation rates, employment rates, and we just finished our ACCSC Reporting cycle, which is the primary creditor across both Concord and UTI. And once again, we have consistently strong performance there. Never always 100% perfect, but we're consistently strong and we think that record stands against anybody in the industry.

Speaker 5

Got it. Great. Thank you for answering my questions. I'll take it offline. Thank you.

Speaker 2

Thanks, Raj.

Operator

The next question comes from Alex Paris with Barrington Research. Please go ahead.

Speaker 6

Hi, guys. Congrats on the strong finish to the fiscal year.

Speaker 2

Hey, Jim. Thanks, Alex. Thanks for joining us.

Speaker 6

Oh, yes, for sure. So a lot of my questions have been asked and answered, but I have Follow ups from previous questions. So with regard to starts enrollment revenue, You said that you're not getting much of a tailwind at this point from rising unemployment because that hasn't really risen too significantly yet at this point. But it's less of a headwind, that's good to hear. I'm wondering, to what extent do you attribute your strong growth To prospective students evaluating alternatives to 4 year colleges, this has been a trend It's been noted in the press.

Speaker 6

Are you seeing some lift from that?

Speaker 2

Well, I mean, we're thrilled to see The press engage on the notion that college isn't for everyone. It's something that we try to get the message out as strongly as we can to, In a sense, give people permission to choose something other than a traditional 4 year degree if they're not so inclined to move down that path. Anecdotally, we don't have hard evidence because it's really tough to track when you're talking to a prospect, are you Trying to decide between us and going to a 4 year school, but we are seeing anecdotally more students that From a profile standpoint, traditionally may not have chosen a 2 year school or a tech school, Talking about socioeconomic backgrounds, FASFA qualification backgrounds, etcetera. So there's starting to be a little bit The hint out there that people are seeing these high demand skills areas for what they are, which is really Solid long term career. So it's good to see that the message is starting to flow through.

Speaker 3

The other thing I would add Alex is as we brought in and again Concord has a very broad offering portfolio. And now as we broaden the UTI portfolio that We've always said, we're talking to 100 of 1000 of prospective students lead generation every year, but Historically, UTI only had a handful of programs to offer them. Now as we broaden that portfolio, there's more for us to talk to prospective students about and supports a growth trajectory.

Speaker 6

Thank you for that. Are the Enrollment counselors brought together or are they separate between UTI and Concord? And does an enrollment counselor At one or the other institution have the ability to cross sell the other?

Speaker 2

That's a great question. We have not brought together, I think one of the things you've heard from us over the last few quarters is that, our collaboration or operational integration Strategies that are being explored for Concord and UTI were not something we engaged on last year. Last year, we engaged on Regulatory issues, controls, back end, HR, benefits, things along those lines that would not disrupt the trajectory of the business in 2023. As we've Turn the page into 2024, we're spending significantly more time talking about collaboration ideas. There's a large population of the admissions enrollments that are enrollment counselors That we wouldn't look at that collaboration because you know that many of them are very local on the campus, taking people who are touring specific campuses for specific reasons.

Speaker 2

And of course, that would keep them separate. But as you take a look at how we may want to represent healthcare in the high schools or in the military, That's something we're taking a very serious look at right now, specifically the military, which has got a, I think a great opportunity for us to be significantly more aggressive in the way we represent healthcare professions as people rotate out of the military.

Speaker 3

That makes sense. That's helpful.

Speaker 6

I appreciate that color. And then A question on inflation and its impact on fiscal 2023. Looks like inflation has peaked and it is receding. What's your experience within UTI and Concord with inflationary pressures, salaries, the ability to find instructors, etcetera?

Speaker 2

Well, 2 things. 1, I think one of the things we've commented on and continue to comment on I think the sort of peaking and beginning to subside of the inflationary pressures has created sort of a posture of the new normal out here. I was watching the news this morning and they were talking about how gas had gone down to $3.39 a gallon here in Phoenix and they were high fiving each other about it, where just a few years ago that would have been something you didn't do. So the new normal I think is really out there and we're really That in our prospects where people are like, listen, being an Amazon driver isn't a career and I really want to look at something That's durable, good pay, great demand. And so I understand that I'm paying more for all of these things, but this is something I want to Get on within my life.

Speaker 2

And so what we've really seen is more people who in the past, meaning 2022 and 2023 were saying to us, I'd love to do this, but I just can't afford it. Now saying it's time to get on, Right. And so, have we seen a huge rush? No, no, we haven't. But the conversations certainly have changed with the prospects.

Speaker 3

Yes. And Alex, I don't know, I think maybe you were also asking about our cost structure, but just Quick comment there. I mean, again, we commented on it in prior calls. On the healthcare side, it's more a dynamic of just the Supply and demand of healthcare workers and many of the Concord instructors in particular are active healthcare workers and they're adjuncts From a teaching perspective, so that does put a little bit of extra pressure on the Concorde side that's different than the UTI side. But generally speaking, we are not having trouble staffing.

Speaker 3

We have actually seen a little bit less pressure this past year as well as in some more of the Enterprise type functions, IT, finance, etcetera. Definitely seeing some pullback. In fact, we're seeing a lot of resumes for some of the positions we're posting Here recently, so moving in the right direction there.

Speaker 6

Great to hear. And then the last question is Related to your Series A preferred stock, as I recall, you are able to force conversion if the VWAP equals or exceeds $8.33 a share for 20 consecutive days. It seems like we almost get there Repeatedly and we don't just quite get there. Where do we stand now? When would you expect that that would be?

Speaker 6

This was a great earnings report, so I don't think you're going to backtrack. And then once converted, what's the dilution thought? There'll be 20,000,000 more shares, but of course, you don't have the preferred dividend any longer.

Speaker 3

Sure. And this is Troy. I mean, certainly given the trading we saw exiting the last window throughout In between period and hopefully momentum we're carrying here into out of this earnings release and into the next window, which opens on Monday, We're optimistic that we will achieve the company trigger. It is 20 consecutive trading days within an open window, volume weighted average share price Above, 833 or above. And we're Knock on wood.

Speaker 3

We'll get there in this window. The overall dynamics though on an EPS perspective, we don't Because of the way we calculate our EPS, we're doing it on the 2 class method. The converted shares are already we're basically apportioning net income between Converted shares and unconverted or the common shares and the unconverted shares already. So there's really no meaningful impact on EPS other than the preferred Dividend, it will be a little over 20,000,000 shares that would converse. We go up to 54,000,000 and change In total outstanding shares, but it doesn't really you get to the same number in a different formula from an EPS perspective.

Speaker 6

Great. Thank you both very much. Congratulations on the quarter and I will take the rest of my questions offline.

Speaker 4

Thank you. Thanks, Alex.

Operator

This concludes our question and answer session. I would like to turn the call over to Mr. Grant for any closing remarks.

Speaker 2

Well, thank you very much for joining us everyone. This concludes our call for this quarter. I want to wish everyone a Safe, healthy and happy holiday season and we look forward to following up with many of you over the next couple of days. And if not, we will talk to you again in late February.

Speaker 3

Thank you.

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Earnings Conference Call
Universal Technical Institute Q4 2023
00:00 / 00:00
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