Universal Technical Institute Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2025

There are 9 speakers on the call.

Operator

Good day, and welcome to the Universal Technical Institute's Second Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press then 2.

Operator

Please note this 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.

Speaker 1

Hello, and welcome to Universal Technical Institute's fiscal second quarter twenty twenty five 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 dot 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 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 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 twenty twenty four. 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. 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.

Speaker 1

For more 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?

Speaker 2

Thank you, Matt. Good afternoon, everyone, and thank you for joining us to discuss our results for the second quarter of twenty twenty five. Over the past few months, I've heard from many of you, which is great, as we pride ourselves on keeping the lines of communication open with the investment community. With everything going on in Washington, many of you were interested in how we're responding to the changes already made and potential changes in the regulatory environment. So before I get into our strong Q2 results, I'd like to start today's call by briefly sharing my views on recent regulatory developments, and the broader macro environment we're operating in.

Speaker 2

Despite our initial cautious outlook for both the 2025 top and bottom line heading into the presidential election, and recent developments across the higher education regulatory landscape that may suggest otherwise, I'm pleased to share that we've not experienced any disruptions to our operations or growth trajectory. As a matter of fact, the lines of communication with the new leadership team within the Department of Education have only strengthened since the inauguration. Our expansion plans remain firmly on track, and depending on how circumstances evolve, we may actually be positioned to accelerate the growth of our Concord and UTI divisions. We certainly will share specific news on that front as plans take shape. With respect to tariffs, we expect impacts, if any, to be minimal for us, but we'll keep monitoring for changes.

Speaker 2

From a macro environment perspective, demand for skilled labor, particularly across the trades and healthcare, also continue to strengthen in this environment. The ongoing supply and demand imbalance in these critical sectors, and improving dialogue in favor of trade schools over traditional four year degrees, is generating additional tailwind for our business. Employers continue to voice their urgent need for well trained professionals, and our campus network and program offerings are increasingly aligned with that demand. With that, let's move to the results for the quarter. We maintained strong operational momentum throughout the second fiscal quarter of twenty twenty five, continuing to deliver results that exceeded our expectations.

Speaker 2

We executed with discipline and consistency, staying focused on our growth, diversification, and optimization strategy, while navigating dynamic macro environment and prioritizing outcomes for our students. Given the broader uncertainty in the market, we were conservative with our estimates and deliberate with our spending throughout the quarter. As a result, and in conjunction with the favorable environment for our graduates, both revenue and adjusted EBITDA significantly outperformed forecast. Revenue for the second quarter increased nearly 13% year over year to $207,400,000 Average full time active students grew over 10% year over year to 24,604 students, with the new student starts growing more than 21% year over year. Net income increased 47% to $11,400,000 with diluted earnings per share of $0.21 Adjusted EBITDA grew approximately 28% year over year to $28,900,000 We are pleased with the strong results we are sharing today.

Speaker 2

They serve as a powerful proof point of our business model's strength and resilience, reinforcing our confidence in achieving our long term goals. We remain firmly committed to delivering both year over year top and bottom line growth throughout the second half of twenty twenty five. Now, to our division specific highlights for the quarter. Starting with Concord, the division continued to deliver robust year over year growth, driven by sustained marketing investments, and the effectiveness of our admissions team, as well as strong program demand. Our marketing and admissions investments in Concord continue to generate very strong conversion rates, driving new student starts.

Speaker 2

We're continuing to test the elasticity of the Concord model, and we've yet to find the ceiling on how far we can push ROI. Regarding Concord's program expansion strategies, our previously announced initiatives remain on track, including the launch of a brand new nursing program in Jacksonville, Florida, in mid fiscal twenty twenty five, our Dallas Nursing program capacity expansion, which is set to add 60 additional students later this year, and the 10 non Title IV short course programs rolling out across the Concord campuses in 2025. With optimization in mind, we're relocating our Aurora, Colorado campus to Denver. This is part of our ongoing plan to enhance operations, expand programs, and improve margin. The new campus will occupy 60,000 square feet, and will open in February of twenty twenty six.

