Good day, and welcome to the Universal Technical Institute's Fourth Quarter Fiscal 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President, Corporate Finance. Please go ahead.

Hello, and thank you for joining us. With me today are our CEO, Jerome Grant; and CFO, Troy Anderson. During the call today, we'll update you on our fourth quarter and fiscal year 2022 business highlights, financial results, and vision for the future. Then we will open the call for your questions. Before we begin, we want to remind everyone that today's call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Please carefully review today's press release for additional information and important disclosures about forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. As a reminder, relevant factors that could cause actual results to differ materially from the forward-looking statements are listed in the press release and our SEC filings, and the section entitled Forward-Looking Statements in today's press release also applies to everything discussed during this conference call. During today's call, we will refer to adjusted net income or loss, adjusted EBITDA and adjusted free cash flow, which are non-GAAP financial measures. Adjusted net income or loss is net income or loss adjusted for items that affect trends and underlying performance from year-to-year and are not considered normal recurring operations, including the income tax effect of the adjustments utilizing the effective tax rate. Adjusted EBITDA is net income or loss before interest expense, interest income, income taxes, depreciation, amortization, adjusted for items not considered as part of the company's normal recurring operations. Adjusted free cash flow is net cash provided by or used in operating activities, less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations. Management internally uses adjusted net income or loss, adjusted EBITDA and adjusted free cash flow as performance measures and those figures will be discussed on today's call. As a reminder, we have provided reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements in today's press release. We encourage you to carefully review those reconciliations. It is now my pleasure to turn the call to our CEO, Jerome Grant.

Thank you, Matt. Good morning, everyone, and thank you for joining us today. And thank you to our faculty and students for enabling us to continue to operate seamlessly for another quarter and in fiscal 2022 as a whole. This past year was a pivotal year for UTI as we significantly expanded the reach and breadth of our program offering, positioning the company as a workforce solutions provider for a wide range of skills, careers and fields going forward. We made significant progress on executing on our long term strategy and entered 2023 with strong momentum, despite enduring the less than favorable macroeconomic backdrop, which has provided no shortage of uncertainties and challenges for us to manage through. Some highlights for the year include the addition of two MIAT campuses and their eight new programs early in '22, while making significant progress on the planning and rollout activities for the initial MIAT program expansions in 2023. Opening two new UTI campuses in the second half of the year in Miramar, Florida and Austin, Texas, both initially launching with our automotive, diesel and welding programs and with additional space available for MIAT expansions. Launching two new welding programs in Mooresville, North Carolina and Exton Pennsylvania, expanding our industry aligned training relationships with key manufacturer partners including Volvo and BMW and continuing to execute on our electric vehicle strategy, both in our core curriculum and with several of our industry partners. Revenue for the year was up 25% to approximately $419 million while adjusted EBITDA was up 72% to approximately $56 million, while new student starts grew 2.7% for the year. All of these major metrics are either in line or at the high end of our most recent guidance. Troy will provide more color on both the year and the quarter…

Thank you, Jerome. I want to echo Jerome's comments and welcome the Concorde team to the company. We have great respect for their business and are extremely excited about being in the healthcare education space and the many opportunities that now affords us. We finished fiscal 2022 in line or above our most recent expectations and overall delivered strong financial and operational performance during the fourth quarter and fiscal year. Full year revenue increased 25% to $418.8 million, which was at the higher end of our guidance range. The increase was primarily due to higher average undergraduate full time active students, including the addition of MIAT, and higher revenue earned per student. Total revenue for the quarter increased 13.5% compared to the prior year to $110.6 million. Revenue per student for the quarter was approximately 8,700 and for the year 32,600 and is now essentially fully normalized to pre-COVID levels adjusting for annual price increases. We saw meaningful growth on the bottom line for the full year with $25.8 million in net income, representing a 77% increase from 2021 and includes the impact from the valuation allowance reversal. Net income in the fourth quarter was $2.8 million compared to $12 million. Fully diluted earnings per share for the full year was $0.38 versus $0.17 in the prior year. Shares outstanding at the end of the quarter were $33.8 million. Adjusted net income for the full year came in at $35.5 million above the high end of our guidance range. Adjusted net income in the fourth quarter was $8 million compared to $13.9 million. For the full year, adjusted EBITDA was $55.9 million versus $32.5 million in 2021, representing 72% year-over-year growth and above the high end of our guidance range. The growth in full year adjusted EBITDA was driven primarily…

