Universal Technical Institute, Inc. Aktie

Good day, and welcome to the Universal Technical Institute's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded.

I would now like to turn the conference over to Matt Kempton, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Hello, and welcome to Universal Technical Institute's Fiscal Third Quarter 2026 Earnings Call. Joining me today are our CEO, Jerome Grant; and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC.

During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law.

Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2025. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for, the company's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement and investor presentation.

With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks. Jerome?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. The third quarter was another strong quarter for Universal Technical Institute and reinforces our confidence in both the environment for job demand for our students as well as student interest in our program offerings. Despite some shorter-term challenges we will discuss, we remain extremely confident in the strength of our long-term North Star strategy. driven by the strength of our new campuses and programs as well as stronger-than-expected interest in our skilled trade programs, we exceeded expectations for new student starts this quarter, generating 11% year-over-year growth, with a particularly strong contribution from UTI division, which increased 23% year-over-year.

Average full-time active students increased 6%, reflecting continued enrollment growth across both UTI and copper divisions. Revenue grew 7% year-over-year to $219 million. Baseline adjusted EBITDA for the third quarter was $27 million. Our SEC reported adjusted EBITDA for the quarter was $18 million due to $9 million in strategic growth investments. These results continue to validate the strategy we've been executing over the past several years and reinforced that the underlying demand environment remains exceptionally healthy. Across the industries we serve, employers continue to face significant shortages of skilled workers, whether we're speaking with automotive dealers, manufacturers, health care systems, electrical contractors or industrial employers, the message is consistent. Demand for qualified skilled graduates continues to far exceed the available supply. That sustained supply and demand imbalance has created a durable and attractive backdrop for our business.

We are seeing particularly strong momentum across skilled trades, where infrastructure investment, domestic manufacturer, energy projects and data center construction continue to drive demand for electricians, HVAC, tech, welders, industrial maintenance professionals and other skilled workers. Nearly every week, you will read articles in major print and digital publications such as the Wall Street Journal, New York Times, Forbes and Bloomer Business Week about both the increasing demand for and accelerating interest in the trades. These trends further reinforce that the investments we've made to expand our Skilled Trades offerings were the right strategic decision.

The demand for skilled health care workers also remains quite strong, with providers continuing to face staffing shortages across many of the disciplines we serve. We're seeing particularly strong momentum in our radiology technician programs where enrollment and demand have ramped rapidly. Now at the same time, employer demand for transportation technicians remains exceptionally robust. For example, there are more than twice as many open positions on our campus job boards than the number of automotive or diesel graduates we produce. And the Bureau of Labor Statistics is projecting tens of thousands of job openings in this space. Several years ago, we made the decision to expand beyond transportation because we believe that the long-term workforce education opportunity was much broader.

Today, we have the programs, campuses and employer relationships in place to meet the evolving student demand. As students increasingly gravitate towards our skilled trades offering, our newer campuses, capacity expansions of skilled trays offering and recently launched programs continue to outperform both our plan and market expectations. These results further validate the diversification strategy we've been executing throughout North Star. And because we move aggressively and invested ahead of where the student demand is moving, we are well positioned to capture those opportunities while continuing to support the needs of our employer partners in all industries we serve.

While we've had strong year-to-date results and the overall demand environment remains exceptionally healthy, we have unfortunately seen some near-term softness in our UTI division's high school channel relative to our original expectations. Specifically, fourth quarter UTI high school starts, which are primarily weighted towards auto and diesel programs are tracking below our initial outlook. This year's UTI division lead flow is up over 15%. And candidly, we simply did not get to all the prospective students who expressed interest, but we view this as a near-term opportunity to improve execution, especially within this channel. We are proactively taking steps to strengthen our engagement with prospective students and improve conversion through the enrollment process. To address this, this summer, we are increasing our admission staffing dedicated to the high school channel by approximately 20%.

We've largely completed this initiative, putting us on strong footing heading into fiscal 2027. These staffing additions will improve our conversion and better serve the needs of our employer partners. As previously noted, we also experienced stronger-than-expected student interest in our skilled trades offerings. As a result, we saw more enrollment growth than originally anticipated in these programs, which are shorter in duration, delivering marginally less revenue and profit than some of our other offerings like automotive and diesel. We are continuously refining our pricing strategies and strengthening the value proposition across our portfolio to ensure our programs remain aligned with employer needs, evolving student demand and long-term market opportunities. Collectively, these actions position us to more optimally balance enrollment opportunities across the portfolio, improve execution and enhance profitability over time. Although these efforts won't materially change the financial outcome for fiscal 2026, they reinforce our confidence in the opportunities ahead and strengthen our outlook as we enter fiscal 2027.

With that backdrop, let me provide some additional context on our full year outlook. Entering 2026. And as we communicated with you throughout the year, we expected a strong fourth quarter contribution from the UTI high school channel. But as I mentioned, those new student starts are coming in softer than anticipated. As a result, this and to a smaller degree, the faster-than-expected increase in student interest in our skilled trades programs over transportation offering are impacting our fiscal 2026 expectations. And let me make this clear. This is only about our near-term financial outlook. While we are updating our fiscal 2026 financial guidance, we are really adjusting expectations for Q4 2026. We now anticipate generating consolidated revenue between $893 million and $900 million, reflecting approximately 7% year-over-year growth. Baseline adjusted EBITDA is now expected to exceed $135 million and reported adjusted EBITDA to between $100 million and $103 million due to approximately $35 million of growth investments.

We're also tightening the range of our new student starts, which are now expected to be between 31,900 and 32,300. I want to emphasize that these fiscal 2026 adjustments in no way whatsoever alter our confidence and the result of the financial targets we've outlined for Phase 2 of our North Star strategy. We remain confident in both our medium- and long-term projections, which means we are still firmly on track to exceed $1.2 billion in revenue and approached $220 million in adjusted EBITDA in 2029. Bruce will walk through our updated guidance in more detail, but we remain confident in North Star financial targets and the significant long-term opportunity in front of us.

The objective of the second phase of our North Star strategy was to build a larger, more diversified workforce education platform with a durable growth engine. This quarter is another proof point that, that strategy is working. Our new campuses continue to outpace expectations. For example, the first start at our newly launched UTI Atlanta campus in July performed exceptionally well, tracking 30% ahead of expectations. Additionally, the strength of UTI San Antonio, which opened in the spring has not slowed. To date, new student starts are tracking roughly 40% ahead of the launch model. The early strong performance of both UTI San Antonio and UTI Atlanta gives us confidence these locations have the potential to ramp to scale faster and perhaps above their projected mature run rates of approximately 800 and more than 1,500 students annually, respectively.

Looking ahead, we continue to make excellent progress on our fiscal 2027 campus pipeline. Construction and planning activities are advancing as expected, and we recently announced the campus precedents for our new UTI campus in Salt Lake City and our new Concorde campuses in both Houston and the Phoenix metropolitan areas. These new locations represent another significant opportunity to expand reach into attractive and underserved markets. Our comprehensive UTI campus in Salt Lake City, like Atlanta is designed to support approximately 1,500 students while each of the new [ Concorde campuses ] to open in Houston, Atlanta and Glendale, Arizona, are expected to serve roughly 600 students each.

