Q3 2024 Universal Technical Institute Inc Earnings Call
Good day and welcome to the Universal Technical Institute's third quarter 2024 earnings Conference call.
Operator: Good day, and welcome to the Universal Technical Institute 3rd Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode.
Operator: Good day, and welcome to the Universal Technical Institute, Third Quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: All participants will be in a listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Matt Kempton, VP of Corporate Finance. Please go ahead.
Speaker Change: So do you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded.
Speaker Change: To ask a question you May press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Speaker Change: Please note this event is being recorded.
Matthew Kempton: I would now like to turn the conference over to Matt Kempton, VP Corporate Finance. Please go ahead.
Speaker Change: I would now like to turn the conference over to Matt Kimpton VP Corporate Finance. Please go ahead.
Speaker Change: Hello, and welcome to Universal Technical Institute's fiscal third quarter 2024 earnings call. Joining me today are our CEO Jerome Grant and CFO Troy Anderson.
Matt Kempton: Hello, and welcome to Universal Technical Institute's fiscal third quarter 2024 earnings call. Joining me today are our CEO, Jerome Grant, and CFO, Troy Anderson.
Matthew Kempton: Hello and welcome to Universal Technical Institute's fiscal third quarter 2024 earnings call. Joining me today are our CEO, Jerome Grant, and CFO, Troy Anderson. Following our prepare for remarks, we will open the call for your questions.
Matt Kempton: 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.
Speaker Change: Following our prepared remarks, we will open the call for your questions.
Matthew Kempton: A replay of this call, its transcript, and our investor presentation will be archived on the investor relations section of our website at investor.utii.edu. Along with our earnings release issued earlier today in furnished to the SEC.
Speaker Change: A replay of this call its transcripts and our investor presentation will be archived on the Investor Relations section of our website at Investor Dot UTI Edu, along with our earnings release issued earlier today and furnished to the SEC.
Matthew Kempton: 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 in SEC filings. These statements do not guarantee future performance, and therefore under 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 a court by law.
Speaker Change: 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.
Matt Kempton: 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.
Speaker Change: 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.
Speaker Change: We do not intend to update these forward looking statements as a result of new information or future developments, except as required by law.
Matthew Kempton: Please note, and let's otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2023. 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 US GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable cap measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement, and investor presentation.
Matt Kempton: Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2023. 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 MondGap financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable revenue measure.
Speaker Change: Please note unless otherwise stated all comparisons in this call will be against our results for the comparable period of fiscal 2023 the.
Speaker Change: The information presented today also includes non-GAAP financial measures.
Speaker Change: He 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 Change: All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure.
Matt Kempton: 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.
Speaker Change: For more information regarding definitions of our non-GAAP measures. Please see our earnings release financial supplement and Investor presentation.
Jerome Grant: With that, I will turn the call over to your own Grant, CEO of Universal Technical Institute, for his prepared remarks, Jerome. Thank you, Matt. Good afternoon, everyone.
Speaker Change: With that I will turn the call over to Jerome Grant CEO of Universal Technical Institute for his prepared remarks true.
Jerome Grant: Thank you Matt good afternoon, everyone.
Jerome Grant: Before we jump into the quarter, I think it's important for us to reflect on the progress our organization has made since we first began this leg of our journey in November of 2017. At that time, we put in place a very specific strategy focused on unlocking the true potential of Universal Technical Institute. We focused on profitably growing the business and creating durable shareholder value, all while continuing to ensure the highest levels of student outcomes in industry satisfaction. When I became CEO in October of 2019, we further enhanced that strategy, accelerating our efforts to grow and diversify the company.
Speaker Change: Before we jump into the quarter I think it's important for us to reflect on the progress of our organization has made since we first began this leg of our journey in November of 2017.
Jerome Grant: At that time, we put in place a very specific strategy focused on unlocking the true potential of Universal Technical Institute, we focused on profitably growing the business and creating durable shareholder value.
Jerome Grant: While continuing to ensure the highest levels of student outcomes and industry satisfaction.
Speaker Change: When I became CEO in October of 2019, we further enhanced that strategy accelerating our efforts to grow and diversify the company.
Jerome Grant: As we have executed on our plan, which we internally coined our North Star strategy, we made significant strides in improving the business. It's very rewarding to see our market capitalization near the $1 billion threshold and to have delivered an approximately 400% increase in the company's stock price. While we are certainly not finished yet, I'm incredibly proud of how much work our entire organization and all our stakeholders have done to help us get us to this point.
Speaker Change: As we have executed on our plan, which we internally coined our north star strategy, we made significant strides in improving the business, it's very rewarding to see our market capitalization near the 1 billion dollar threshold and to have delivered an approximately 400% increase in the company's stock price.
Speaker Change: Well, we are certainly not finished yet I'm incredibly proud of how much work our entire organization and all our stakeholders have done to help us get us to this point.
Jerome Grant: Now, as I'm sure you've seen in the recent headlines, macro data is indicating a weaker economy, including fewer jobs being added than expected and the unemployment rate rising. Though the economy baby lagging in certain sectors, demand for skilled colored labor across transportation, skilled trades, and healthcare remains robust, with ample job opportunities and anticipated job growth across all of our focus areas over the next 10 years. When people look to reskill or upscale themselves as a leading workforce solutions provider, we can offer them the industry-aligned education they need to achieve positive outcomes, as exemplified by our 80-plus percent infield employment rates across both divisions.
Speaker Change: Now as I'm sure you've seen in the recent headlines macro data is indicating a weaker economy, including fewer jobs being added than expected and the unemployment rate rising.
Speaker Change: So the economy baby lagging in certain sectors demand for skilled collared labor across transportation skilled trades in health care remains robust with ample job opportunities and anticipated job growth across all of our focus areas over the next 10 years.
Speaker Change: When people look to reskill or upskill themselves as a leading workforce solutions provider, we can offer them the industry aligned education, they need to achieve positive outcomes as exemplified by our 80 plus percent infield employment rates across both divisions.
Jerome Grant: With that noted, let's jump into our performance for the quarter. Building on our robust growth in the first half of the year, we continue to see strong operational momentum across our key metrics, with results consistently meeting or exceeding expectations in the third quarter. We achieved nearly 16% growth in revenue to 177.5 million and a 13% increase in our average undergraduate full-time active students year over year, underscoring the execution on our North Star strategy. Net income grew to $5 million with diluted earnings per share of nine cents. Adjusted EBITDA was 18.4 million, which is an impressive 61% increase.
Speaker Change: With that noted, let's jump into our performance for the quarter.
Speaker Change: Building on our robust growth in the first half of the year, we continued to see strong operational momentum across our key metrics with results consistently meeting or exceeding expectations in the third quarter.
Speaker Change: We achieved nearly 16% growth in revenue to $177 5 million.
Speaker Change: And a 13% increase in our average undergraduate fulltime active students year over year underscoring the execution on our North Star strategy.
Speaker Change: Net income grew to $5 million with diluted earnings per share of nine SaaS. Adjusted EBITDA was $18 4 million, which is an impressive 61% increase.
Jerome Grant: All of these metrics landed in line or exceeded our expectations and improved significantly compared to the prior year period. Total student starts increased by 5% year over year. This is also in line with our expectations and is positioning us nicely to achieve the higher end of our start guidance by the end of the fiscal year. Concred benefited from favorable start timing in the quarter, particularly in our clinical start opportunities, which contributed to their nearly 35% year-over-year growth in starts. The UTI division experienced a year-over-year decline in starts in the quarter, primarily because of a shift in students from the last start in June to the first start in July versus last year.
Speaker Change: All of these metrics landed in line or exceeded our expectations and improved significantly compared to the prior year period.
Speaker Change: Total student starts increased by 5% year over year.
Speaker Change: This is also in line with our expectations and is positioning us nicely to achieve the higher end of our start guidance by the end of the fiscal year.
Jerome Grant: Concord benefited from favorable start timing in the quarter, particularly in our clinical start opportunities, which contributed to their nearly 35 percent year-over-year growth in starts. The UTI division experienced a year-over-year decline in starts in the quarter, primarily because of a shift in students from the last start in June to the first start in July versus last year.
Speaker Change: Concord benefited from a favorable start timing in the quarter, particularly in our clinical start opportunities, which contributed to their nearly 35% year over year growth in starts the U T. I division experienced a year over year decline in starts in the quarter, primarily because of shift in students from the last chart in June to the first start in July versus.
Speaker Change: Last year.
Jerome Grant: Regardless, we anticipate double-digit start growth for UTI in the fourth quarter and approximately 10% growth for the fiscal year.
Speaker Change: Regardless, we anticipate double digit start growth for U T I in the fourth quarter and approximately 10% growth for the fiscal year.