Speaker 2

This reimagined space will include new simulation lab for students to gain hands on experience with real life medical scenarios, as well as additional space earmarked for other high demand programs, as well as a larger dental hygiene clinic. Shifting to our partnerships, I'm pleased to announce that we broke ground on our new co branded Heartland Dental Campus in Fort Myers, Florida last month. This first of its kind campus, set to open in early fiscal twenty twenty six, will train up to 190 dental hygienists and assistants annually. As previously mentioned, this campus will begin as a non Title IV campus, with plans to apply for Title IV funding once conference growth restrictions are lifted. We expect this location to contribute more than $4,000,000 in annual revenue, as the campus scales.

Speaker 2

Turning to our UTI division, the UTI division maintained strong year over year improvements, largely as a result of program expansions, the immense market demand for skilled college workers, and our strong lead conversions. Building the foundation for UTI's continued success are our ongoing expansion efforts. This quarter, we made exciting progress on our program expansion initiatives. As we previously announced, we have eight full length programs launching across UTI campuses this year. In March, we added our HVACR program to our UTI Orlando campus, and most recently launched our Electrical, Electronics, and Industrial Technology, or EEIT program, at UTI's Exton and Mooresville campuses.

Speaker 2

This new twelve month EEIT program will train students for entry level careers in low voltage electronics and high voltage electrical systems, for certain residential and commercial construction applications. This program also includes the maintenance of industrial technology, including industrial robotics, hydraulics, and mechanical systems. By expanding our portfolio with in demand programs, we're continuing to reach even more students in high demand employment areas. Additionally, as part of our North Star Strategies Phase II, we plan to open three campuses in 2026, subject to regulatory approval. These are the Heartland Concord co branded campus, a fully optimized UTI campus with a comprehensive set of program offerings in Atlanta, and most recently, we announced the last of the three campuses in 2026, our inaugural skilled trades focused UTI campus in San Antonio, Texas.

Speaker 2

The San Antonio campus will offer programs in high demand skilled trades, including HVACR, welding, and electrical technologies, aligning with our strategy to diversify our educational offerings and meet the evolving needs of the work workforce. This expansion marks a significant step in broadening our program offerings beyond our traditional transportation focused training. We anticipate that this campus will open in the first half of fiscal twenty twenty six. When fully ramped, this campus should contribute upwards of $23,000,000 in revenue, with significant margin contribution. Our optimization efforts are also progressing well.

Speaker 2

We expect our MIT Canton campus, along with Institute, Marine Mechanics Institute, and NASCAR Technical Institute campuses, to officially operate under the Universal Technical Institute brand in the coming months. With the sustained, robust performance across both divisions, our conservative spending, and a favorable macro environment, I'm pleased to announce that we are raising our fiscal twenty twenty five guidance ranges once again. We now anticipate generating consolidated revenue between $825,000,000 and $835,000,000 reflecting approximately 13% year over year growth. We now expect adjusted EBITDA between 124,000,000 and $128,000,000 and we now expect new student starts to be between 29,000 and 30,000. Bruce Schuman, our new Chief Financial Officer, will walk through our updated fiscal twenty twenty five guidance in-depth in just a moment.

Speaker 2

Bruce recently joined as CFO, bringing deep experience from high growth, multisite organizations, and a proven track record for leading financial operations through transformative periods. His leadership will be critical as we pursue significant growth and profitable opportunities, driven by rising demand for skilled trades and healthcare professionals across The US. We're excited to have Bruce on board and on the call with me today, and look forward to his partnership in advancing our strategy. We also promoted Todd Hitchcock to Chief Operating Officer. Todd has been instrumental in every phase of transformation, including developing and driving the North Star Strategy focused on growth, diversification, and optimization.

Speaker 2

His leadership in operational alignment, shared services, and campus performance has been key to our success. In his expanded role, Todd will strengthen our market position, as we scale to meet the growing workforce demands. Supporting these efforts, Adrian Ditre recently joined as Chief Information Officer to lead the build out of a modern technology and data platform, further enhancing our operational visibility and the student experience. I'm thrilled that our team's now fully in place execute on phase two of our North Star strategy, with great focus and precision. With that in mind, I'd like to take a few moments to reiterate what phase two of our North Star strategy entails, both operationally and financially.