With all 3 of our new fiscal 2026 campus is now open and 4 campuses getting ready to launch in fiscal 2027, we remain firmly on track with our North Star operational targets. To reiterate, we plan to open a minimum of 2 and up to 5 new campuses annually, while replicating 12 to 20 new programs annually across the legacy UTI and Concorde campuses each fiscal year. With respect to program replications, this year, we're on track to launch more than 20 new programs across UTI in Concorde, making fiscal 2026 one of the most active years for program replications in our history. At the UTI division, we've continued to build on the red hot demand for our skilled trades offerings while strengthening our position in aviation. With 12 new programs on existing UTI campuses across HVAC, our Electrical suite and aviation maintenance in 2026. Most recently, we completed the nationwide rollout of our electric vehicle and hybrid curriculum and added HVAC/R to the UTI Lyle campus.

On the Concorde side, we set out to launch 10 program replications this year. And as of today, we've actually successfully launched 12 programs across the health care campuses. These programs include dental assistant, diagnostic medical sonography pharmacy technician radiology technician and surgical technician. Over the last several years, we have successfully executed the first 2 pillars of the North Star strategy, growth and diversification. We fundamentally transformed Universal Technical Institute from a primarily transportation-focused education company into a diversified workforce education platform serving transportation, the skilled trades, health care and the dental markets. A major catalyst in that transformation was our acquisition of Concorde Career Colleges, which unlock an entirely new market as we made our entrance into health care and broaden our addressable market.

From the beginning, we took a deliberate approach to integration, preserving the strength and brands of both organizations while creating infrastructure needed to support a larger, more diversified company. That approach has worked brilliantly and has enabled us to expand our campus footprint, launch dozens of new programs, increased student capacity and establish a stronger enterprise. As we continue to scale, we've reached an important inflection point, where we believe we can better leverage the capabilities we've built across the organization. As I mentioned last quarter, we're increasingly operating as 1 enterprise with 2 highly respected brands serving distinct markets. The North Star strategy, as we've repeatedly shared with you, has 3 components: growth, diversification and optimization.

To date, the third leg of the North Star has been focused on optimizing how we operate behind the scenes by unifying supporting capabilities and simplifying operations. In the culmination of a year-long strategic initiative, as of the end of July, we are now operating all of our programs within both of our brands under one enterprise operating model. This is an important planned step in the evolution of our company. By unifying the capabilities we've developed across both UTI and Concorde brands, we can simplify how we operate, improved student acquisition and better align our resources behind the highest return opportunities across our businesses.

Many of these opportunities ahead are enterprise-wide. Whether it's adapting to change in the digital marketing landscape, leveraging the power of artificial intelligence to enhance student acquisition, deepening employer partnerships or supporting future campus expansion, we believe a more unified approach will allow us to move faster and execute more effectively. What does not change in this unification is the strength of our customer-facing brands, UTI and Concorde have tremendous brand equity in respective markets, and we will continue to preserve what makes each institution unique while leveraging the capabilities we have cultivated.

One area where this is particularly relevant as student acquisition. Students are increasingly using AI tools earlier in their research process, which is changing where [indiscernible] originate and how prospective students engage with our brands. Our acquisition strategy has never depended on a single source of lead. We have built a diversified model that spans paid search, social, organic discovery, admissions outreach, referrals, nurture campaigns and other digital off-line channels. That diversification has allowed us to adapt as search behaviors evolve. We're already seeing the resilience of our results.

At Concorde, total marketing leads increased 22% year-over-year, while UTI total increase increased 18%, demonstrating continued healthy demand across the portfolio even as students increasingly discover us through different channels. We are also continuing to strengthen our position by creating more authoritative content, optimizing our media investments, expanding third-party validation through employer relationships and earned media and enhancing how we measure performance as AI-driven discovery continues to evolve. We believe these efforts, combined with our strong brand and employer partnerships position us well to efficiently continue attracting prospective students regardless of how they choose to begin their search.

Another strong area of opportunity is expanding our B2B partnerships. While each employer has unique needs, employers across the industries we serve are facing common challenges. They need more qualified talent and they need solutions that help them recruit, train and retain talent more effectively. We believe our platform positions us to play even a larger role in how we can help employers address these workforce challenges. We continue to pursue opportunities to create customized workforce solutions that expand the talent pipeline for new employer partners while deepening our relationships with our existing partners.

For example, we're working with several of our current transportation and skilled trade partners that need to hire hundreds of additional workers annually. A number of these partners are facing rising costs due to limited supply of qualified talent and are evaluating -- having UTI expand their bespoke training curriculum across additional campuses while supporting recruitment in student services. We're currently in conversation with a major electric vehicle manufacturer regarding this topic. Another potential partner a leading multinational company focused on electrification and industrial automation also has limited internal training capacity due to the number of facilities available to support its month-long onboarding process. This company is exploring a new broader partnership with UTI to spot recruitment, training and onboarding, while leveraging our campuses to create additional capacity.

We're also evaluating similar opportunities with major airlines and defense contractors that are facing increasing pressure to attract and retain the talent necessary to fulfill contract obligations. And finally, we continue to work with Heartland to address the significant demand for dental hygienist. We're currently discussing 3 additional co-branded Concorde campuses that would build on the success of Fort Myers location. With Concorde recruiting, training and placing students into Heartland locations nationwide. While each of these opportunities is unique, they all reinforce the same point. Employers increasingly view Universal Technical Institute as a trusted workforce partner capable of helping them solve critical talent challenges. We look forward to sharing more specific details on these opportunities as they continue to develop.

As we look ahead, our confidence in the business continues to strengthen as our North Star strategy moves forward. As demonstrated by the performance of our new campuses and programs, we have built a durable and repeatable growth platform, supported by strong demand, disciplined execution, a healthy balance sheet and meaningful long-term tailwinds across the workforce education. Moving forward, we will continue to optimize our existing campuses and program portfolio to further improve campus level performance enhance conversion and retention and drive same-store growth, leverage our proven campus launch model to expand into attractive new markets while adding high-demand programs and increasing capacity in areas where demand is strongest, and deepen and diversify our strategic partnerships with employers and industry leaders.

Now before I wrap up, I'd like to highlight the recognition our organization continues to receive. Earlier this year, we were added to the S&P SmallCap 600 Index, an important milestone that reflects the significant progress we've made scaling and diversifying the company. Additionally, this fall, 3 of our UTI campuses will once again be recognized as ACCSC School of Excellence, underscoring our continued commitment to educational quality, student outcomes and operational excellence. These accomplishments reinforce the strength of our platform, the dedication of our people, the significant progress we've made and most notably, the immense opportunity that remains ahead.

I want to thank our students, instructors, campus team and employees for their hard work and commitment. Their passion for steering students and supporting our employer partners is what makes these results possible. We're proud of our performance this quarter and remain focused on executing on our strategy and creating long-term value for our students, employer partners and shareholders.