Jerome Grant: We are also happy to see that both our company and industry continue to garner attention from national media outlets such as CNBC, Forbes, and the Wall Street Journal, which underscores the success of our strategic direction and the high level of demand for a skilled workforce in the U.S. To that end, I want to extend my gratitude to our divisional and corporate teams for their ongoing leadership, as well as our faculty, staff, partners, and students. Their hard work and dedication has not gone unnoticed, and we are proud to be recognized by these national publications.
Speaker Change: We are also happy to see that both our company and industry continue to garner attention from National media outlets, such as C. N B C Forbes and the Wall Street Journal, which underscores the success of our strategic direction and the high level of demand for skilled workforce in the U S.
Speaker Change: To that end I want to extend my gratitude to our divisional and corporate teams for their ongoing leadership as well as our faculty staff partners and students there.
Jerome Grant: Their hard work and dedication has not gone unnoticed. In addition, it's a key element of our broader brand unification strategy, which we recently announced. This year, we expect to derive over $30 million in revenue from these partnerships, with solid year-over-year growth and significantly more economic benefit through joint marketing and donations of products, equipment, and cash. And last, but certainly not least... We also plan to open at least two new campuses each year, starting in Fiscal 2026 through the beginning of Fiscal 2029.
Speaker Change: Their hard work and dedication has not gone unnoticed and we are proud to be recognized by these national publications.
Jerome Grant: Now, diving into our divisional specific highlights for the quarter, the Concord Division continues to outperform expectations across the board. The benefits from our increased marketing spend and focus on overall marketing and emissions effectiveness, which have endured throughout the year, are key contributor. Clinical programs show very strong growth due to sonography and dental hygiene program expansions. Expansion of our associate degree programs and an overall shift in start opportunities between the 3rd and 4th quarter relative to the prior year. We also continue to see good performance from our core and shorter cash pay programs like Flabotomy and sterile processing, which we are working to expand across the Concord campus footprint.
Speaker Change: Now diving into our divisional specific highlights for the quarter.
Speaker Change: The conquer division continues to outperform expectations across the board.
Speaker Change: The benefits from our increased marketing spend and focus on overall marketing and admissions effectiveness, which have endured throughout the year our key contributor.
Speaker Change: Clinical program, so very strong growth due to a sonography and dental hygiene program expansion expansion of our associate degree programs and an overall shift and start opportunities between the third and fourth quarter relative to the prior year.
Speaker Change: We also continue to see good performance from our core and shorter cash pay programs like phlebotomy sterile processing, which we are working to expand across the Concord campus footprint.
Jerome Grant: The expansion of our dental hygiene program at San Diego remains on track, which students begin clinical coursework later this year. We're also excited to announce the upcoming launch of the nursing program in Jacksonville, Florida, in early fiscal 2025. Moreover, in Dallas, we have also been approved to expand our nursing program, which we expect to add approximately 60 average active students in fiscal 2025. The team that Concord is also dedicated to enhancing graduates' employment opportunities and improving accessibility and affordability to the programs by expanding Concord's partnership network. One example of a great partner is our relationship with Heartland Dental.
Speaker Change: The expansion of our dental hygiene program at San Diego remains on track with students beginning clinical course work later this year.
Speaker Change: We're also excited to announce the upcoming launch of the nursing program in Jacksonville, Florida in early fiscal 2025.
Speaker Change: Moreover, in Dallas, we have also been approved to expand our nursing program, which we expect to add approximately 60 average active students in fiscal 2025.
Speaker Change: The team at Concord is also dedicated to enhancing graduate employment opportunities and improving accessibility and affordability.
Speaker Change: Two the programs by expanding Conchords partnership network.
Speaker Change: One example of a great partner is our relationship with Heartland dental were thrilled to announce the expansion of our existing relationship to now include groundbreaking new initiative to open co branded campuses that will initially serve as cash pay training centers for dental hygienist and dental assistance.
Jerome Grant: We're thrilled to announce the expansion of our existing relationship to now include a groundbreaking new initiative to open co-branded campuses that will initially serve as cash-pay training centers for dental hygienists and dental assistants. Our first location is slated to open in the fall of 2025 in Fort Myers, Florida. Under this first-of-its-kind partnership model, Heartland, the nation's largest dental service organization, or DSO, will fund the cost of construction of the co-branded campus, including durable equipment and initial supplies. Heartland will also provide financial support to students, while our team will manage the campus and be responsible for training students in monitoring outcomes.
Speaker Change: Our first location is slated to open in the fall of 2025 and Fort Myers, Florida.
Heartland Dental: This first of its kind partnership model Hartland, the nation's largest dental service organization, our DSO will fund the cost of construction of the co branded campus, including durable equipment and initial supplies.
Speaker Change: Lynn will also provide financial support to students while our team will manage the campus and be responsible for training students and monitoring outcomes.
Jerome Grant: Once Concord's growth restrictions are lifted, which is targeted to be in fiscal 2026, students will also be able to qualify for Title IV funding, further increasing the appeal for students and operating leverage. The new campus will serve as a direct feeder school into Heartland's over 1,700 locations nationwide, as their offices have significant and growing demand for well-trained dental hygienists and dental assistants. From a financial perspective, we anticipate this location to add over $4 million in annual revenue and be solidly accretive to Concord's EBITDA margin within two years after the first start, and expanding from there.
Speaker Change: Once conference growth restrictions are lifted which is targeted to be in fiscal 2026 students will also be able to qualify for title for funding further increasing the appeal for students and operating leverage.
Speaker Change: The new campus will serve as a direct feeder school into Heartlands over 1700 locations nationwide as their offices have significant and growing demand for well trained dental hygienist and dental assistance.
Speaker Change: From a financials perspective, we anticipate dislocation to add over $4 million in annual revenue and be solidly accretive to comparable EBITDA margin within two years. After the first start and expanding from there.
Jerome Grant: Finally, it's important to underscore that this campus in Fort Myers is merely the first of what we jointly envision to become several more over the next five years.
Speaker Change: Finally, it's important to underscore that this campus in Fort Myers is merely the first of what we jointly envision to become several more over the next five years.
Jerome Grant: Corporate partnerships have long been a distinguishing characteristic and competitive edge for the UTI division, and we're thrilled to bring this differentiator to Concord as well.
Speaker Change: Corporate partnerships have long been a distinguishing characteristic and competitive edge for the U T. I Division and we're thrilled to bring this differentiator to comfort as well.
Jerome Grant: Now, turning to the UTI division, the UTI division also performed well. Overall, program expansions continue to be in the forefront of our efforts. The HVACR program expansions at the Avendale and Long Beach campuses had their first class to start in June and July, respectively. The first cohort in Bloomfield is currently enrolling students and will be starting in September, and our Sacramento program is on track to start early next fiscal year. Furthermore, the 14 new programs we launched at the end of fiscal 2023 have sustained their encouraging growth as market demand continues to strengthen. With the nearly 700 students starts year to date in these programs, we remain confident we will comfortably exceed 1,000 new students starts in this first fiscal year for the programs. As discussed in previous call, these program launches mark the beginning of expanding and synthesizing the MIT sourced aviation, skilled trades, and energy programs across UTI's division's campuses.
Speaker Change: Now turning to the UGI Division. The UGI Division also performed well overall program expansions continue to be in the forefront of our efforts. The HV ACR program expansions at the Avondale and long Beach campuses had their first class to start in June and July respectively.
Speaker Change: The first cohort in Bloomfield is currently enrolling students and will be starting in September and our Sacramento program is on track to start early next fiscal year.
Speaker Change: Furthermore, the 14 new programs, we launched at the end of fiscal 'twenty twenty-three have sustained their encouraging growth as market demand continues to strengthen.
Speaker Change: With the nearly 700 students starts year to date in these programs. We remain confident we will comfortably exceed 1000, new students starts in this first fiscal year for the programs.
Speaker Change: As discussed in previous calls these program launches Mark the beginning of expanding and synthesizing B M. I T sourced aviation skilled trades and energy programs across U T I's divisions campuses.
Jerome Grant: The ongoing unification of the UTI and MIT operations in Houston into a single operating campus is progressing as planned and is set to be completed by the end of this calendar year. In fact, we've completed transitioning the first wave of programs to the UTI division in May. This consolidation exemplifies our strategic focus on optimization, aiming to boost operational efficiencies while also enhancing student experience and maintaining superior outcomes. Further, it's a key element of our broader brand unification strategy, which we recently announced, driven by stakeholder input and aimed at leveraging Universal Technical Institute's strong national brand.
Speaker Change: The ongoing unification of the U T I M E T operations in Houston into a single operating campus is progressing as planned and is set to be completed by the end of this calendar year. In fact, we've completed transitioning the first wave of programs to the UTI Division in May.
Speaker Change: This consolidation exemplifies our strategic focus on optimization aiming to boost operational efficiencies, while also enhancing student experience and maintaining superior outcomes. Further it's a key element of our broader brand unification strategy, which we recently announced.