Speaker 2

Operationally, we remain committed to launching at least six new programs each year across Concord and or UTI campuses, pending regulatory approval. In addition, we plan to open at least two new campuses annually, beginning in fiscal twenty twenty six. We've already announced nine new programs for fiscal twenty twenty five, and three campuses for fiscal twenty twenty six, demonstrating that we're not only on track to meet our objectives, but positioned to exceed them. Financially, this organic strategy should result in revenue exceeding $1,000,000,000 by the end of twenty twenty nine, and adjusted EBITDA margins approaching 20%. As we mentioned on our last call, it's important to note that our EBITDA margins will reflect increased investment in fiscal years twenty twenty six and 2027.

Speaker 2

These strategic investments are expected to temporarily moderate margin growth before new campuses and programs begin to scale, ramping margin expansion significantly in fiscal twenty twenty eight and 2029. With that, I'll turn the call over to Bruce, our CFO, to review our second quarter financial results. Bruce?

Speaker 3

Thank you, Jerome. It's a pleasure to be here with you all on my inaugural earnings call with UTI. I am thrilled to be part of a company that plays such an important role in providing The US economy with the skilled workforce solutions that are critical for growth. I look forward to partnering with Jerome and the leadership team to help drive the next phase of our North Star strategy. With that, let's dive into our second quarter results.

Speaker 3

Q2 marks another quarter of consistent execution as we outperformed our expectations and delivered strong growth. For the second quarter, average full time active students increased 10.3% year over year to 24,604 students. New student starts increased 21.4% year over year to 6,650 starts, exceeding our expectations. The Concord division drove a 15.5% increase in average full time active students compared to Q two twenty four, while new student starts rose 15.9% year over year in the second quarter. These increases were driven by further investments in Concord's marketing and admissions and the effectiveness of those teams.

Speaker 3

The UTI division generated a 7% increase year over year in average full time active students for the quarter. New student starts grew 26.4% year over year in the second quarter. The year over year increase is largely due to robust demand for skilled collar workers and strong lead conversion rates. Turning to our financial performance, second quarter revenue on a consolidated basis increased 12.6% year over year to $207,400,000. Concord contributed 73,200,000.0, an increase of 20.3 over the prior year quarter, while the UTI division contributed 134,200,000.0, an increase of 8.8% over the prior year quarter.

Speaker 3

From a profitability standpoint, consolidated net income for the second quarter was $11,400,000 or $0.21 per diluted share. Adjusted EBITDA for the second quarter was $28,900,000 a year over year increase of 27.8%. As Jerome mentioned earlier, we were deliberate in our spending throughout the quarter, which helped drive out performances in all key financial metrics. Included in these results is $400,000 of growth investment spend primarily on our program expansions. At the end of the quarter, we had 54,400,000.0 shares outstanding and total available liquidity at the end of the quarter was $235,000,000 including 40,000,000 of short term investments and $99,000,000 of remaining capacity on our revolving credit facility.

Speaker 3

During the second quarter, we paid down an additional $25,000,000 on our revolver ending with positive net working capital of $13,400,000 Year to date operating cash flow was $22,200,000 and adjusted free cash flow was $8,000,000. Year to date capital expenditures were $14,300,000 as we continue to progress our program expansion and new campus initiatives across both divisions. Fueled by our strong second quarter performance and ongoing execution on our strategic priorities, we are raising our fiscal twenty twenty five guidance ranges across all key metrics. Starting with revenue, we now expect to generate between $825,000,000 and $835,000,000 of revenue for fiscal twenty twenty five or approximately 13% year over year growth at the midpoint. This reflects the strong growth in average full time active students from program expansions and deliberate investments we've made this year.

Speaker 3

Total new student starts in fiscal twenty twenty five are expected to range between 59,000. Regarding the balance of the year, we anticipate both q three and q four revenue growth rates to be in line with our full year guidance of about 13%. For starts, due to increasingly tougher comparable periods, we expect Q3 growth in the mid to upper single digits and Q4 likely closer to low single digit growth. Adjusted EBITDA margins by quarter should follow a similar pattern as last year due to the seasonality in our business. For fiscal twenty twenty five, we are raising our net income expectations to a range of $5,660,000,000 dollars with diluted earnings per share projected between $1 and a $1.08 We anticipate full year adjusted EBITDA to now range between $124,000,000 and $128,000,000 or around a 23 year over year increase at the midpoint.