With that, I'll turn the call over to Bruce, our CFO, to review our third quarter financials and provide you with additional details on our guidance. Bruce?

Thank you, Jerome. As Jerome discussed, our third quarter results reflect a business that continues to execute well operationally, while we also invest to support the long-term opportunity outlined in our North Star Phase 2 strategy. In the third quarter, total average full-time active students grew 5.8% year-over-year to 25,131 while total new student starts increased 10.9% to 6,342. This growth was driven by continued strength across our newly launched programs and campuses with the UTI division contributing significantly to the increase.

Concorde starts were softer driven by fewer clinical starts in the quarter relative to the comparable year. As we've mentioned in the past, start instances can vary based on academic calendars and the timing of program cohorts, and this impact was known and included in our Q3 outlook. The Concorde division grew average full-time active students, 8.5% year-over-year for the third quarter, reflecting continued strength in our dental programs. The UTI division increased average full-time active students 4% year-over-year, driven by continued momentum across new campuses and program expansions as well as strong demand for skilled trades offerings. Third quarter revenue on a consolidated basis increased 7.2% to $218.9 million. Concorde contributed $80.9 million, an increase of 11.1% over the prior year quarter, while the UTI division contributed $138 million, an increase of 5% over the prior year quarter.

Turning to profitability. Consolidated net income for the third quarter was $2.3 million or $0.04 per diluted share, which was consistent with our expectations outlined last quarter. Baseline adjusted EBITDA for the third quarter was $27.2 million, including $9 million in growth investments, our SEC reported adjusted EBITDA for the quarter was $18.2 million. At the end of the quarter, we had 55 million shares outstanding. Total available liquidity at the end of the quarter was $181 million, including short-term investments and remaining capacity on our revolving credit facility. Year-to-date capital expenditures were $85.4 million or approximately 85% of our originally targeted spend for the year. In an effort to capitalize on the momentum we're seeing in the business and to ensure on-time launches of our fiscal year '27 initiatives, we've accelerated some of our CapEx spend and now expect to execute on approximately $110 million of capital expenditures this year.

Now turning to our full year outlook. As Jerome discussed, the underlying fundamentals of the business remain healthy. Employer demand continues to exceed available graduate supply, student interest remains strong and our newer campuses and recently launched programs continue to perform at or above our expectations. We also believe it's important to balance that confidence with appropriate expectations for the remainder of the current year based on what we're now seeing. Due to the challenge in our high school starts in Q4 and the more muted impact of our program mix, we now expect consolidated revenue to range from $893 million to $900 million for fiscal 2026 or approximately 7% year-over-year growth at the midpoint.

Net income is now anticipated to be between $32 million and $36 million, with diluted earnings per share of $0.57 to $0.64. Baseline adjusted EBITDA is now expected to exceed $135 million and reported adjusted EBITDA to be between $100 million and $103 million due to approximately $35 million of growth investments. We are also tightening the range for total new student starts, which are now expected to be between 31,900 and 32,300.

Let me provide some additional context around what's driving the revised outlook. First, and most importantly, as Jerome emphasized, this is not an underlying demand issue. In fact, inquiries are up solidly in both divisions. We exceeded our expectations for new student starts during the quarter, and we continue to expect to finish the year squarely in the range of our original start expectations. The primary driver, as Jerome outlined, is lower-than-anticipated fourth quarter new student starts specific to our UTI division's high school channel, primarily in the [indiscernible] program. To a lesser extent, we're seeing some impact of UTI's portfolio mix due to the incredibly strong starts performance in the skilled trades, which are shorter and drive less revenue compared to other offerings.

As we've shared with you since first releasing our fiscal 2026 guidance last November, based on our normal seasonality as well as the timing of our growth investments this year, we expected Q4 to have an outsized impact on the year. Because our new student starts in the fourth quarter are not coming in as strong as we'd initially expected, revenue and profitability are impacted and we've, therefore, aligned our outlook to reflect a still strong and very profitable but more measured Q4. Further, we continue to maintain confidence in the long-term earnings power of the business and in our trajectory toward our fiscal 2029 targets.

Second, fiscal 2026 represents the largest investment year-to-date in our North Star Phase 2. We've intentionally accelerated investments in campus expansions and new programs. The early results we're seeing across these initiatives only reinforce our conviction that expanding access to the programs we offer is the best use of capital for our students, employer partners and investors. Nothing in our updated fiscal 2026 outlook changes our confidence in the long-term financial framework we've established for North Star Phase 2 nor in the underlying building blocks to get there. We continue to maintain confidence in delivering more than $1.2 billion in revenue by fiscal 2029 and adjusted EBITDA approaching $220 million that year.

As we move into fiscal 2027, we continue to expect revenue growth higher than fiscal 2026 and are targeting modest EBITDA growth with more meaningful EBITDA expansion in fiscal 2028 and 2029. Supporting new campus and program launches, we continue to plan for $100 million or more of annual capital expenditures. Importantly, looking ahead, we remain confident in our long-term outlook outlined in Phase 2 of our North Star strategy. With the results we're seeing, we are emboldened that the investments we are making today are strengthening the foundation for sustained growth and long-term value creation. We also remain focused on executing with discipline, managing our investments thoughtfully and positioning the company to continue to deliver revenue growth, margin expansion and shareholder value.

In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation and upcoming 10-Q filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives and guidance. As always, thank you to our students, team, partners and investors for your ongoing support.

I'd now like to turn the call over to the operator for Q&A. Operator?

[Operator Instructions] And today's first question comes from Jasper Bibb with Truist.

You mentioned, I think in the fourth quarter, the high school leads were up 15% year-over-year on UTI, but it sounds like the starts are going to be flat, maybe down in the fiscal fourth quarter for the high school channel. So I guess, just to clarify, do you think this was a capacity problem on your end if some leads may be drop on the floor for lack of a better term? Or conversion problem? And how does that inform some of the changes that it sounds like you're making?

It's a great question. It's not a capacity issue. We do have some capacity issues associated with the skilled trades programs which are growing at a significantly faster pace than we originally planned. But we're working very fast to increase capacity for those courses. I frankly, it was an execution issue in terms of the number of reps we had in the field on a persistent basis. We were not able to get to all of the students that we're inquiring. And frankly, that's what's making it fall short. As we said in the call, we've already taken steps in the last month or 2 to remediate that. And we're loaded now with our reps, and we've actually added 20% to the field this year so that it's not replicated again in 2027.

And then I think as you look back to last year, I think the high school channel was a little bit weaker than expected than other diesel in fiscal '25, too. I guess maybe -- are you seeing anything different in the student behavior that's made the productivity of the high school channel or the enrollment cycle a little like weaker or less predictable than it's been historically over the past 2 years?