Speaker Change: Driven by stakeholder input and aimed at leveraging Universal Technical Institute strong National brand, we are streamlining branding to the U T. I campus brand for M. I T Canton motorcycle Mechanics Institute Marine Mechanics Institute and NASCAR Technical Institute.
Jerome Grant: We are streamlining branding to the UTI campus brand for MIT, Canon, Motorcycle Mechanics Institute, Marine Mechanics Institute, and NASCAR Technical Institute. Although all of the division's campuses will be known as UTI by mid 2025, our partnership with some of the most revered names in transportation, skill trades, and energy continues to be a key driver of success. And we're constantly looking at new and innovative ways to expand our extensive partner ecosystem.
Speaker Change: So all of the divisions campuses will be known as U T. I by mid 2025, our partnership with some of the most revered names in transportation skilled trades and energy continue to be a key driver of success and we're constantly looking at new and innovative ways to expand our extensive partner ecosystem.
Jerome Grant: With the announcement of the exciting new Heartland partnership that conquered, I thought it'd be beneficial to provide a brief recap of the extensive nature of UTI division partnerships. This year, we expected to arrive over $30 million in revenue from these partnerships, with solid year-over-year growth and significantly more economic benefit through joint marketing and donations of products, equipment, and cash. In the auto and diesel space, we currently have 29 manufacturer-specific advanced training program instances or MSFs with nine different major manufacturers across the UTI campus footprint. Another three manufacturer programs at nine of their locations that we run on their behalf, including Mercedes and Porsche, and three on-base military programs partnering with BMW and Daimler Trucks.
Speaker Change: With the announcement of the exciting new Heartland partnership at Concord, I thought it would be beneficial to provide a brief recap of the extensive nature of UTI division partnerships.
Speaker Change: This year, we expect to derive over $30 million in revenue from these partnerships with solid year over year growth and significantly more economic benefit through joint marketing and donations of products equipment and cash.
Speaker Change: In the auto and diesel space. We currently have 29 manufacturer specific advanced training program instances or SaaS with nine different major manufacturers across the U T. I campus footprint I know there are three manufacturer programs at nine of their locations that we run on their behalf, including Mercedes and Porsche.
Speaker Change: And three on base military programs partnering with BMW and Daimler trucks.
Jerome Grant: We expect nearly 3,000 students to start across these programs this year, reflecting growth from increased marketing efforts and expansion of the number of program instances over the past few years. We also provide dealer training for several manufacturers and at major manufacturer programs for motorcycle and marine, along with running programs for both industry and government agencies. And last but certainly not least, we have over 70 business alliance relationships that include cash, products, branding, and other partnership benefits. It's important to note that these are deep and long-term relationships, some spanning 25 years. Combined, this is an amazing portfolio of assets that uniquely positions us in the industry.
Speaker Change: We expect nearly 3000 students just start across these programs this year.
Speaker Change: <unk> growth from increased marketing efforts and expansion of the number of program instances over the past few years.
Speaker Change: We also provide dealer training for several manufacturers and a major manufacturer programs for motorcycle and marine along with running programs for both industry and government agencies.
Speaker Change: And last but certainly not least we have over 70 business alliance relationships that include cash products branding and other partnership benefits. It is important to note that these are deep and long term relationships. Some spanning 25 years combine this is an amazing portfolio of assets that uniquely.
Speaker Change: <unk> us in the industry.
Jerome Grant: and while these partnerships are currently focused in the transportation space, we see great opportunity to expand the model to include MIT source programs centered around skilled trades and aviation, similar to what we've done at Concord and Hartle.
Speaker Change: And while these partnerships are currently focused in the transportation space, we see great opportunity to expand the model to include M. I T source program centered around skilled trades in aviation similar to what we've done at Concord and Heartland.
Jerome Grant: Overall, I'm pleased with the continued momentum we experience across both divisions. As a result, we're reaffirming our guidance for fiscal 2024, with the expectation that we will hit the upper end of our revenue and new student start ranges.
Speaker Change: Overall I'm pleased with the continued momentum we're experience across both divisions as a result, we're reaffirming our guidance for fiscal 2024 with the expectation that we will hit the upper end of our revenue and new student start ranges.
Jerome Grant: Before I hand the call over to Troy, I want to spend some time looking at the bigger picture and discussing the next phases of our strategy, which we announced yesterday. With the close of fiscal 2024, we will successfully complete the first phase of our North Star strategy, one that has been marked by significant achievements, including the launch of two new UTI locations, the completion of two strategic acquisitions, and significant program expansions, which together have nearly tripled our campus locations and more than doubled the number of students we serve across transportation, the trades, and healthcare. Financially, we will have more than doubled our revenue and seen adjusted EBITDA increased by more than five times during this period, all while continuing to ensure strong student outcomes.
Speaker Change: Before I hand, the call over to Troy I want to spend some time looking at the bigger picture and discussing the next phases of our strategy, which we announced yesterday.
Speaker Change: With the close of fiscal 'twenty 'twenty four we will successfully complete the first phase of our North Star strategy.
Troy: One that has been marked by significant achievements, including the launch of two new UTI locations. The completion of two strategic acquisitions and significant program expansions, which together have nearly tripled our campus locations and more than doubled the number of students we serve across transportation, the trades and health care finance.
Troy: Italy, we will have more than doubled our revenue and seen adjusted EBITDA increased by more than five times during this period.
Speaker Change: All while continuing to ensure strong student outcomes.
Jerome Grant: With these accomplishments, we're now poised to begin phase two of our North Star strategy. Once again, focusing on addressing the critical need for highly trained skilled-colored workers in America. As you may have seen in yesterday's press release, pending regulatory approval, we plan to launch a minimum of six new programs annually on UTI and/or Concord campuses beginning in fiscal 2025. We also plan to open at least two new campuses each year starting in fiscal 2026 through the beginning of fiscal 2029, initially with UTI campuses, and then expanding to Concord campuses once the Department of Education growth restrictions are lifted.
Speaker Change: With these accomplishments were now poised to begin phase two of our North star strategy. Once again, focusing on addressing the critical need for highly trained skilled collared workers in America.
Troy: As you may have seen in yesterday's press release pending regulatory approval, we plan to launch a minimum of six new programs annually on UTI <unk> Concord campuses beginning in fiscal 2025.
Speaker Change: We also plan to open at least two new campuses each year starting in fiscal 2026 through the beginning of fiscal 2029, initially with UTI campuses and then expanding the Concord campuses. Once the department of education growth restrictions are lifted.
Jerome Grant: Initially, with UTI campuses and then expanding to Concord campuses once the Department of Education growth restrictions are lifted. In addition to growth, we'll be focusing on realizing efficiencies in student acquisition, facilities utilization, and educational delivery, resulting in an adjusted EBITDA margin for the company approaching 20% by the end of 2029.
Jerome Grant: With the momentum built in this first phase of the strategy and the benefits from the second phase, we anticipate achieving a compound annual revenue growth rate of approximately 10% between fiscal 2024 and fiscal 2029. In addition to growth, we'll be focusing on realizing efficiencies in student acquisition, facilities utilization, and educational delivery, resulting in an adjusted EBITDA margin for the company approaching 20% by the end of 2029. Our experience team, coupled with growing markets eager to hire our well-trained, industry-aligned graduates, positions us well for continued success and mission fulfillment in the coming years.
Jerome Grant: As preliminary approvals and site selections are complete, we'll announce locations and targeted launch dates for any new campuses and programs. In addition to our organic initiatives, we also remain active and will continue to opportunistically pursue strategic acquisitions.
Troy Anderson: With that, I'll turn the call over to Troy to review our financial results and guidance in more depth. Thank you, Jerome. Through the third quarter, we continue to deliver positive operational and financial performance, meeting our exceeding expectations across our key metrics. In the third quarter, total average undergraduate full-time active students grew 13.4% versus the prior year period. In total, new student starts increased 5% year-over-year, both in line with our expectations. The Concord Division generated a 14% increase in average undergraduate full-time active students. While new students starts increased by 34.8%, partially due to timing shifts of clinical start opportunities between the third and fourth quarters, relative to the prior year.
Speaker Change: Positive operational and financial performance meeting or exceeding expectations across our key metrics.
Speaker Change: In the third quarter total average undergraduate fulltime active students grew 13, 4% versus the prior year period.
Speaker Change: In total new student starts increased 5% year over year, both in line with our expectations.
Speaker Change: The Concorde division generated a 14% increase in average undergraduate fulltime active students while new student starts increased by 34, 8%, partially due to timing shifts of clinical start opportunities between the third and fourth quarters relative to the prior year.