Thank you, Troy. To summarize, we're pleased with our performance this past year. Not only did we deliver against our stated financial goals for the year, in an environment that became increasingly more challenging as the year progressed. But importantly, we demonstrated the flexibility we built into our business as we proactively responded to shifting landscapes across the specific student channels, addressing the needs of our constituents (ph) as they look to further their career goals through our programs. As we enter our 2023 fiscal year and expand our set of work force solutions offerings to the healthcare field with the addition of Concorde, it's worth noting how far we've come in just a few short years. Comparing our fiscal 2023 guidance to 2020, we will have more than doubled revenue and more than tripled adjusted EBITDA while also strengthening our balance sheet. We are a significantly stronger and healthier company financially and have dramatically expanded the breadth of our program set and our geographic footprint, and as a result the growth pathways in front of us. Our business strategy is long term focus as we don't manage to a specific economic forecast or outlook nor which political party is in favor or power. With that said, it certainly has been the case in prior periods of economic uncertainty and rising unemployment that our business has benefited as workers look to our offerings as an opportunity to upgrade their skills and position themselves for long term stable careers and we're well positioned to support them. I would now like to turn the call over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Eric Martinuzzi with Lake Street. Please go ahead.

Yes. First to comment and then we'll get into questions, really, you guys have had a terrific fiscal year just getting the new campuses up and running, but also wanted to congratulate you on the completion of the Concorde acquisition. So getting into the questions, I wanted to just get your take on the macro demand versus kind of 90 days ago or less when you report Q3, the unemployment figures don't seem to have changed too much, but just wanted to know what's it like from the ground level view?

Sure. Hey, Eric. How's it going? It's Jerome here. So as we said in our comments, we've started to see improvement in the adult channel. What I mean by starting to see improvement is that we watch as we've mentioned in our previously quarter results, both conversion rates of leads, which again are still operating at a very high level. Our lead flow is very, very strong, conversion of those leads into enrollments and then show rates of students. The number of students who go through the process of financial aid and housing and, excuse me, thinking about their jobs while they're in school, et cetera. And in October and November, we've seen improvement over last year's third and fourth quarter. Is it back to normal? No. But the gap is beginning to close and that's a great sign that we're seeing. We're starting to see some -- a little more unemployment in the 18 to 24 year old range in unskilled labor jobs, the construction markets and things along those lines and we're getting just a little bit more engagement than we saw last year, but I want to make sure I outlined, we're not saying it's back to normal. What we're saying is that compared to the third quarter and fourth quarter of last year, we've seen improvement.

Okay. All right. And then if I could just go layer deeper on your outlook for new student starts. The -- I understand we've got the -- there's a legacy business and then there's the incremental students from Concorde, but we've also got kind of new students from the new campuses. What is it? If we just kind of go back to a same-store sales, if I strip out Concorde and if I strip out Austin and Miramar, what is the kind of the new student start implied in those campuses?

Yeah. Hi, Eric. It's Troy. Our base assumption as we've talked about in prior quarters is low to mid-single digit growth out of the base. And then growth initiatives, additives to that, so that's our starting point for our fiscal ’23 view for the same-store, if you will. And of course, a little bit of a shift as Jerome was just talking about with adult, we're not counting on growth from adult in ’23 [Technical Difficulty] last year in '22, really that growth coming primarily out of high school and military and with that then a skew toward later in the year given the timing of ramping those admissions resources as well as just when those students would start their programs.

Got you. And then what's the -- last question for me, the current thinking on tuition, you're obviously facing greater inflationary pressures on your cost side? What's the thinking on tuition increase?

Well, build our model around a fairly consistent low-single digit annual increase. We did shift our timing a little bit this year. Historically, it would be in February or March. We did pull it forward to January 1 and we're contemplating some further timing shift as we get into fiscal ‘24 to do a little bit of catch up, if you will, given the cost escalations we've seen in various areas.

Got it. Thanks for taking my questions.

Thank you. And our next question today comes from Steve Frankel with Rosenblatt. Please go ahead.

Good afternoon. Good morning and congratulations again on Concorde and this new close. Given this shift in dynamic towards high school, could you just remind us what the adult high school military mix was in FY '22 and what that looks like in ‘23 for UTI?

Sure. Thanks for the question Steve. I actually had add that. It's -- if we got ‘22 ended up being overall, so all-in including MIAT was about 42% adult, 44% high school and about 14% military. MIAT is more skewed toward adult. So if you just look at UTI, it's more like 40%, 45% and 15% or 20%.

And then how's that likely to look in ‘23? [Multiple Speakers]

Yeah. So you'd probably shift about two points toward high school and out of adult one to two points.

Okay. And then in terms of Concorde, obviously, you've got some investments in synergies that are going to be pushed out. But in terms of what's going on the ground, does their business look incrementally stronger or incrementally weaker than six months ago?