Well, as I said, the weakness we outlined was more about the volume of reps we had in the field to be able to process the leads that we had. The change we are seeing in behavior is traditionally, the high school students have been all about auto diesel, right? And that they're 16, 17 years old, they just got their first car and all they want to do is fixed cars. We believe that because of a significant increase in the amount of press that's out there around the opportunities in places like welding, electronics, HVAC technicians, et cetera, that people are seeing and younger people are seeing that as an opportunity to hit where the trend is going. I'm going to go help build data centers or industrial automation or things along those lines. What we didn't get right and our mix shift this year is just how many of the students were going to choose these skilled trades over auto diesel.

The demand for auto diesel is still quite high and projected to become even higher. What we're seeing, though, is that -- I think because of a lot of the energy that's out there in the market about onshoring and data centers and manufacturing being in the U.S., et cetera, that the message has gotten more down into -- what traditionally was really just an auto diesel group that, "Hey, I want to be a welder or I want to be an HVAC tech. I can make good money." Frankly, I can get through school faster. And that mix shift, we did not have right this year.

Last one for me. I know you said that fiscal '29 targets won't be impacted by this, but you build there of '27 and '28. I mean just to kind of confirm '27 expectations in the context of the plan, would it be, I guess, fair to say that maybe total enrollment or total revenue might need to recalibrate for a lower starting point on enrollment going into the year? And then on the comment about modest EBITDA dollar growth for 2017, is that going to be off the new $100 million to $103 million baseline?

Jasper, this is Bruce. Let me address that. So overall, I can tell you, we feel very confident about '27. So yes, there will be a little bit of carry-in impact from the high school miss directly. But there are so many offsets with the incredible demand we're seeing on the skilled trade side. And frankly, we have been building capacity all for the last several quarters now in '26. You're going to really see that that better capacity utilization starts to flow through in '27. We're going to lean in further to capacity in '27 in general in the skilled trades. So no, we don't expect to come off our guidance, especially on EBITDA for '27. We feel very good about how that -- our forward-looking year in '27 is shaping up.

And the next question is from Luke Horton with Northland Securities.

Just wanted to touch back on kind of the softer high school enrollment starts. Were you guys alluding to this kind of relating to the increasing usage of AI search as causing kind of some top of the funnel disruptions. Was that kind of what led to the softer high school? Or are those kind of 2 separate instances?

No. No, not at all. And you're familiar with most of how high school works. Most of how high school works is not at all dependent on AI search whatsoever. We have had 160-some reps out in the field. They do presentations in front of students who inquire off a QR code on the board for the presentation and -- or an inquiry card, and those are followed up on manually. What I'm saying is that throughout the year, we were running at a deficit of the number of reps that were necessary to get to the number that we were expecting out of them. It was really not a strategy issue. It's really not an AI issue. It was an execution issue, and we've rectified it. So that's more of what of what we saw there.

And then the other piece we saw, it's about a 70-30 mix of the deficit is we did not believe going into the year that this many high school students were going to choose to go into the skilled trades, because they hadn't before. But that dynamic has shifted and skilled trades are shorter, are cheaper, are marginally less profitable, although we're working on that. And that's another point in which that affected the high school channel.

What we said about AI, just as a point, is that, that type of search is a part of how people find us. But because of the number of diversified channels that people use to find us, we are not seeing the effects in the AI disruption that you are seeing from people who are heavily weighted towards search technologies. So not really much to do at all with the high school channel and rather muted when it comes to UTI. As a matter of fact, our search volume is up, as we said, 18% for UTI, 23% for Concorde. That's because our marketing departments have done such a great job of pivoting into these other channels. There have seen any headwinds in the AI space.

Okay. Got it. No, that's helpful. And then just kind of shifting gears on the unified UTI and Concorde being under one kind of enterprise operating model. Are there any sort of expected cost synergies or efficiency gains that you guys want to call out or any sort of timeframe where you expect those to materialize? Or anything significant there?

Yes. I mean we've begun the process of the unification most recently in July as we had been planning throughout the year. Just to reiterate, when we bought Concorde, we specifically did not look at integrating the operating functions or the customer acquisition functions because we believe that in the first 3 years, we could make significant progress in moving Concorde from a $185 million company with single-digit EBITDA to a $300 million company with double-digit EBITDA, and we were very successful at doing that.

Now that we've reached sort of a standard operating model of program expansions, campus launches, capacity increases there's much more similar about the 2 units than they were separate. And that's why we made the choice earlier this year to begin the process now. Sure. Over time, there definitely will be synergies, right? Some of the duplications we lived with for 3 years will be taken out of the system. But what we really think is that it's going to allow us to move faster and more efficiently in things like the customer acquisition process. A single investment in AI technologies and systems like CRMs, student information systems, communication systems, all of that will allow us to move more efficiently and effectively. And so yes, we will see synergies and we'll lay that out to you over time. But we really believe it's going to have a simplification effect on the company by merging systems and processes and technologies moving forward.

And the next question is from Steven Frankel with Rosenblatt.

Just to revisit this [indiscernible] one more time. Maybe parse out for us, how much of the shortfall is your staffing issue versus mix shift to the students that you did get choosing to be in skilled trades. And then one other aspect. Are any of these students get able over a period of time? And do you have e-mail campaigns or other outbound ways to maybe pull them back into the funnel?

Yes. Sure, Steven. So I can maybe take the first part of that. Jerome can take the second part. So let me bridge you between kind of 2 data points. The adjusted EBITDA numbers we've had in our guide originally, it was north of $155 million, we're now seeing that baseline EBITDA is going to be about $135 million, just north of that. That $20 million delta 70%, roughly, Stephen, is directly related to the auto diesel high school start miss for all the reasons Drone just outlined. About 30% is the mix piece.

And remember, that mix thing is something that's not an accident or where this is a very good thing for the company. We're intentionally driving this mix shift is a critical part of our strategy over the next 3 years. It just happened a little faster than we anticipated. So that's what we're sort of working through and we have good plans to address that for '27. But that's the mix shift on your first part of your question, and I can let Jerome second piece.

Yes, absolutely. And in the staffing up we've done over the last month, 1.5 months, as we've seen -- as we saw the trend begin to happen. Step 1 early in the year is to go back to those that did not convert and see if we can't get them in, in the first quarter of next year. right? And so absolutely, the basket of nonconverting leads is larger this year, and we have 20% more staff that we've handed them to. So have expectations that they'll begin to rally in the first quarter.

Okay. Great. And then 1 more funnel related question. Everybody talks about AI search kind of raising your cost because you've got to do a lot of other things that you described, what's going on in your cost per lead?

Well, in general, cost per lead has been relatively stable overall. If you look at our -- just our marketing and advertising spend, Stephen, as a percent of revenue, we're actually down a little bit sequentially versus last quarter up a little versus prior year as we really focus on new campus and new program launches. But we've not seen a very material impact in cost [indiscernible] this point.

Our next question comes from Eric Martinuzzi with Lake Street.

Jerome, I wanted to follow up on your reps in the field number. You said you're at 160. Is that you were at 160 and you're going to 192 you were at 130-something and you went 160.