Troy Anderson: This is a function of the start frequency and cohort sizes that we are approved for by the various programmatic accreditors. Clinical starts grew as staggering 64% year-over-year in the quarter, while starts for the combined core and short programs grew 20.6%. With the fourth quarter, we expect overall Concord start growth in the mid-single-digit range, which is notably lower than third quarter due to the timing shift of the clinical starts. The UTI Division drove a 13% increase in average undergraduate full-time active students. For new student starts, we saw more students in the first start in July, instead of the last start in June versus the prior year, resulting in a 12.5% decrease in new students' starts during the third quarter.
Speaker Change: This is a function of the start frequency in cohort sizes that were approved for by the various programmatic of creditors.
Speaker Change: Clinical starts grew a staggering 64% year over year in the quarter, while starts for the combined core and short programs grew 26%.
Speaker Change: For the fourth quarter, we expect overall Concord start growth in the mid single digit range, which is notably lower than third quarter due to the timing shift of the clinical starts.
Speaker Change: The UTI division drove a 13% increase in average undergraduate fulltime active students.
Jerome Grant: Total new student starts increased 5% year-over-year, both in line with our expectations. However, for new students, we saw more students in the first semester in July instead of the last semester in June versus the prior year, resulting in a 12.5% decrease in new student starts during the third quarter.
Speaker Change: For new students starts we saw more students in the first start in July instead of the last start in June versus the prior year.
Speaker Change: <unk> and a 12, 5% decrease in new student starts during the third quarter.
Troy Anderson: We anticipated we would see this shift in our overall start-facing. For reference, our UTI division starts were down year-over-year in June by approximately 480 starts, but are up year-over-year by approximately 570 starts in July. We expect UTI to show double-digit growth in starts in the fourth quarter and approximately 10% start growth for the fiscal year. For the fourth quarter overall, we now expect year-over-year growth in new student starts in the mid-to-high single digits, given the dynamics I described previously, and driven by baseline growth along with the ongoing ramp of recent program expansions and new program rollouts.
Speaker Change: We anticipated we would see the shift in our overall start phasing for.
Speaker Change: For reference our UTI Division starts were down year over year in June by approximately 480 starts but are up year over year by approximately 570 starts in July.
Jerome Grant: We expect UTI to show double-digit growth and starts in the fourth quarter and approximately 10% start growth for the fiscal year. Given our year-to-date cash flow performance and estimates on profitability and cash flow for the remainder of the year, we expect our next growth phase to deliver the following.
Troy Anderson: For the year, this would put total new student starts on the higher end of our 25,500 to 26,500 guidance range.
Troy Anderson: Turning to our financial results, revenue on a consolidated basis was 177.5 million, reflecting 15.8% year-over-year growth and exceeding our expectations. The UTI Division's revenue of 117.1 million increased 16.1%, and Concord's revenue increased 15% to 60.3 million. Both of these reflect the strong growth in the respective average undergraduate student populations, along with a few points of average tuition rate improvement. For the fourth quarter, we expect low double-digit revenue growth, reflecting the ongoing growth momentum in our average undergraduate student population. And as a result, for the fiscal year, we expect to be in the higher end of our revenue guidance range of 720 to 730 million.
Troy Anderson: In addition to positive results across our student metrics and revenue, we also saw considerable year-over-year increases in profitability. Consolidated net income was 5 million, compared to a net loss of 0.5 million in the prior year quarter. This translated to 9 cents of diluted earnings per share for the quarter. At the end of the third quarter, we had 53.8 million common shares outstanding. Adjusted EBITDAI was 18.4 million, an increase of 60.9% year-over-year. Our profitability performance was in line with expectation. Actions, driven by revenue and student expansion and improved operating leverage, that have amplified the returns on our growth investments in optimization efforts.
Speaker Change: $53 8 million common shares outstanding.
Speaker Change: Adjusted EBITDA was $18 4 million, an increase of 69% year over year.
Speaker Change: Our profitability performance was in line with expectations, driven by revenue and student expansion and improved operating leverage that have amplified the returns on our growth investments and optimization efforts.
Troy Anderson: For net income, the Luttered earnings per share in adjusted EBITDA in the fourth quarter we continue to expect significant year-over-year growth to close out the year as our profitability is seasonally most pronounced in the fourth quarter.
Speaker Change: For net income diluted earnings per share and adjusted EBITDA in the fourth quarter. We continue to expect significant year over year growth to close out the year as our profitability is seasonally most pronounced in the fourth quarter.
Troy Anderson: Overall, we expect to end the year comfortably within our guidance ranges across our profitability metrics, which are as follows. Net income of $37 million to $41 million, Luttered earnings per share of $0.68 to $0.73, and total adjusted EBITDA of $102 million to $104 million, which translates to adjusted EBITDA margin of 14.2% at the midpoint, or roughly $350 basis points of margin expansion versus last year. As of the end of the third quarter, our total available liquidity was $148.5 million, which includes $33 million of available capacity from our revolving credit facility. We paid down an incremental $4 million this quarter and ended the quarter with networking capital of $2.8 million.
Speaker Change: Overall, we expect to end the year comfortably within our guidance range is across our profitability metrics, which are as follows.
Speaker Change: Net income of 37 to 41 million diluted earnings per share of <unk> 68 to 73.
Speaker Change: And total adjusted EBITDA of $102 million to $104 million, which translates to adjusted EBITA margin of 14, 2% at the midpoint, we're roughly 350 basis points of margin expansion versus last year.
Speaker Change: As of the end of the third quarter. Our total available liquidity was $148 5 million, which includes $33 million of available capacity from our revolving credit facility.
Speaker Change: We paid down an incremental $4 million this quarter and ended the quarter with net working capital of $2 8 million.
Troy Anderson: At this time, we expect to pay down another $10 to $15 million on the revolver as of the end of the fourth quarter. Year-to-date operating cash flow was $18.4 million and adjusted $3 cash flow was $10.9 million, both showing significant improvement versus the prior year. Year-to-date capital expenditures were $16.8 million. Included in CAPEX are the program expansion investments across both divisions, along with spending associated with curriculum and equipment refresh and upgrades, facility and leasehold improvements, and IT investments. Given our year-to-date cash flow performance and estimates on profitability and cash flow for the remainder of the year, we expected to deliver adjusted free cash flow solidly within our previous guidance range, which is $62 million to $66 million, and includes total CAPEX spend of approximately $30 million.
Troy Anderson: We also remain confident in the initial fiscal 2025 projections we announced last quarter. We estimate revenue of nearly $800 million for the year, representing approximately 10% growth, and we estimate adjusted EBITDA margin of approximately 15%, or at least 100 basis points of margin expansion compared to this year. We plan to provide formal guidance for the year when we report our fourth quarter in fiscal 2024 results in November.
Troy Anderson: And finally, as Jerome mentioned, we are entering phase two of our North Star strategy, with a launch and ramp of our previously announced initiatives well underway, continued load amid single-digit baseline new student start growth, and the new organic growth initiative Jerome outlined. We expect our next growth phase to deliver the following. Approximately 10% revenue CAGR through fiscal 2029, an overall adjusted EBITDA margin approaching 20% by fiscal 2029. This would translate the revenue of approximately $1.1 billion in adjusted EBITDA for approximately $200 million in fiscal 2029. In terms of phasing, we expect revenue growth to begin accelerating in fiscal 2027 as the benefits of the initial elements of the strategy begin to be realized.
Speaker Change: Overall, adjusted EBITDA margin approaching 20% by fiscal 2029.
Speaker Change: This would translate to revenue of approximately $1 1 billion and adjusted EBITDA of approximately $200 million in fiscal 2029.
Speaker Change: In terms of phasing, we expect revenue growth to begin accelerating in fiscal 2027 as the benefits of the initial elements of the strategy begin to be realized.
Troy Anderson: For adjusted EBITDA, we anticipate modest absolute dollar growth from fiscal 2025 through fiscal 2027, as we begin the investment period, with significant margin expansion and absolute dollar growth in the later year. In support of the new growth initiatives, we expect Catholics of at least 50 million per year beginning with fiscal 2025, funded through operating cash flow. As we stated in previous quarters, we will continue evaluating and opportunistically pursuing strategic acquisitions and will adjust our longer term expectations as appropriate if the transaction is completed or if we foresee any changes in our organic trajectory.
Speaker Change: For adjusted EBITDA, we anticipate modest absolute dollar growth from fiscal 2025 through fiscal 2027, as we begin the investment period with significant margin expansion in absolute dollar growth in the later years.
Speaker Change: In support of the new growth initiatives, we expect capex of at least $50 million per year, beginning with fiscal 2025 funded through operating cash flow.
Speaker Change: As we stated in previous quarters, we will continue evaluating and opportunistically pursuing strategic acquisitions.
Speaker Change: We'll adjust our longer term expectations as appropriate if a transaction is completed or if we foresee any changes in our organic trajectory.