I would say it's relatively -- add a little bit of a waiver maybe early in the calendar year, this year, but then they've done pretty well the last few quarters. They had good growth in their business, in the trailing 12 month period through 930 (ph), both in revenue and starts and we feel good about some growth there as well. They've had some program expansions that they've been working on the past two years. So a few programs dental hygiene in particular that are ramping and fill very nicely. So we feel pretty good. It's a different market, adult, female and primarily local, in fact almost all local. So it's a really different dynamic than the UTI business.

[indiscernible] diversification is great. And then from a regulatory standpoint, are there any programs or campuses on the Concorde side where there's some concern in terms of where they are relative to where they need to be?

They have one or two campuses where their 90:10 ratio and again that's measured at the OPEID level, they -- Concorde operates with 12 OPEID. So there's a few of them that have multiple campuses, but many of them have a single campus. And they had a few that are in the mid to upper 80s on the 90-10, but this program expansion I mentioned contributes nicely to bringing that down and they have some other strategies where sales, we'll see some improvements in those ratios. But so no concerns, it's some things that are being managed, but no concerns.

Okay. Great. Thank you. I'll come back in the queue.

Thank you. And ladies and gentlemen, our question today comes from Raj Sharma with B. Riley. Please go ahead.

Hi. Good morning. Thank you for taking my questions. I wanted to understand the guidance, the adjusted EBITDA guidance for ‘23. So the core UTIs business that are margin pressures and I just wanted to understand if you could provide more color on, you're getting those margin pressures because the adjusted EBITDA guide is kind of flat to less to ‘22. But then how do you -- how do those pressures revert and help you get back to the -- getting to your $700 million and $100 million EBITDA a year earlier?

Sure. Yeah. Thanks, Raj. It's Troy. Well, as we mentioned, so at an overall, call it, 3% growth rate in ‘22 with really all of that being driven by the addition of MIAT and then the new campuses, new welding program. So same-store, we were down measurably, again driven heavily by adult, but still down nonetheless. And with the leverage that we get on the upside, on our margin, we unfortunately had to reverse that happens as well. So we start the year, we have some bridges in our investor materials that have spent some time looking at with you as well, but we see the opposite on the way down. We had a very, very strong Q1 of '22 because of that same effect, we had very strong student growth in '21. The costs had not yet caught up with all the student inflows and so we had $20 million in adjusted EBITDA in Q1 of last year, which was frankly a bit of a windfall. So as we move through the year, though, we also had the new camp is ramping, Miramar just had its first class in August of last year, so that will be operating at a loss for the first half of the year. We have the program expansions that will be in the fourth quarter. We'll have the pre-marketing costs and we'll adjust out some of the startup costs. So there's just a number of factors in the first part of the year that will weigh us down on the UTI business and then reverse as we get into the fourth quarter and into ‘24, which to the latter part of your question is then the momentum that we carry into ‘24 with both the base business, as well as with the growth initiatives in the full year of Concorde, which give us confidence in the $700 million and approaching $100 million in ‘24.

Great. Thanks. Thanks for that clarification. And then just one other question on your draw of $90 million on the revolver. Can you talk about how much of that is the working capital sort of how do we think about working capital needs for the year in the first half, some more color on that? And then how much is it being used for corporate purposes entirely?

Sure. Yeah. We wanted to make sure we had a stronger balance sheet as we could going into the closing, there's various activities that occur around the closing that we just wanted to make sure we had ample liquidity. We have no concerns about working capital. We have -- we will be carrying excess cash probably through most of the year. So as we mentioned in our prepared remarks, we'll continue now looking at the next leg of our growth and diversification strategy, both organic and inorganic opportunities don't know that anything incremental would be delivered in ‘23 necessarily, but certainly we'll be doing planning in looking at those next opportunities and where to deploy capital, which we have plenty of.

Right. And Concorde two came in with a cash balance, correct?

Correct. They had a very good way. drone cash balance as well and of course, there was a working capital element to the closing settlement and all that came relatively aligned to our expectations.

And just exactly on Concorde, what growth -- what are the growth expectations for '23? I know they ended the year with $200 million and $17 million in EBITDA. Any sort of indication on how Concorde is expected to do?

Well, again, it will be a partial year, so it will be hard to compare and unfortunately as I mentioned in my comments, December as with UTI business is a weaker month. But I would say, overall, if we were looking at more of a pro forma view of ‘23, a few points of growth, maybe 5% growth, top in line and a little bit more on EBITDA as they again with growth you get leverage on fixed costs and SG&A and the like. So you get a little bit of enhanced effect from a profitability perspective and starts as well some good growth there mid to upper-single digits.

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

All right. Thank you, Raj.

And ladies and gentlemen, this concludes our question-and-answer session. I’d like to turn the conference back over to the management team for any final remarks.

Thank you very much. Well, this concludes our session for today. I want to wish you all very happy holidays and thank you for joining us. We'll talk to you in a few months. Thank you. Bye-bye.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.