It's somewhere in between, right? We were more in the range of 140-ish throughout the year. running at somewhat of a deficit, team believed they could catch up and they didn't. And then we're adding to that, again, another tenors out of that as well.

Okay. So as we stand here today, we're at roughly $150-ish and that is sufficient to...

170ish, a little over 170.

Okay. All right. And as far as ramping those field reps, is there -- is it pretty cut and dry recipe that you can have somebody or is there a training time line that takes place?

Well, a brand-new rep is not as productive as say, 2- or 3-year rep. That's when they hit their stride. They don't have the relationships with counselors, with schools, et cetera, to be able to do that. That's in our expectation for next year, but it's mitigated by the increase in head count as well. So yes, I mean, a seasoned rep is going to have more success than someone who's been there a year or so but we've got that built into our plan, and we'll share that with you in November when we set guidance for next year.

Okay. And I was wondering if the -- if there was any Obviously, Atlanta is a new campus, you opened it in July. Was there any tail in the student shift that you enrolled? You said, obviously, you were ahead of plan, you said 30% ahead. But did you see -- was it also with the mix shift evident in Atlanta?

Not really. And the reason is that when you think about the time line in which you are able to start recruiting to a new campus when you've been approved by Ed for Title IV funding, your state approvals, et cetera. That time line wasn't long enough for us to be counting on many high school kids to come in, in July. So in our numbers, we didn't expect that many high school kids to come in. Now that being said, we had already, as we told you on our last call, we had already increased the capacity from the original model and our skilled trades by 50% in the bigger areas because our anticipation was that we were going to get more interest in skilled trades initially because it's also initially mostly an adult population that you get in your initial cohorts.

And we were right. right, is that we're getting about what we expected to get out of auto diesel from the adult population. A longer sale, easier to bring that -- or easier to identify and bring that person through. But we also are glad that we started the capacity increases there. early because when we're talking about 30% upside, a lot of that did come out of skilled trades.

Got it. And then I just wanted to -- Bruce, if you could recap that FY '27. I know it wasn't guidance, but just sort of color. I think you said FY 2027, that the anticipated revenue is greater than FY 2026. So you've guided to $893 million to $900 million. So something in excess of that would be the expectation for 2027. And then I wanted to make sure I understood the adjusted EBITDA, the modest expansion commentary there is that the 100 to 103 new range modest expansion from that?

Well, so first of all, Eric, a couple of things. Let me just -- we have not guided '27 yet, but I'll just give you sort of some general contours like I said in my prepared remarks, our revenue growth will be higher in '27 versus '26. I think in general, where we had sort of pegged EBITDA before that modest growth versus our additional guide, we're going to be -- we feel kind of comfortable with that as where analysts have us right now. But we have not guided 27%. We're still working on it, but we feel very strong about the plan in general.

And the next question is from Eric [indiscernible] with Texas Capital.

Just a couple of quick questions, again, back on the high school kind of headwind you had in the quarter. I guess when you talked, obviously, the mix shift towards the skilled trade versus auto diesel. What's kind of a good average in terms of what that revenue delta would be between those 2 programs as that mix shift continues to something you kind of talked about you had planned on, but it kind of came a little bit earlier. And then is that something you feel that you can adjust pricing around if that demand is moving in [ 1 waivers ] now that you can take advantage of that and price into it? Or is that not possible for 1 reason other competitively or something else?

Yes, Eric, thanks. I'll take that. So the way to think about the pricing, that average revenue per student for UTI that we disclosed that's going to be very similar -- it looks very similar across all of our Skilled Trades programs. The big difference is program length. So some of our skilled trades programs are 9 months or so versus kind of 51 weeks to a full year for auto diesel. That's kind of the differential. And then from a margin perspective, again, we don't disclose detailed margins, but there's a small margin differential between skilled trades and auto diesel. We feel, again, very comfortable all the capacity expansions we've made this year, you're going to see those really get to full capacity. We'll have better utilization in '27, so margins will improve, just on that alone, and we're going to look at everything, pricing optimization and the skill trades as well.

Yes. Let me just put a cap on that, which is we talked about the things that we're doing to look at the skilled trades program. There's 2 that sort of our immediately actionable. One is the more capacity you create, the more margin you create on a given campus. And so we're working much more aggressively on building capacity in the skilled trades in our existing campuses. That will drive margin expansion for the skilled trade. And the second point is there is absolutely pricing power. When you've got this much demand and you're selling out many of your cohorts, we do have the ability to reevaluate our price points in here. Not in any crazy matter effect or anything like that.

But if we're getting a couple of points in price out of -- or we're getting a couple of points in price, you may be able to get a couple more that's where I see that. Now -- so those 2 things are actually actionable.

[Operator Instructions] The next question is from Griffin Boss with B. Riley Securities.

I hate to beat a dead horse, but I do hope you appreciate, we want to fully understand this. So on the high school side, I just want to make sure I'm clear here. So one, you said demand for skilled trades is trending much higher than you anticipated. But I think you also said demand for auto diesel is also very robust, right? It's not just a shift from auto diesel to skilled trades to demand for both is robust?

Yes. That is true. right. And so the question is that -- or the thing is that we were articulating in the mix is that if traditionally 5% of the students picked going into one of the skilled trades and 95% go into auto diesel, that is no longer that way. That's -- there's a significant shift to the number of them that are saying, "Well, I'll be a welder or I'll be an electrical worker or I'll be HVAC tech, that shift, we did not anticipate moving as quickly as it did. And then the other issue, which we outlined about the skilled trades is we simply did not have enough conversations with enough of the leads because we were not running at an optimal staffing level the entire year. I believed we could catch it up. The team did, did -- and so that not a strategy error but really an execution issue.

And so on that last point, so where the prospects per rep, it was, what, too high or higher than it has been historically that you were not able to catch up in a way that you have in years past?

No, it was reps for prospect. The lead count the lead count is robust. And yes, we are happy with what we're seeing overall in both digital and non-digital lead count, meaning, there's no -- there definitely is a tailwind around going into the trades and to the transportation areas as well as health care. You can see the numbers in health care. So the issue is, is that we needed more bodies in the field more persistently to be able to have those conversations, and we did not.

Got it. Okay. Yes. Understood. And then so just wanted to shift gears one more for me. Separately, I was hoping if you could share for us, what percentage of your student body are military affiliated, so veterans or active duty that could be relying on tuition assistance, just an area that was hoping we can get more context on.

So that's pretty clear. It's about 15% of UTI, right? Now you're going to ask me to do the math overall. I'm going to have trouble with that. So -- But 15% of UTI, very small population in Concorde and quite frankly, the unification that we're moving on now, which we didn't do in the first 3 years, actually brings health care into our military sales channels [indiscernible] for lack of a better word. And so we see that actually as a significant opportunity to be able to work with the military on transitioning soldiers out into the health care areas. It's frankly just something we didn't put any energy into because Concorde wasn't putting energy into it prior to the acquisition.

And this does conclude our question-and-answer session. I would now like to turn the conference back over to Jerome Grant for any closing remarks.