Speaker 3

We now expect twenty twenty five full year adjusted free cash flow to range between 62 and $68,000,000, which continues to assume approximately $55,000,000 in CapEx spend. Consistent with our historical cadence, we still anticipate the bulk of our cash generation and year over year growth to occur in the fourth quarter. Looking ahead, we are entering an exciting phase of investment to fuel our next chapter of growth. As Jerome mentioned, I want to reiterate that while our investments for phase two of the North Star strategy are expected to generate significant returns over the next five years. Our margin expansion over that time frame will not be linear.

Speaker 3

As new campuses ramp and program expansions are built out, we anticipate EBITDA growth in fiscal twenty twenty six and into 2027 will slow as a result of the associated growth investments. As these initiatives scale, we expect to build meaningful momentum, setting the stage for significant EBITDA growth acceleration into fiscal twenty twenty eight and 2029. We are confident these strategic investments will unlock even greater growth opportunities and further strengthen the scalability of the broader UTI model. In addition to today's earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation, and the upcoming 10 Q filing. These materials provide the latest updates on our consolidated and segment results, strategic initiatives, and guidance.

Speaker 3

Thank you to our team members, partners, students, and investors for your continued support. I'll now turn the call back over to Jerome for closing remarks. Jerome?

Speaker 2

Thank you, Bruce. Our team continues to execute on growth, diversification, and optimization as part of our North Star strategy. While favorable macro trends, particularly the ever rising demand for skilled trades and health care professionals, provide a solid foundation to build upon, it's our execution, operational rigor, and commitment to student outcomes that are driving our success. Looking ahead, our growth initiatives remain sharply focused. Organically, we're one, growing our campus footprint into greenfield locations.

Speaker 2

Two, expanding the reach of our existing programs and adding new in demand offerings. And three, deepening industry relationships and broadening our partner network. Inorganically, we continue to pursue strategic acquisitions that will enhance our educational reach geographically, and complement our portfolio, with a particular focus on healthcare. With strong momentum, a fully aligned leadership team, and a clear, proven strategy, UTI is exceptionally well positioned to continue to drive sustainable growth and long term value creation. Our healthy financial profile, extraordinary outcomes, and consistent execution give us confidence in our ability to continue delivering meaningful stakeholder returns into the years ahead.

Speaker 2

We appreciate your continued support, and look forward to keeping you updated on our progress. As always, we encourage you to visit our campuses to see firsthand the impactful initiatives we're driving. Please don't hesitate to reach out if you'd like to schedule a tour. And now I'd like to turn the call over to the operator for Q and A. Operator?

Operator

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press then 2. At this time, we will pause momentarily to assemble our roster.

Operator

Our first question comes from Mike Grondahl with Northland Securities. Please go ahead.

Speaker 4

Hey, guys. Thanks and congrats on a really nice quarter. Two kind of quick questions. One, very strong new starts. Any campuses or programs to really call out in there because of that performance?

Speaker 4

Then secondly, you mentioned in the press release taking advantage of favorable tailwinds. I can think of trades over four year colleges, job demand, the administration. Maybe just highlighting what you see as those tailwinds, just to make sure I understand them. Thank you.

Speaker 2

Well, thanks Mike. Jerome here. Thanks for joining. Why don't we take those questions in reverse? First of all, the things that are fueling what we're seeing, some pretty impressive lead generation.

Speaker 2

You actually pretty much answered the question with the points you made for what's driving it, is that there's significantly more energy being focused right now the notion that four year colleges aren't necessarily for everyone. And that message is resonating with parents, and we're hearing it when we're talking to parents. You understand that for just about everything we do in both divisions, the parents are involved in this decision because most of our students are still at dependent status, therefore parents are part of the decision. So, that message is beginning to get through quite strong. I think some of the messages around the political environment of onshoring and we want to build more here, we want to be a stronger infrastructure here, is actually making people say, okay, what kind of jobs are those?

