Universal Technical Institute, Inc. 2026 Q3 Earnings Call

Please go ahead. Hello. Welcome to Universal Technical Institute's fiscal third quarter 2026 earnings call.

Joining me today are our 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 continued enrollment growth across both UTI and Concorde 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 due to $9 million in strategic growth investments. 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, The 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.

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 North Star. 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. 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 summer, we are increasing our admission 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, as we communicated with you throughout the year, we expected a strong fourth-quarter contribution from the UTI high school channel. 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. 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 million 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 approach $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.