Thank you, operator. I'd like to also thank everyone who attended today. As always, Bruce, Matt and I are available for follow-up questions. We encourage everyone if you have an opportunity, too, to visit one of our campuses. If you're interested in doing that, please let us know, and we'd be happy to host you. We look forward to speaking with you, our investors and analysts when we report our fiscal fourth quarter and full year results for 2026 in November. Thanks again, and have a great evening.

Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines, and thank you for your participation.

Good day, and welcome to the Universal Technical Institute Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance and Investor Relations. Please go ahead.

Hello, and welcome to Universal Technical Institute's Fiscal Second Quarter 2026 Earnings Call. Joining me today are our CEO, Jerome Grant; and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call , its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC.

During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law.

Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2025. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement and investor presentation.

With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks. Jerome?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. Before I dive into the details of our second quarter results, I want to take a moment to give you some insight into how we're thinking about the business right now. The first half of the year has played out quite well and in some areas, better than we originally anticipated. As always, a huge thank you to our team, industry partners and over 26,000 active students for being a part of this and driving these strong outcomes.

Let me tell you, demand is strong, our model is working, and we have exceptionally clear visibility into the returns on our strategic North Star investments. We're seeing increasing validation that these investments are driving the outcomes we expected. With that in mind, I'll walk you through our Q2 performance and execution before I take you on the journey of opportunities ahead of us.

And in a few minutes, our CFO, Bruce Schuman, will dive deeper into our financials. Building on what's been a strong start to the year, we saw some key leading indicators come in at or above our expectations, further reinforcing our confidence in the trajectory of our business. We delivered yet another quarter of strong operational performance, supported by sustained demand across both of our divisions and continued execution against our North Star strategy. Total new student starts increased 14% year-over-year in the quarter with meaningful contributions from both divisions. The UTI division delivered approximately 15% growth, while the Concorde division grew 13%, highlighting the consistency and durability of demand across both our trades and health care.

Average full-time active students grew 7%, reflecting continued momentum as we scale both new and existing campuses. Core growth and program expansion performance translated into continued top line strength with revenue of $221 million, up nearly 7% year-over-year. Our baseline adjusted EBITDA came in at $25 million, including approximately $11 million of growth investments, our reported adjusted EBITDA was just over $14 million, in line with expectations. Our performance in the first half of the year has reinforced our confidence in our full year outlook. And as such, we're reaffirming our guidance on all metrics. Bruce will walk you through the guidance in more detail shortly. We believe this reaffirmed strong outlook for 2026 reflects our confidence in the performance of the business while also setting us up brilliantly for the final 3 years of this phase of our North Star strategy.

It's not just the macro demand environment that gives us this confidence, but also how we're executing against a model that is proving to be both repeatable and scalable. Our campus launch playbook continues to deliver consistent results. And importantly, those results are trending in line or ahead of our expectations. At UTI San Antonio, which opened in March, each of the first 2 starts exceeded our plan by nearly 60%. Based on early performance, we now expect the campus to ramp to scale at or better than originally modeled with a projected mature run rate of approximately 800 students. In Atlanta, we're preparing to launch our first comprehensive UTI campus in the state. This campus is expected to serve over 1,500 students at scale. We're already seeing great traction with strong interest in early enrollments pacing well in preparation for the planned start in July.

Although these are exciting results in 2026, more importantly, they are early leading indicators critical to ensuring the success of this multiyear strategy. They validate not only demand, but also our ability to execute faster and fill campuses more efficiently than originally modeled, giving us increased confidence looking at our broader new campus pipeline. Looking ahead to fiscal 2027, we remain on track with our 4 previously announced locations across the country and are excited to see those launch next year. These campuses include a comprehensive UTI campus in Salt Lake City, expected to serve 1,500 students as well as Concorde conquered campuses in Houston, Atlanta and the Phoenix Metro area, each with projected run rates of approximately 600 students. Throughout all of this, the North Star operational targets we've previously outlined remain unchanged. We plan to open a minimum of 2 and up to 5 new campuses annually as well as launch 12 to 20 new programs across the UTI and Concorde divisions each fiscal year.

In fiscal 2026, we will have opened 3 new campuses and are on track to launch 20 new programs with at least 10 coming from each division. On the UTI side, we have 2 campuses and 12 programs lined up this year. The new programs span HVACR, aviation maintenance and our electrical suite, which includes industrial maintenance, robotics and automation and wind and turbine technology. Most recently, the UTI Sacramento campus graduated its first HVACR class in January and the UTI Austin campus successfully delivered its first EV courses in February. On the Concorde side, we've opened 1 new campus and across our existing campuses, we will launch at least 10 new programs in 2026, including high-demand fields such as radiation technology, surgical technology and diagnostic medical sonography.

Beyond program replications and new campuses, we're also continuing to focus on optimizing our existing footprint. As you may recall, we recently expanded the UTI Dallas campus to serve an additional 600 students and incorporate HVACR, aviation and electrical programs in addition to auto diesel and welding. Since launching last quarter, all of the program enrollments and starts have exceeded expectations and the second half of the year looks to be just as promising. In addition to expanding capacity for popular programs such as aviation, HVACR, welding and the dental hygiene at legacy campuses, we're increasingly focused on how UTI and Concorde divisions can collaborate more closely across areas such as marketing, admissions and operations. Through cross-brand collaborations fueled by rapid AI technology advancements, we believe we can potentially unlock incremental margin expansion in the coming years while simultaneously enhancing execution across the company.

And while on the topic of artificial intelligence, I want to focus on some extremely important opportunities ahead of us at our company. As many of you know from the stories in the media, each quarter as U.S. jobs data is published, we are in the early stages of a generational shift in the labor market. Driven in large part by artificial intelligence, the long-standing dynamic between white collar and skilled-collar jobs opportunities has been disruptive. AI is reshaping the economy, but not only in the way many initially expected. As white collar work is becoming increasingly automated, especially at the entry levels, demand for trades and health care professions is accelerating. Beyond this shift, it's important to realize that there are also new AI-enabling opportunities and roles essential to building, maintaining and operating the infrastructure that supports this new economy.

From data centers and energy systems to advanced manufacturing and health care delivery, the physical and technical workforce required to support AI-driven growth has expanded rapidly. This is exactly where we are positioned. We're not only training students for today's job, we're preparing them for the future AI-enabled workforce that's being built right now. Importantly, we believe that this trend is not cyclical, it's structural. We believe this dynamic will continue to drive demand for our programs for years to come. Supported by both powerful macroeconomic tailwinds and long-term partnerships, the opportunity in front of us continues to expand. We maintain strong relationships with leading industry partners, including, for example, a nearly 30-year partnership with Porsche.

This quarter, we reached a memorable milestone with them. As of February, UTI has now graduated over 1,000 technicians from the Porsche training centers we run that are serving more than 200 Porsche stores nationwide. We also recently announced a new 3-year partnership with Fuji Auto Spray, who will provide professional-grade equipment for the collision repair and aviation programs on the UTI campuses across the U.S. Long-standing industry partnerships are a cornerstone of the success of our graduates and our company, and we continue to pursue additional such opportunities across automotive, aviation, health care and other high-demand industries.