Troy Anderson: As always, we encourage everyone to review our press release, financial support, supplement, and investor presentation, as well as the 10-Q once it is filed, as these materials include the most current information on our consolidated and segment actual results, our strategic roadmap, and our guidance.
Speaker Change: As always we encourage everyone to review our press release financial supplement and Investor presentation as well as the 10-Q once it is filed as these materials include the most current information on a consolidated and segment actual results, our strategic roadmap and our guidance.
Troy Anderson: I'd like to thank our students, investors, partners, and team for their unwavering support.
Jerome Grant: I'll now turn the call back over to Jerome for closing remarks.
Jerome Grant: Thank you, Troy. Moving into this final quarter of the fiscal year, our consistently strong performance has positioned us to continue making significant strides in delivering durable shareholder value. The core tenets of our mission, growth, diversification, and optimization remain the foundation for phase two of our North Star strategy. Organically, our initiatives are focused on expanding our campuses to green field geographies, broadening the reach of our existing programs, and adding new in demand program offerings. We'll also continue to forge new partner relationships across the programs. Inorganically, our efforts remain centered around opportunistically exploring strategic acquisition opportunities, with an emphasis on enhancing our presence in healthcare and program offerings that complement conquered.
Jerome Grant: Moving into this final quarter of the fiscal year, our consistently strong performance has positioned us to continue making significant strides in delivering durable shareholder value, and we will also continue to forge new partner relationships across the program. We believe we are well positioned to capitalize on the increasing market opportunities to maximize shareholder value and expand the UTI brand.
Jerome Grant: As we close out the fiscal year, we will continue to focus our efforts around ramping recent campus and program launches to further boost enrollment revenue and profitability, enhancing marketing and admissions efforts to optimize lead generation and inquiry conversion, and improving workforce and facility utilization to increase program availability, margin expansion, and operating leverage. We remain steadfast in our commitment to driving growth and innovation for both our students and our investors. We believe we are well positioned to capitalize on the increasing market opportunities to maximize shareholder value and expand the UTI brand.
Jerome Grant: Thank you for your continued support, and we look forward to providing further updates on our exciting trajectory over the coming quarters.
Jerome Grant: As always, we welcome the opportunity to showcase our campuses and all the exciting initiatives we're working on, so please don't hesitate to reach out if you're interested in a campus tour.
Operator: I'd now like to turn the call over to the operator for Q&A. Operator? We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speaker phone, 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 star, then two.
Speaker Change: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we'll pause momentarily to assemble all raster.
Speaker Change: At this time, we will pause momentarily to assemble roster.
Jasper Bibb: The first question today comes from Jasper Blip with Truus Securities. Please go ahead.
Speaker Change: The first question today comes from Jasper Blip with Truth Securities. Please go ahead.
Jasper Bibb: Hey, good afternoon, guys. Colleges for any background noise here. I wanted to ask about the North Star strategy and the 20% target for 29.
Jasper Blip: Hey, good afternoon guys.
Jasper Blip: All of these for any background noise here I wanted to ask about.
Jasper Blip: North Star strategy in the 20% target from 29, just curious what that contemplates as far as the underlying segment margin potential for UTI and hospital segments.
Jasper Bibb: Just curious what that contemplate as far as the underlying segment market potential for the ECI conference segments.
Troy Anderson: Hi, Jasper, it's Troy. Thanks for the question. We're not going into the segment-level detail just yet.
Speaker Change: Yeah, Hi, Jasper it's Troy Thanks for the question.
Speaker Change: We're not going into the segment level detail just yet we're setting our longer range marker out there.
Troy Anderson: We're setting up longer range marker out there, as far as the expectations from a growth perspective is drum commented on, and as you know, from prior discussions and others know currently we have growth restrictions on Concord due to the change in ownership through the Department of Education. So initially, the initiatives will be more skewed toward UTI, but we expect as we get into 27 and beyond that we would be more evenly distributed between UTI and Concord as far as campuses and programs. And therefore, you know, they would kick in as well as we get into the latter part of the five-year trajectory.
Speaker Change: The.
Speaker Change: As far as the expectations from a growth perspective is drone commented on.
Speaker Change: And as you know from prior discussions and others know.
Speaker Change: Currently we have growth restrictions on Concorde due to the change in ownership through the department of education. So initially the initiatives will be more skewed toward UTI, but we expect as we get into 2007 and beyond.
Speaker Change: That we would be more.
Jasper Bibb: Thanks, that's helpful.
Troy Anderson: And just to maybe follow up on the margin goals, I guess how you think about capacity as part of the North Star plan, both I guess in place capacity and potentially moving some force work on lines. Sure, yeah, I mean, we are expecting, you know, consistent level of baseline growth, you know, low to mid single digit. That won't be equal across the footprint. Some campuses are more full than others. So in, but you know, capacity is not a finite variable. We are constantly refining our educational delivery; our space utilization. That's a big initiative for us over the next few years is to continue getting more streamlined and being able more flexible in our space utilization to continue increasing capacity.
Jerome Grant: as part of the North Star Plan, both in-place capacity and potentially moving some coursework online.
Troy Anderson: We have shifts, you know, available at many of our campuses that we could add. So, you know, we're going to continue working to fill our facilities as much as possible with the existing programs while we're adding new programs in upgrading our technology and getting more flexible with our delivery model. It's not as much a change. I don't think in terms of how much is online versus on ground. We may see some evolution in that over time, bringing in some virtual reality type training aids as well, which again are less space intensive. So there will be evolutions in some of the technology and in our approach to teaching over time, but the bottom line is, you know, a measurable portion of it.
Troy Anderson: And we have a slide to our investor presentation, a bridge slide from the 800 million initial projection for next year to the 1.1 billion. I referenced if you run the math out on the 10% cager and, you know, a measurable portion of that comes through organic that baseline growth and then the new programs and new campuses.
Jasper Bibb: Make sense.
Jasper Bibb: Last one for me.
Jasper Bibb: I asked what your experience has been with some of the fast and issues that have been reported. I guess that both segments and what level that might have contributed to the climate check on your enrollment in the corner. Sure, it's still not perfect. We've been working through our backlogs. I wouldn't say it's a direct contributor to some of that shift we saw with UTI from June to July, but because we had people so focused on working the back logs, we didn't spend as much time working on students shifting into that last June start. It's just not a start; it's right before the 4th of July, and students, a lot of students, are just getting out of school a few weeks before that. So it's always taken a bit of effort to get students into that start, and if they signed up for a later start and then we tried to pull them into that start, they would have had to go back to the old fastwavers or the new fastwavers.
Jerome Grant: Sure. You know, it's still not perfect. We've been working through our backlogs. Some of the, I wouldn't say it's a direct contributor to some of that shift we saw with UTI from June to July, but because we had people so focused on working the backlogs, we didn't spend as much time working with students, you know, shifting into that last June start. It's just not a start.
Speaker Change: Because we had people so focused on working the backlogs we didn't spend as much time working on studer.
Speaker Change: Students.
Speaker Change: Shifting into that last June start, it's it's just not a starts right before the fourth of July and our students a lot of students are just getting out of school a few weeks before that so it's always taken a bit of effort to get students into that start and and if they signed up for a later start than we we tried to pull them into that start they would've had to go back.
Jerome Grant: It's right before the 4th of July, and students, a lot of students are just getting out of school a few weeks before that. So, it's always taken a bit of effort to get students into that mindset. And if they signed up for a later start and then we tried to pull them into that start, they would have had to go back to the old FAFSA versus the new FAFSA. So, it was just making a lot of noise in the system.
Speaker Change: To the old fastball versus the new fast food. So it was just it was a lot of noise in the system.
Troy Anderson: So it was a lot of noise in the system, but overall I'd say we're near normal. There are some differences; there are some things that do make it, it's actually not simpler for students and their parents, it's a little bit more complicated. But we continue to work through it, and it doesn't affect us from a full year perspective by any means.
Jerome Grant: But overall, I'd say we're near normal. There are some differences. There are some things that do make it, it's actually not simpler for students and their parents. It's a little bit more complicated, but we continue to work through it. And, you know, it doesn't affect us from a full year perspective by any means.
Speaker Change:
Speaker Change: But overall I'd say we're.
Speaker Change: We're near normal there are some differences there are some things that do make it it's actually not simpler for students and their parents, it's a little bit more complicated.
Speaker Change: But but we continue to work through it and I don't know.
Speaker Change: It doesn't affect us from a full year perspective by any means.
Jasper Bibb: Thanks for the context there. We're looking forward to seeing everyone in California next week. Great, thanks.
Speaker Change: Thanks for the context, there looking forward to seeing everyone in California next week.
unknown: Thanks for the
Speaker Change: Great. Thanks for the questions.
Operator: Great, the question.
Mike Grondahl: The next question comes from Mike Grondall with Northland Securities.