Speaker 2

Those are jobs where you're a welder or you're an electrician or the American auto industry and things along those lines. And so that's again what we believe and what we're hearing is fueling heightened interest in the skilled collared areas. And then, finally, your first question, which was, are there any particular areas? Well, we've continued to put increased marketing investment in the healthcare side pretty much across the board. There's particular strength in our clinical courses.

Speaker 2

That tends to be the front door where people come in and say, I want to be a nurse or a physical therapist or something along those lines. And so, as we continue to work on the project we talked about and put in place to really get the biggest potential out of our clinical courses. We're seeing a lot of strength in our clinical courses, that's one thing to highlight. And then on the UTI side, I think, highlighting the skill traits. You know, the cornerstone of UTI has always been the auto diesel curriculum, curriculum, and it's still holding strong and moving along nicely.

Speaker 2

But our program expansions tend to specifically be around proliferating much more in the way of skilled trades on the legacy UTI campuses. And what we're seeing is those are filling faster than our models. We are seeing that the interest is higher. More local and more adult, which is actually good for mature decision making and the ability to start faster. And those would be the things I'd highlight for what we're seeing.

Speaker 4

Thanks for that. Congratulations again.

Speaker 2

Thanks, Mike.

Operator

Our next question comes from Jasper Bibb with Truist. Please go ahead.

Speaker 5

Hey, good afternoon, guys. I heard the enrollment and revenue comments Just curious how that enrollment growth breaks out for UTI and Concord at the segment level in the third and fourth quarter. And guess with the increase in new start guidance driven by one segment or you ended up outperforming plan at both schools?

Speaker 2

Well, mean, nature of looking at the third and fourth quarter has something to do with the mix, and then also something to do with what we've been saying quarter by quarter with Concord, which is we'll continue to on the Concord side, we'll continue to invest in looking for the upside. But we can see as we're approaching our capacities on the clinical courses that continuing to be able to generate that higher double digit growth, as you saw in this, is something that will likely become challenging. It's also because we started this project in the second half of last year, and therefore, we're kind of lapping ourselves on some of those investments. And not that we wouldn't be thrilled to be able to take advantage of that, and that we're not ready to take advantage of it, but it's just not something that it's probably prudent for us to project. And then on the UTI side, in terms of the cadence of the rest of the year, a lot of the rest of the year has to do with high school.

Speaker 2

And high school is by and large pretty much over now, and therefore, right now what we're working on is, in a sense, shepherding the high school population that have always already committed into their seats in June, July, August, and September. And the last question I had was about where are we seeing the biggest bright spots, and maybe the upside surprises that we're seeing on the UTI side, and it tends to be around the skilled trades. Welding, etcetera, HVAC. And the skilled trades tend to lend themselves to more of our adult population, or those that have already left high school a year or two, three years ago, usually engage in the skilled trades area, whereas a lot of kids coming out of high school are very much, I'm a car person, I wanna fix cars. And that's not to say that auto diesel isn't doing well, it's just you know, not seeing as big of those increases as we see in the skilled trades.

Speaker 2

And so, the combination of it being very much about high school, and the work we've done over the last now year, and we're lapping ourselves in high school, is why we believe that the trajectory is as we outlined, high single digits and mid single digits in the fourth quarter. Does that get to your question?

Speaker 5

Yes. No, that's helpful. Then on the comments around hiring growth investments in '26 and '27, maybe driving slower EBITDA growth versus '28, '20 '9. I think the EBITDA CAGR in your five year plan is about 15%. So I imagine you're saying '26 is much slower than that.

Speaker 5

But is there any way to kind of, I guess more specifically frame a for what EBITDA

Speaker 2

actually introduced that concept last quarter, which was that we took two years off from building campuses while we were in a sense digesting the two acquisitions that we had, with only launching two years ago, almost now launching Austin and Miramar. And so, that sort of creates a gulf of strategic investment in 'twenty four and 'twenty five. But with opening three new campuses in 'twenty six, we haven't even announced the program expansions in 'twenty six, and then beginning the investment in the campuses that we will be announcing for 'twenty seven, you see a significantly more strategic investment than you saw in 'twenty four and 'twenty five. And we want to make sure people are and the other point on that is we're no longer adjusting that strategic investment out of our non GAAP measures because of so how we're working with the SEC and rule making, etcetera, that we will note in our messages what the strategic investment won't, but it won't be piled into our adjusted EBITDA as it was in the past. And so, we still are confident that over that the period of 2025 through 2029, you'll see an average growth rate in double digits, as we've said before, and that we believe we still will be approaching a 20% margin at the end of that period of time.