Similarly, we're actively exploring potential B2B opportunities with military programs, state workforce initiatives and employers to help address critical labor shortages across the economy. As we look ahead, our confidence in the business continues to strengthen as our North Star strategy moves into full implementation mode. We have built a durable and repeatable growth engine, supported by strong demand, disciplined execution, a very healthy balance sheet and meaningful long-term macro tailwinds. Organically, we will continue to optimize our campuses and program portfolio, drive operational excellence and expand both capacity and program offerings to meet demand. At the same time, we'll continue to evaluate inorganic opportunities that align with our strategy, particularly in health care, where we see significant long-term potential.

Our priorities remain focused on executing our North Star strategy with discipline as well as deploying capital with purpose to position the divisions to deliver sustained growth and value. And we are already starting to discuss what 2029 and onwards looks like for the company. We will share more on that as our plans unfold.

With that, I'll turn the call over to Bruce, our CFO, to review our second quarter financials and provide you with additional details on our guidance. Bruce?

Thank you, Jerome. I'll start by saying we're pleased with how the business has performed through the first half of the year. The results we're reporting today reflect a strong start to fiscal 2026 with solid revenue growth, continued momentum in enrollments and leading indicators across the business that remain very encouraging.

In the second quarter total average full-time active students grew 7.2% year-over-year to 26,385, while total new student starts increased 13.8% to 7,569, in line with the expectations we outlined last quarter and reflective of recently launched new campuses and programs starting to ramp. The Concorde division grew average full-time active students 10.2% year-over-year for the second quarter, driven by consistent demand trends across our dental and allied health programs. Within the UTI division, average full-time active students grew 5.3% year-over-year, reflecting steady performance across the program portfolio, underpinned by strong demand and recently optimized campus capacity.

Turning to our financial performance. Second quarter revenue on a consolidated basis increased 6.7% to $221.4 million. Concorde contributed $78.7 million, an increase of 7.5% over the prior year quarter, while the UTI division contributed $142.7 million, an increase of 6.3% over the prior year quarter. Shifting to profitability. Consolidated net income for the second quarter was $400,000 or $0.01 per diluted share, which was in line with the outlook we shared last quarter.

Baseline adjusted EBITDA for the second quarter was $25.1 million, including $11 million in growth investments, our SEC reported adjusted EBITDA for the quarter was $14.1 million. At the end of the quarter, we had 55 million shares outstanding. Total available liquidity at the end of the quarter was $202.4 million, including short-term investments and remaining capacity on our revolving credit facility. Year-to-date capital expenditures were $52.7 million or approximately half of our expected spend for the year.

Turning to our full year outlook. Based on our performance in the first half and the visibility we have into the second half, we are pleased to reaffirm our fiscal 2026 outlook. We continue to expect consolidated revenue to range from $905 million to $915 million for fiscal 2026 or approximately 9% year-over-year growth at the midpoint. As I shared last quarter, we expect mid- to high single-digit revenue growth in Q3 as we saw in Q2. Q4 is still anticipated to be the highest revenue growth quarter in the low to mid-double-digit range. Net income is anticipated to be between $40 million and $45 million with diluted earnings per share of $0.71 to $0.80.

As I also shared in prior quarters, the net income contraction in Q2 will improve in Q3, though we still expect year-over-year contraction. In Q4, we expect strong net income growth. Our baseline adjusted EBITDA is anticipated to exceed $150 million. Including approximately $40 million in growth investments, our SEC reported adjusted EBITDA is expected to be between $114 million and $119 million. Similar to net income, as we make our significant growth investments this year, the adjusted EBITDA contraction in Q2 will improve in Q3, though we still expect year-over-year contraction. In Q4, we expect robust year-over-year adjusted EBITDA growth.

Total new student starts are expected to be between 31,500 and 33,000. We anticipate high single-digit growth in the remaining quarters as our base business performs and our growth initiatives continue to ramp. Looking at the broader North Star financial framework, our expectations remain unchanged. We continue to target more than $1.2 billion in revenue by fiscal 2029 with a 10% CAGR throughout that period and adjusted EBITDA approaching $220 million in that year. Beginning in fiscal 2027, we expect revenue to accelerate and are targeting modest EBITDA dollar growth and more meaningful EBITDA expansion in fiscal 2028 and 2029. To support the new campuses and programs driving this growth, we continue to plan for $100 million or more of annual capital expenditures.

Overall, we view the first half of the year as a strong start, reflecting solid execution, improving demand trends and continued progress against our North Star strategy, giving us increased confidence in the repeatability and durability of our model. We are investing from a position of strength with clear visibility into the path ahead. The actions we are taking in 2026 are intended to support faster scaling, higher utilization and stronger long-term returns, including predictable and sustainable cash flows and increasing profits for years to come. At the same time, we are creating additional opportunities to expand margins through increased operational efficiency and greater leverage as the company further grows, reinforcing our confidence in delivering on both our fiscal 2026 guidance and our longer-term financial objectives.

In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation and upcoming 10-Q filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives and guidance. Thank you to our students, team, partners and investors for your ongoing support.

I'd now like to turn the call over to the operator for Q&A. Operator?

[Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities.

Congratulations on the progress. Maybe the first one for Jerome. You talked about data centers a little bit more this call. Are you seeing incremental opportunities there? And are you able to start new programs? How are you kind of responding to that? And what are you seeing?

Well, I think the example we gave was really to highlight the sources of job opportunities for the students in the programs we already teach are growing and in some cases, accelerating. Data centers need welders, Data centers need electronics technicians, building automation specialists, all of the things that we have. If you've listened to some of the folks in the AI space talking about what's holding them back, it's not technology, it's their ability to actually get these places open because they can't find enough workers. And so what we're seeing from a job standpoint is a stronger diversification of employers that are coming to the table and looking for our skilled trades workers.

Got it. Got it. And then -- maybe one for Bruce. Bruce, when you were talking about UTIs, I think, enrollment up 5.3% year-over-year, you mentioned recently optimized campus capacity. Could you just explain that a little bit?

Yes. Sure, Mike. So I mean, our optimization has been a core foundational pillar we've been talking about for quite a while, and we continue to optimize capacity, looking for space in legacy campuses to put these program replications, things like HVAC, welding, aviation. We're using some of our legacy campuses to roll that out. That's what I was referring to. That work continues and is continuing to improve our margin outlook.

Can you speak to like, hey, you expanded capacity a couple of percent over the last 6 months? Or is there any way to kind of quantify that?

Well, I mean, basically, if you look at our base, our core business, that what we delivered last year, roughly 100 basis points of expansion, we would have kind of delivered similar if it weren't for the growth investments. A lot of that comes -- probably more than half of that comes from that optimization pillar of our strategy. That's the best way I could explain it to you, Mike.