Speaker Change: The next question comes from Mike Grondahl with Northland Securities. Please go ahead.
Mike Grondahl: Please go ahead. Hey guys, thanks.
Mike Grondahl: Hey, guys. Thanks could you kind of provide an update on maybe your marketing channels and just at a high level. How each one is doing maybe kind of strongest to strong if you will.
Mike Grondahl: Could you kind of provide an update on maybe your marketing channels and, you know, just at a high level how each one is doing, maybe kind of strongest to strong, if you will?
Jerome Grant: Hi Mike, it's Jerome. So you know obviously with two divisions and two different demographics in the division between transportation trades and energy and the UTI division and health care, the marketing groups work a little differently in health care where we're seeing you know some great results. We're very much focused on the 25 to 35 year olds and in that population people are making job changing decisions and looking for something more stable, and we're seeing some you know quite favorable rates in terms of media spend in that channel. We are too in the UTI channel. So you know strong results. I think you know double digit beyond our expectations of what we're seeing in terms of media generation for the same dollars that we budgeted, and that's one of the things that's fueling the growth on the concrete side.
Jerome Grant: On the UTI side, it's really a blend, right? Is that in the fourth quarter of about 65% of our students, our high school students who graduated this past year, and our lead generation with them is very much about doing presentations in the high schools. And with the increased number of reps that we put into the field over the last two years, we're seeing some, you know, some nice increases. That's one of the reasons why what Joy and I both had said, as you're going to see a double digit increase in the fourth quarter, is that we'll see some stronger results also out of high school. And we're seeing that same favorability on our media spend, whether it's streaming media, paid search, paid social, where again we're seeing, you know, nearly double digit improvement over what we expected this year in terms of both rates, and that allows us to get more leads for the same amount of money.
Mike Grondahl: So you know real strong, real strong performance out of marketing this year.
unknown: Great to hear. And then just one more. One, roughly when do you think you'd announce those, and, you know, the slide has that campus size arranged between 600 and 1200. Do you think those two locations will be at the smaller end, the larger end? So just sort of, you know, rough announcement dates and sizes.
Mike Grondahl: Great to hear.
Mike Grondahl: And then just get one more; your two new locations in 2026. One, roughly when do you think you'd announce those? And you know the slide has that campus size, a range between 600 and 1200. Do you think those two locations will be at the smaller end, the larger end? So just sort of, you know, rough announcement dates and size.
Jerome Grant: Yeah, well, we're not yet ready to lay out the specific details of the product mix makeup of the divisions. But, as we've said on past calls, we now have a lot more optionality by markets and by product mix with the increase of, and of course, remember in 2026, it's really all about the UTI side because of the finishing up of the growth. Right.
Jerome Grant: We won't be able to open a campus till 27 there. And so, you know, we've been looking at locations that would be great for, you know, a skill trades and aviation campus. We've been looking at locations where the new version of why we see UTI, which is a combination of transportation, skill trades, and energy. And you know, we'd anticipate being able to utilize both of those models as quickly as possible. But well, it won't be long before we'll be able to talk about at least the first location, and, and, and the second will follow right after that.
Jerome Grant: We like to get a couple of approvals and, in the, you know, under our belts from state agencies, et cetera, before we go ahead and point at a specific city. And, and so, but we don't anticipate that being very far off at all.
Mike Grondahl: Got it.
Mike Grondahl: Thanks, guys.
Steve Frankel: Thank you, Mike. The next question comes from Steve Frankle with Rosenblatt.
Steve Frankel: Please go ahead. Good afternoon.
Steve Frankel: Jerome, just diving into the growth restrictions again, just the exact timing on Concord. And is there any difference in program expansions versus new campuses as to when you can do those? No, you know, the, whenever you buy something in this space, the Department of Education likes to see two full years of financials of the new combined company prior to allowing you to either start new campuses or add previously unapproved programs on those existing campuses. Right. And so, last year and going into this year, we've been launching new programs on the Concord campuses that were previously approved prior to the merger and launching new programs that are cash pay.
Speaker Change: <unk> campuses.
Speaker Change: As to when you can do that.
Speaker Change: No.
Speaker Change: The.
Speaker Change: Whenever you buy something in this space the department of education likes to see two full years of financials of the new combined company <unk>.
Speaker Change: Prior to allowing you to either start new campuses.
Speaker Change: Or add previously on approve.
Speaker Change: Approved.
Speaker Change: Programs.
Speaker Change: Those existing campuses right.
Speaker Change: And so last year and going into this year, we've been launching.
Speaker Change: Our new programs on the Concord campuses that were previously approved prior to the merger and launching new programs that are cash pay we talked about things like sterile processing et cetera, where non title for new new programs.
Jerome Grant: We talked about things like sterile processing, et cetera, where non-title for new new programs can can be launched. You also can launch new campuses that are not title for dependent. And so you saw our, our Heartland partnership where we'll be opening a co-branded campus in Fort Myers, Florida, prior to the growth restrictions being lifted because there are no title for funding requirements for that campus initially. Once the restrictions are lifted and that we are anticipating sometime in mid to late 2026, we will be able to offer title for funding on that campus, pending approval, of course, at that time.
Speaker Change: <unk> can be launched you also can launch new campuses that are not title for dependent and so you saw our our heartland partnership where we will be opening a co branded campus.
Speaker Change: Myers, Florida prior to the growth restrictions being lifted because there are no title for.
Speaker Change: Funding requirements for that campus. Initially once the restrictions are lifted and that we are anticipating sometime in mid to late 2026, we will be able to offer title for funding on that on that campus pending approval of course at that time and that's one we'll be able to start announcing new Concord campuses and continue.
Jerome Grant: And that's one we'll be able to start announcing new Concord campuses and continued program expansions across the 17, now 18, with the Heartland campus that will be out there. So we're getting ready. We're loading it all up. It's part of our, you know, it's part of our, our North Star strategy, and, you know, we're getting ready for it.
Speaker Change: <unk> program expansions across the 2017.
Speaker Change: Now 18 with the with the.
Speaker Change: Heartland campus.
Steve Frankel: That's great.
Steve Frankel: It's a really exciting new concept.
Troy Anderson: Help me understand the economics. Given that Arlen is putting up the capital, does your share of the profits look different under that model than it does when you're the one putting up capital?
Troy Anderson: And will it change when it moves from cash pay to a combination of cash pay and title court?
Troy Anderson: Yeah, those are good questions. Steve, this is Troy.
Troy Anderson: In our, in the appendix in our investor slide, we have a dental hygiene illustrative program launch and time horizon. And so that campus will be Dental Hygiene and Dental Assisting. So it's not exactly representative of what will be in that campus. But generally speaking, the ramp of the program will look similar to that. We will run the program; we are administering the student finances, et cetera. Hartland will be providing financial assistance to the students, both in the form of scholarships as well as backing the student loans similar to what, you know, Department of Edit Title 4.
Troy Anderson: But there will be private loans. And we keep all the economics once it's open. So that, the deal is we run it. We staff it. We're responsible for all the regulatory requirements, et cetera. We'll monitor outcomes; we'll ensure we're meeting the outcome standards and all the things required around that. And then we keep the economics there. The economics will change once we are Title 4 eligible as we are offering more of a discounted because it's cash pay and dental hygiene is a, you know, average $85,000. So, to your program, dental assisting obviously, much, much less expensive.
Troy Anderson: But once it will be discounted relative to that under the cash pay model, and then we'd split back to more of our standard pricing for dental hygiene and dental assisting post Title 4.
Steve Frankel: That's all. You're one more question. Yes, that's really helpful.
Steve Frankel: And then on the North Shore next phase, you talked about six program expansions per year. Is that a total of six, or six across a number of campuses? Well, it's a minimum of six.
Jerome Grant: Well, it's a minimum of six, and I'm thrilled that Troy let me put the word minimum in there. It's a minimum of six, and it is across both divisions, and it's an average.
Steve Frankel: And thrilled that Troy let me put the word minimum in there. It's a minimum of six. And it is across both divisions, and it's an average. Obviously, we won't be launching as many programs and conquered earlier. But over that, over that time period, we just wanted to put a marker out there for that you could see. Obviously, in the in the in the later years, we'll be looking at being more aggressive across both of the divisions. There's still a lot of opportunity to bring the MIT programs onto the UTI campuses, which will be most of what's initially launched in 25, 26, 27.
Jerome Grant: Obviously, we won't be launching as many programs in Concord early on, but over that time period, we just wanted to put a marker out there that you could see. Obviously, in later years, we'll be looking at being more aggressive across both of the divisions. There's still a lot of opportunity to bring the MIT programs onto the UTI campuses, which will be most of what's initially launched in 25, 26, 27. And then the opportunity to bring new programs onto the Concord campuses is something that we're looking forward to, specifically nursing, because nursing is only on a few of their campuses right now. So that's what's built into that.