Speaker 2

But as we did in the last quarter, what we're signaling is, you'll see higher strategic investment in 'twenty six and 'twenty seven, which will limit the percentage growth rates of our adjusted EBITDA number, until those campuses built in '26 and '27 come to scale in '28 and '29, and then the trajectory moves forward.

Speaker 3

And Jasper, this is Bruce. The other quick thing I would add to that is if you look at the revenue component of kind of that five year CAGR, we do expect the revenue piece to be roughly linear. It's really the the EBITDA side, excuse me, where you're gonna kinda see that bend in the curve, if you will, kind of slower growth rate 2627, you'll see kind of accelerated EBITDA growth 2829. We still feel confident in that ultimate kinda 20% marker by '29.

Speaker 5

Appreciate the detail there. Thanks for taking the questions guys.

Operator

Our next question comes from Bruce Goldfarb with Lake Street Capital Markets. Please go ahead.

Speaker 6

Jerome and Bruce, congratulations on the great results and thanks for taking my questions.

Speaker 3

Sure.

Speaker 6

Could you comment on trends in employer demand both transportation and skilled trades graduates and health care graduates?

Speaker 2

Sure. First of all, transportation is something that's been a known quantity to UTI for sixty years. And so, generally speaking, if you think about sort of the accuracy of reading trends moving forward, that would be the place where we probably have the most dependability over the years because of our ingrained position in the transportation trades area. And therefore, what we're seeing is steady, consistent, and growing, but not explosive, lately growing demand in the transportation area. As we've said before, there still are three or four jobs for every UTI transportation graduate on the job board.

Speaker 2

And we project that will continue to be so, if not grow because of the graying population of the workforce over the next ten years. Skilled trades is actually something that's somewhat new to UTI. Remember, we bought MIT, which got us into HVAC, and the electrical areas, and wind energy, and aviation, and some of the other areas that we hadn't been before. And we're just now proliferating them into the 14 legacy UTI campuses, along with the two MIT campuses where we have already merged Houston and we plan on bringing auto diesel into the Canton campus. Anyway, so our projections and estimates as we're moving in, are always what we believe to be rational, What we can see in the data that we're putting out over it, and what I'm signaling here is that they're every bit of what we saw, if not better.

Speaker 2

And what we're hearing people say is, we're getting a lot more demand for welders, if we're going to be building ships and planes, etcetera, in The US. We can't get enough electrical workers to keep up with data centers that are being built, and things along those lines, and that HVAC techs are in very, very high demand. So we're happy with what we're seeing, the trajectory of the demand in skilled trades. It's somewhat outpacing our initial estimates of what we expected to see. And we've got room for them, and we're building our facilities to have room for them as we move forward, and we're happy to see that demand is robust.

Speaker 2

On the healthcare side, it isn't so much our getting to know what the demand side of healthcare is, is actually getting to know what this great engine that we bought in Concord can do to meet that demand. We've always known that the supply and demand curve in healthcare is significantly out of whack, and that it's even stronger than it is in the Transportation Skilled Trades and Energy Division. Our upside has been our ability to continue to work closely with the marketing and admissions organizations on the Concord campuses to find more people to help fill some of that demand. And so, no surprises in terms of healthcare of how big the demand is. But we're thrilled with what we're seeing in our ability to go out and capture more of it with bringing more people into our campuses.

Speaker 2

Did that get your question? Okay.

Speaker 6

Yes, thank Awesome.

Speaker 2

Hey, thanks for joining.

Speaker 6

Thank you. Wait, I have a couple more quick.

Speaker 2

Oh, a couple more. Okay.

Speaker 6

Sure. That's okay. Could you comment on the level of activity in your corporate development efforts and also seller attitudes versus six months ago?

Speaker 2

Probably comparable to maybe a little less activity out there. If you think about it, people are seeing what we're seeing, which is demand becoming robust, more focus on the skilled trades, more focus on health care, more focus on four year colleges aren't necessarily what you'd want. Doesn't mean that there aren't opportunities that are out there, but the number of for sale signs probably is a little smaller than what we would have expected.

Speaker 6

That would make sense. And then in terms of marketing spend, what is the plan for marketing spend? Is it going to be more level or targeted for certain quarters? The next

Speaker 3

several We're going to continue to invest. We've seen some really nice kind of ROI, especially in our Concord marketing spend, very good return, very good lead conversion. You know, we'll continue that. It's a little the program dependent, but you will see us ramp marketing as we feel like there's a good ROI to do so.

Speaker 6

Great. Thank you. And congrats again. Hey,

Speaker 2

thanks. Appreciate it.

Operator

Our next question comes from Griffin Boss with B. Riley. Please go ahead.

Speaker 7

Hi, good evening. Thanks for taking my questions. I appreciate the level of detail you provided in the prepared remarks and the Q and just one from me, if I could just drill down into this EBITDA trajectory. I guess what I'm hearing with regard to that in the next couple of years, it comes down to the magnitude between OpEx investment and CapEx investment. So guess what I'm hearing is there's going to be significantly higher OpEx investment in 2026 and 2027, I guess on that education services expense line.

Speaker 7

Is there any way you can handicap that for us? Like what that OpEx investment is looking like And then, you know, what it would look like going forward in, you know, more of a investment heavy year like '26 to '27?

Speaker 3

Yeah. Thanks, Griffin. This is Bruce. I don't really have a guide for you on We're still working on that.

Speaker 3

I'll put it maybe in perspective for you. Second half of this year, we put this in our supplement too. We have about $6,000,000 of growth OpEx, very focused on campus build out, some early hiring we have to do, very focused on that kind of North Star phase two strategy. We do have some pretty significant CapEx as well. We were public about we have a 55,000,000 CapEx spend for this year.

Speaker 3

We still have about 40 of that to spend And, you know, 70% of that is fully focused on growth investments, new campus build outs, program expansions that are mission critical to make sure our 26 growth stays on track. And we look forward to sharing that with you as soon as we can. So hopefully that puts it in perspective for you.

Speaker 7

Yeah. Yeah. That's great. Thanks a lot for the detail. Appreciate it, and, congrats on a great quarter.

Speaker 5

Thanks. Thank you.

Operator

Our next question comes from Raj Sharma with Texas Capital Bank. Please go ahead.

Speaker 8

Hi. Thank you for taking my questions. Great quarter, great continued results. Question Thanks, Raj. My first question is on starts.

Speaker 8

Are the gains and starts purely from better marketing, great lead gens like commented? Or would you attribute any to higher uncertainty or beginning to see any increased uncertainty in an impacted economy?

Speaker 2

I can't put my button on an impacted economy right now. I think we've called recession how many times over the last number of years without any employment shifts to it whatsoever. And so I don't believe that what we've seen is any negative or positive economic And I think that the lion's share of what you're seeing in the upside of the starts, which we're thrilled to see and we've got room for more, is the increased investment that we're making in Concord to help them reach their fullest potential and get up to those full caps in terms of their clinical courses. And then as that sort of migrates its way down to their core courses like medical assisting, etcetera, that's one place where you're really seeing it.

Speaker 2

And then on the UTI side, really around the skilled trades, right? Is that you go into the skilled trades market, you put all these programs onto the UTI campuses, you project your trajectory in the markets based on the best information and intelligence that you have. And the outperformance on those is really what's driving the upside that we're seeing in the earlier part of the year here for UTI in terms of more HVAC, filling welding, all the welding parts. You notice that one of our new tenants to expansions is capacity expansions. We're increasing the capacity in several of our campuses right now by adding more welding booths, etcetera, because we're seeing more drive and demand in the trades.

Speaker 8

So largely from the demand supply, the gap and your great execution on the marketing side, you still haven't seen any from sort of the potential rise in unemployment or a weakening economy. That's fantastic. The young adult starts were really high, military up a lot, anything in particular going on there on the military side?