Steve Frankel: And then the opportunity to bring new programs onto the conquered campuses is something that we're looking forward to specifically nursing because nursing is only on a few of their campuses right now. So that's what's built into that.
Steve Frankel: Great.
Steve Frankel: Thank you so much. I'll jump back into the queue. Great.
Operator: Thank you, Steve.
Raj Sharma: The next question comes from Raj Sharma with Be Riling.
Raj Sharma: Please go ahead. Yeah, thank you for taking my questions. Congratulations on the good results.
unknown: Yeah, thank you for taking my questions. Congratulations on the good results. So my first question is about the start.
Raj Sharma: So, but first question is on the starts. You had guided overall starts to about 5% for Q3. Overall, they seem to be in line. Obviously, the UTI is lower. What you've been guiding.
Raj Sharma: So can you speak of the trajectory and the environment of enrollment here, and you're seeing is the shift. The shift seems to be about 580, 600 students in the June, July shift. And are you making up, really, from your guidance? You're saying you're going to hit the top line. So you are making up more than the students that you would have lost in Q3. And also, how much of the starts shift could you have anticipated? Or is this something new?
Troy Anderson: Thanks for the question, Rajas Troy. We anticipated it. Is it exactly what we anticipated? Probably a little bit more than we anticipated, but we saw it building as we were working our last call 90 days ago, beginning of May. We have pretty good insight into the final, and we could see the enrollments piling up more in July than in that last June. Start to the question I answered earlier. That's just a hard start to get high school students specifically really focused on given the just finishing school, given going into July 4th holiday, et cetera, et cetera.
Troy Anderson: So anyway, we put a lot of effort into trying to fill that start in prior years, and our resources were really focused on working down the fast simplification, you know, roll out in the backlog associated with that. So it is entirely made up in July. In fact, it's more than made up in July for UTI specifically. And again, we see approximately 10% for the full year will be double digit. In the fourth quarter was, I think, 16% and 17% in Q1 and Q2. So it's 100% a timing shift and literally last started June to first start in in July.
Troy Anderson: And again, we anticipated that on the Concord side, just to complete the thought, we have a little bit of a different dynamic where the certain clinical programs have more starts in the third quarter. And they don't have starts, or they have fewer starts in the fourth quarter. And so we saw that significant uplift in the Concord clinical starts in the third quarter. And again, overall, those are still very strong growth for the year for Concord, just timing. And you're going to hear that more from us. We didn't spend a lot of time on that last year.
Speaker Change: Different dynamic where the certain clinical programs had more starts in the third quarter.
Speaker Change: And they don't have starch they had fewer starts in the fourth quarter.
Speaker Change: So we saw that significant uplift in the Concord clinical starts.
Speaker Change: In the third quarter and again overall, though still very strong growth for.
Speaker Change: For the year for Concord, just just tightening and youre going to hear that more from US we didn't spend a lot of time on that last year. We didn't have the year over year compares and really until the last quarter, but those clinical starts are very uneven so any given quarter, you're going to hear from us.
Troy Anderson: We didn't have the year-over-year compares, and really until the last quarter, but those clinical starts are very uneven. So, any given quarter, you're going to hear from us, you know, a really strong quarter or even a decline quarter on the clinical side with Concord.
Speaker Change: A really strong quarter or even a decline quarter on the clinical side with Concorde.
Jerome Grant: Raj, I think the one thing that Troy alluded to in his comments that on the whole notion of that June July piece was, you know, the new FAFSA was for students who started July 1 and beyond. And so all of these thousands of students went through the new FAFSA process in April, May, June; that painful process that was late and filled with errors, quite frankly. And we got them settled in with the new process in July. And traditionally, what we do then is then start moving them back to June to get them started a little early, help us with our capacity, help us with a whole number of things.
Raj: Raj I think the one thing that Troy alluded to in his comments that on the whole notion of that June July piece was.
Raj: The new fast.
Speaker Change: Was for students, who started July one and beyond and so all of these thousands of students went through the fat the new fast process.
April May June.
Speaker Change: That painful process that was late and filled with errors quite frankly, and we got them settled in with the new process in July and traditionally what we do then is then start moving them back to June to get them started a little early help us with our capacity help us with a whole number of things this year because it was the <unk>.
Jerome Grant: This year, because it was the brand new FAFSA, that would amend asking them and their families to go back and fill out the old FAFSA again so that we could get them started the last week in June. And after what they had gone through on the new one, we just weren't going to do that. We were afraid we'd potentially lose them or something like that. So, as Troy said, more than made up in July, we're happy with the trajectory we're having, but this was a particular year because of the fast-for-change that can we say that that's because of the delays?
Speaker Change: <unk>, new fast about that would've meant asking them and their families to go back and fill out the old fast again, so that we could get them started the last week in June.
unknown: and after what they had gone through on the new one, we just weren't going to do that.
Speaker Change: And after what they had gone through on the new one we just weren't going to do that.
Troy: We were afraid we potentially lose some or something like that so as Troy said more than made up in July we're happy with the trajectory, we're having but this was a particular year because of the fast but a change that can we say that that's because of the delays no. But we can say is that it's because of the.
Raj Sharma: No, but we can say it's because of the complications and because of the transition. Got it. That's very helpful.
Speaker Change: Patients and because of the transition.
Speaker Change: Got it got it that's very helpful. Thank you and then on the North Star strategy.
unknown: Got it. Got it. That's very helpful. Thank you.
Raj Sharma: Thank you.
Raj Sharma: And then on the North Star strategy, the timeline of the new campuses, I know you're going to announce the dates. That's relative to the ones that are the new ones that are already on track. And then I just wanted to understand, you know, your guide, you are kind of soft guiding to a 10% Kaggle on the revenues. But if you take a mid-single digit starch growth and a tuition increase of what you had in the past, I mean, that alone accounts for about 8%.
Speaker Change: The timeline on the new campuses I know you haven't announced the date that's relative to the ones the new ones that are already on track.
Speaker Change: And then I just wanted to understand.
Speaker Change: You implied you were kind of soft guiding to a 10% CAGR on the revenues.
Speaker Change: But if you take a mid single digit starts growth.
unknown: And then on the North Star strategy, the timeline for the new campuses, I know you haven't announced the dates. That's relative to the ones that are the new ones that are already on track. But if you take a mid-single-digit starch growth and a tuition increase of what you've had in the past, I mean, that alone accounts for about 8%. So if you add that to.
Speaker Change: And a tuition increase of what you've had in the past I mean that alone accounts for about 8%. So if you add.
Troy Anderson: So if you add, I guess what I'm getting to is the 10% Kaggle, a conservative sort of number, if you add the two new campuses every year with six new programs. Well, a couple of things. Number one, generally speaking, our organic growth, we never predicted to be much more than low to mid-single digits. And therefore, you know, no, we're not, we don't load in 5% organic growth in a model. It's below that. And so, but the way to look at that would be the low to mid-single digits. You know, adding six programs, adding two campuses, gets you to, you know, right around that 10% mark.
Speaker Change: I guess, what im getting to is the 10% CAGR a conservative number if you add the two new campuses every year with six new programs.
Speaker Change: Well a couple of things number one.
Speaker Change: Generally speaking our organic growth, we never predicted to be much more than low to mid single digits and therefore, no. We're not we don't blowed in 5% organic growth in our model.
Speaker Change: Below that and so but the way to look at that would be the low to mid single digits.
Speaker Change: Adding six programs, adding two campuses.
Speaker Change: Gets you to <unk>.
Speaker Change: Around that.
Speaker Change: That 10% Mark and I think one of the differences between what we've been saying and what we're saying now with more of the details in place is that one of the things we've been saying pretty clearly through the quarters is that we think the combination of UTI and <unk>.
Troy Anderson: And I think one of the differences between what we've been saying and what we're saying now with more of the details in place is that one of the things we've been saying pretty clearly through quarters is that we think the combination of UTI and Concord is a business that's somewhere in the mid to high teens in terms of EBITDA. And now we're saying we feel it's closer to 20. And that's an improvement of what we've seen in terms of as we move forward. Yeah, the one thing I'll add, Raj, is that if you think about the trajectory, so 24 to 25, we've already said the approximately 10%.
Concord is a business that's somewhere in the mid to high teens in terms of of.
Speaker Change: <unk>.
Speaker Change: EBITDA and now we're saying we feel it's closer to 20.
Speaker Change: And Thats an improvement of what we've seen in terms of as we move forward.
Speaker Change: Yes, the one thing I'll add Raj is that if you think about the trajectory. So 24 to 25, we've already said is approximately 10% we probably.
Troy Anderson: We probably, because we, the program, any programs we launched at this point in 25, we were very late in 25. And the campuses would be, you know, made, you know, we're hopeful maybe one in the second quarter of 26. And then one in the third quarter, early fourth quarter. So not a huge amount of impact on 26. And then again, programs sort of bathing in. So we probably pull back a little bit in that 26, 27 timing. And then within an accelerates, right? So we're not necessarily 10% every year. Maybe it's 10. And then, you know, 7, 8, 9, and then 11, 12, you know, it starts accelerating in that 27, 28, 29 time horizon to get to that 10.
Speaker Change: We.
Speaker Change: The program any programs, we launched at this point 25 will be very late in 'twenty five in the campuses would be.
Speaker Change: We are hopeful maybe one in the second quarter of 2006, and then one in the third quarter early fourth quarter. So not a huge amount of impact on 'twenty six and then again programs sort of phasing in so we probably pulled back a little bit ended in that 'twenty six 'twenty seven timing and then it accelerates right. So we're not necessarily.
Speaker Change: 10% every year.
Speaker Change: Maybe it's 10, and then 789 and then 11 12. It started accelerating in that 27, 28, 29 time horizon to get to that 10 CAGR.
Raj Sharma: Okay, I got it. Thank you. Very helpful. I'll take my questions off. line. Thank you.
Speaker Change: Got it thank you very helpful.
Speaker Change: I'll take my questions offline. Thank you alright, great. Thank you.
unknown: And I'm out.
Eric Martinuzzi: The next question comes from Eric Martinuzzi with Lake Street. Please go ahead.
Speaker Change: The next question comes from Eric Martin Newsy with Lake Street. Please go ahead.
Operator: The next question comes from Eric Martinuzzi with Lake Street. Please go ahead.
Eric Martinuzzi: Yeah, just interested in your thoughts on the most recent unemployment report. Job growth a little bit below what people were expecting, unemployment a little bit higher. That's the macro, but from your perspective on the micro side, are you seeing anything?
Speaker Change: Yes, just interested in your thoughts on the most recent unemployment report.
Speaker Change: Job growth a little bit below what people were expecting unemployment a little bit higher.
Speaker Change: That's the macro but from your perspective on the micro side are you seeing anything not necessarily with your high school.
Eric Martinuzzi: I'm not necessarily with your high school pipeline, but with your adult learner pipeline.
Speaker Change: High school pipeline, but with your adult learner pipeline.
Jerome Grant: So, hey Eric, good to hear from you, Jerome. Number one, one of the things we've said is when it starts to move, there's usually a lag somewhere in the 90 to 160 days when you start to see, but you potentially start to see impact when the unemployment rate starts to rise. And so, we're seeing the signaling out there that things are tightening up, but it's too new to be able to point to a number and say that. We are seeing that our interest is on the rise. We continue to see strong double-digit growth of our inquiries, and our conversion rates are very, very strong.
Speaker Change: So Eric good to hear from you Joe.
Eric: Number one one of the things. We've said is is when when it starts to move there's usually a lag somewhere in the in the.
Speaker Change: 90 to 160 days when you start to see.
Speaker Change: You potentially start to see impact yeah, when the unemployment rates starts to rise and so we're seeing the signaling out there that things are tightening up but it's too new to be able to point to a number and say that we are seeing that our interest is on the rise.
Speaker Change: We continue to see strong double digit growth of our inquiries and.
Speaker Change: Our conversion rates are very very strong so we feel good about that.
Jerome Grant: So, we feel good about that. But I can't yet call that what we just saw published has already seen the uptick. It's just a leading indicator, which is a strong indication in our part of the market that things tend to move in that direction.
Speaker Change: But.
Speaker Change: I can't yet call that what we just saw published has already.
Speaker Change: Seeing the uptick is just a leading indicator which is.
Speaker Change:
Speaker Change: Our strong and.
Speaker Change: A strong indication and are part of the market that things tend to move in that direction.
Speaker Change: Got it.
Eric Martinuzzi: Got it. As far as the North Star, you know, this is an organic plan, you know, this phase two. Curious to know, what is your expectation? And I know it can change based on a single phone call, but M&A is part of that build from 800 million to a billion one. Is there anything that closes that gap significantly that's maybe somebody you've had conversations with that have started to heat up?
Eric Martinuzzi: As far as North Star, you know, this is an organic plan, you know, this phase two. Curious to know, what is your expectation, and I know it can change based on a single phone call, but M&A as part of that build from $800 million to $1.1 billion, is there anything that closes that gap significantly that maybe somebody you've had conversations with that have started to heat up?
Speaker Change: First the North Star.
Speaker Change: This is an organic plan. This phase two curious to know what is your expectation and I know it can change based on a single phone call but.
Speaker Change: M&A is part of that build from $800 million to 1 billion won.
Speaker Change: Is there anything that causes that gap significantly that's maybe somebody you've had conversations with that have started to heat up.
Jerome Grant: Well, first of all, I just want to make sure you're clear, M&A has nothing to do with the nothing we're talking about right now. And also, I think the way I look at it is we wanna be very, very opportunistic but very strategic in our thinking. We are looking for things that complement what we're doing, whether it's from a geographic perspective or from a program perspective, with particular attention continuing to be focused on healthcare.
Speaker Change: Well first of all I just wanted to make sure you're clear M&A has nothing to do with the <unk>.
Jerome Grant: Well, first of all, I just want to make sure you're clear. M&A has nothing to do with the 800 million to 1.1 billion. It is an organic plan that we put out in the market. So, everything that we signal are things that we've been doing very successfully for the last five years: opening new campuses, starting new programs, becoming more efficient with our marketing and the things that do more margin expansion, et cetera. So, any M&A activity would actually be additive to what we're talking about. So, I just wanted to put that qualifier in there that none of it is assumed in the plan.
Speaker Change: The $800 million to $1 1 billion. It is an organic plan that we put out in the market. So everything that we.
Speaker Change: Signal are things that we've been doing very successfully for the last five years opening new campuses starting new programs.
Speaker Change: Becoming more efficient with our marketing and the things that do both margin expansion et cetera. So any M&A activity would actually be additive to what we're talking about so just wanted to put that qualifier in there that none of it is assumed in the plan.
Jerome Grant: And I think I could probably only reiterate where we are right now, which is, you know, we have been having conversations with a number of folks, but nothing to talk about right now. And also, I think the way I've looked at it is we want to be very, very opportunistic, but very strategic in our thinking. We are looking for things that complement what we're doing, whether it's from a geographic perspective or from a program perspective, you know, with particular attention continuing to be focused in healthcare. We had said before that nursing is a strong focus of what we'd like to see ourselves move forth organically once the growth restrictions have been lifted, but inorganically in the short term.
Speaker Change: And I think I can probably only reiterate where we are right now which is.
Speaker Change: We have been having conversations.
Speaker Change: With the.
Speaker Change: A number of folks but but.
Speaker Change: The the <unk>.
Speaker Change: Nothing too.
Speaker Change: Talk about right now and also I think Mike the.
Speaker Change: The way I look at it is we want to be very very.
Speaker Change: Opportunistic, but very strategic in our thinking we are looking for things that complement what we're doing whether it's from a geographic perspective or from a program perspective with particular attention continuing to be focused in health care, We had said before that nursing as a.
Jerome Grant: We've said before that nursing is a strong focus of what we'd like to see ourselves move forward organically once the growth restrictions have been lifted, but inorganically in the short term. So, nothing to announce right now, but we remain active in conversations, and we'll let you know if anything percolates to that point.
Eric Martinuzzi: Got it. Thanks for taking my questions.
Speaker Change: A strong focus of where we'd like to see ourselves move both organically once the the growth restrictions have been lifted but inorganically in the in the short term.
Jerome Grant: So, nothing to announce right now, but we remain active in conversations, and we'll let you know if anything percolates to that point.
Speaker Change: So nothing to announce right now, but we remain active in conversations and we'll let you know if anything percolate to that point.
Eric Martinuzzi: Thank you. Thanks for taking my questions.
Speaker Change: Got it thanks for taking my questions.
Eric Martin: Sure. Thank you Eric.
Operator: Sure, thank you, Eric. This concludes our question and answer session.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jerome Grant for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Jerome Grant for any closing remarks.
Jerome Grant: I would like to turn the conference back over to Jerome Grant for any closing remarks. Thank you very much. I appreciate those great questions and the attention. Sorry, we took a little more time. We wanted to spend a little more time talking about our longer range plans.
Jerome Grant: Thank you very much and I appreciate those great questions and the attention sorry, we took a little more time, we wanted to spend a little more time talking about our longer range longer range plans.
Jerome Grant: With that, we'll close the call. We look forward to meeting with all of you over the next couple of days and reporting back again in three months. Thanks and have a great evening.
Speaker Change: With that we'll close the call we look forward to meeting with all of you over the next couple of days and reporting back again in three months, thanks and have a great evening.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: For attending today's presentation you may now disconnect.
You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].