Speaker 2

Well, I mean, we've ramped our presence on the military from 16 to I think 26 recruiters. And we're in the second full year of that ramping. And that's, as we said before, when that really takes shape, right, you have the ability to really ramp that. We've had an increased effort on the veteran population, meaning people who have been out of the military for more than a year, but are accessing their GI bill. I would tell you that it's somewhat shocking and extraordinary how many of our veterans don't know that they have the GI bill.

Speaker 2

And so we've had some concerted effort of getting more information about what those benefits really are, and how they and their families can take advantage of it. We're seeing the upside along that. Our group's doing a great job on that front. And we're continuing to add adult reps on the Concord side, as the lead flow continues to outstrip our expectations through the investment that we're putting in there.

Speaker 8

Great. And then just on the Concorde restrictions, end in 2026. Any plans there, what you are teeing up to? And you also commented that you could possibly be speeding those growth plans of bringing them forward a little bit more. Could you comment on that?

Speaker 8

What could

Speaker 2

those We're ready to go. Our real estate team and our program and campus launch teams have been formed and are on the starting line ready to go. And so one thing we want to do is we want to leverage the stronger relationships we have with the Department of Education to get those conversations going so that we're ready when the growth restrictions are lifted. And if it's possible for them to be earlier, we'll continue to press on that. As I said in the call, we think that the new Department of Education, although smaller, is working in a significantly more efficient and communicative fashion, and that we're generally happy what we're seeing and the communication we're having with them.

Speaker 8

Great. And just one last question, promise. The rate the raise in guidance appears conservative in the results, given that you have a full time active students across all programs, they're already in their seats. The second half starts won't affect the fiscal twenty five year results much. And my sense is that the greater, any greater costs in new programs campuses won't either.

Speaker 8

I guess my question is what could go wrong here or keep you from achieving the low end of your guidance here, given that you have the business model that you know what all the seats are in place and given your

Speaker 2

very comfortable and confident in our new guidance ranges that we put out You've hit a lot of the points yourself there, meaning you've kind of answered some of your own questions as you laid that Again, I think what we tried to explain was that you know, we've also been working very, very hard to get more of our high school population into the third quarter from the fourth quarter, which slants them towards auto diesel. It also monetizes them more throughout the year, which is good to see. But we're just signaling that we likely won't see those same robust double digit growth rates in that period, because it does slant significantly to the high school population.

Speaker 8

Right. Thank you. Thank you so much for your color. I'll take it offline. Again, great results.

Speaker 8

Congratulations.

Speaker 2

Great. Thanks, Raj. Good to hear from you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Jerome Grant, CEO, for any closing remarks.

Speaker 2

Thank you very much, operator, and I'd like to thank everyone for attending today. As always, Bruce, Matt, and I are available for follow-up questions over the next few days, and we look forward to speaking with our investors and analysts as we report our third quarter twenty twenty five results in August. Have a great evening and thank you for your time in joining us. Bye bye.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Strong Q2 results: Revenue rose 12.6% year-over-year to $207.4 million, net income climbed 47% to $11.4 million, and adjusted EBITDA grew 27.8% to $28.9 million, driven by a 10.3% increase in average full-time students and a 21.4% jump in new starts.
  • Regulatory and macro tailwinds: Despite higher-education policy uncertainty, operations remain uninterrupted with improved Department of Education dialogue, while surging demand for skilled trades and healthcare professionals and a shift toward trade schools bolster enrollment.
  • North Star Phase II execution: UTI launched eight new full-length programs this year (including HVACR and EEIT), broke ground on a co-branded Heartland Dental campus, and plans three new campuses in fiscal 2026, notably a skilled-trades site in San Antonio projecting $23 million in eventual annual revenue.
  • Campus optimizations: Concord is relocating its Aurora, Colorado campus to a larger Denver facility with expanded simulation labs and dental clinics, and UTI is consolidating MIT Canton and other acquired brands under the UTI banner to improve margins and streamline operations.
  • Raised FY 2025 guidance and long-term targets: Full-year revenue is now forecast at $825 million–$835 million (+13%), adjusted EBITDA at $124 million–$128 million, and new starts at 29,000–30,000, while investments in 2026–2027 will support a path to $1 billion revenue and ~20% EBITDA margin by 2029.
A.I. generated. May contain errors.
Earnings Conference Call
Universal Technical Institute Q2 2025
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