Our next question comes from Raj Sharma with Texas Capital.

Congratulations on the execution. If I could talk about any -- also great new details on the data in the supplementary. So that's very appreciated. I was just trying to understand, revenues were up about 7% year-on-year. The operating expenses were up 16%. And even if I take out the growth OpEx, your OpEx of $11 million, if you take it out, the OpEx was still up about 10%. I'm trying to understand that. Is that -- was that all the increase in advertising?

Yes. Raj, it's Bruce. Yes, I can address that. So a lot of it really is we're executing the year here. There's a little bit of timing element, frankly, as we execute our full year. Again, I'd just remind you, the vast majority of that margin contraction really was from the growth investments. There were a few other things, timing. Our medical, for example, was up a little higher than we planned on, and we chose to invest a little bit more in marketing to make sure we are on track for our second half revenue and starts. But it's really timing. We have offsets for that in Q3, and we feel very confident in our full year profitability that we guided to.

Got it. And then I know you reaffirmed the fiscal guidance. Is it fair to assume that you're looking for starts growth to perhaps be higher for the year given your first half performance? And I know that doesn't impact the current year numbers, but sorry...

By the way, thanks for throwing that in there because it was the thing I was going to say, as a leading indicator, we're very, very happy with what we're seeing primarily the overachievement of the new campuses and the new programs that we're putting into place. And yes, that monetizes mostly over '27 and beyond. So we've got a lot of confidence that, that's going to continue to happen. Now will San Antonio continue to sit people at 60% higher than what we had in the model? Not likely, but it's a very, very strong start, and we think that it will continue to move past our models as is the programs that we're moving on. So we feel real confident that the starts aren't going to fall anywhere near below and could be in the top part of the range. So I feel good about it.

Great. And then just last for me, any sort of new opportunities that could expand your current growth plan? Or do you think you're good for now until you get to the North Star 2 strategy is that there's likelihood of not any further expansion in that?

No. I actually -- I mean, remember, we're -- at the end of '26, we're 2 years into a 5-year strategy. We're set up very -- for the strategy, the way it's laid out right now, which is primarily an organic strategy of 2 to 5 campuses a year, 12 to 20 new programs a year, modest base growth out of our same-store, 2% to 5% growth in our same-store. What we're trying to express is a high level of confidence in the execution on the plan as is. All of that, which you're talking about would be sort of gravy on top. And there's a lot of great conversations going in the B2B space right now that I wouldn't count out opportunities during this 5-year time frame that could have some impact on the upside of that number.

Nothing to announce today, but there are a lot of employers and manufacturers out there right now that are seeing the same thing we are needing, which is the supply and demand problem is growing, not shrinking. And that brings them more to the table to have constructive conversations around partnering to solve it. So we feel good that some of that will come in line during this [ strat plan ] period, not after.

The next will come from Max Michaelis with Lake Street.

Just 2-parter here. San Antonio looks like, obviously, you have terrific starts there, up 60% versus your internal expectations. Anything different you did there in terms of go-to-market, advertising that you could share? And then the second part of that question would be, obviously, that's a pretty high standard that San Antonio has already set. But what kind of demand trends are you seeing at the Atlanta -- new Atlanta campus? And would you put that on par with San Antonio?

Well, why don't I answer in reverse is we're really happy with what we're seeing in Atlanta. We don't really like to talk about prestart numbers because we want to make sure that we get people comfortably in their seats and moving forward. But the trends we're seeing in terms of contract pace for the timeline. Remember, we still have until July to get this open makes us real confident that Atlanta is going to be quite the winner for us. Once we get past our -- I think when we report in August, we're going to have some solid numbers for you, and we're really optimistic about what we're going to see there. One of the things I think we've always said to you, the analysts and folks out there is Texas has been a very, very strong market for us. Austin blew away our projections quite quickly. And our thoughts about San Antonio is that could happen. Of course, again, not counting your chickens before they hatch, we didn't want to go out there strong.

Well, what we're seeing is that's quite true. right, which is there is a very strong demand in Texas for what UTI is bringing. So we're thrilled with what we see. And when we're picking new sites around the country, of which Salt Lake City is coming up and then the subsequent sites from there, we really do think about those same metrics as can we see a way to beat our models. And when we're picking sites of the many that are available, we're really looking for where we might be able to ramp the fastest. And so far, we're really happy with what we're seeing with the first 2, which is San Antonio and Atlanta.

Up next, we have Jasper Bibb with Truist.

Just a quick clarification question. I heard high single-digit growth in starts in the next 2 quarters. I think you had guided to mid- to high single-digit growth for those quarters on the last call. So just wanted to confirm you're kind of thinking this year is going to end up in the upper end of the range on starts. Is that kind of the right way to think about it?

Yes, Jasper, this is Bruce. That's correct. That's how we're thinking about how the year is shaping up.

Okay. Makes sense. And then some of your, I guess, online education peers have talked about like the consumer shift to GenAI over search and algorithm changes at Google kind of impacting the top of the funnel on student acquisition a bit. The starts are obviously strong, so it doesn't seem like an issue for you, but I'm just wondering if you're seeing something similar and how you're managing through that?

Well, it's actually one of the reasons that we wanted to underscore the collaboration going on between the 2 divisions, specifically in areas like customer acquisition, marketing is that there is a pretty significant shift in how people are searching for opportunities out there, much in the same way as TV moved to streaming very, very fast for the 18- to 24-year-olds. Information is moving quite rapidly to the AI engines from traditional search. And we want to make sure that we're on the leading edge of capturing that as those advertising platforms harden over the next months and years. And so what we really wanted to do is we really wanted to make sure that our digital organizations were working in unison one, so we're not overspending researching these things between the 2 divisions. And #2, that each of them can take advantage of the opportunities that we're seeing by beginning to invest in these areas. So we feel like we're well positioned to get the most out of that transition.

Last one for me. I think you mentioned kind of ongoing discussions for B2B partnerships, also potentially some opportunities with the military or state workforce development programs, too. So I guess maybe my question is, are you seeing a broadening kind of interest in the types of B2B partnerships that are coming to you and potentially a different structure, too, versus, I guess, what you already did versus Heartland with the Heartland campus?

So the short answer is yes. There is a broadening of who is approaching us to see whether we can help them solve their problems, whether it is municipalities, other portions of the military who may be engaged with some of the onshoring activity to help people who are trying to solve that problem, hospital chains, things along those lines where they're starting to think we better act in concert with some of the larger partners like ourselves in the country. And so the incoming is definitely on the rise and broadening and where we get them. I made a comment about data centers and infrastructure for AI. Two years ago, we weren't getting calls from construction companies that were opening data centers around the country, looking for HVAC techs, welders, electricians, building automation specialists. Now we are.

And so I think those are all opening doors for opportunities for us to potentially look at training models in unique and innovative ways. And -- but those things take time. And again, like I said, we have nothing to announce on a specific front on those, but we are staffed up and diligently focused on it because we think those are going to be an opportunity over the next couple of years.

Our next question comes from Steven Frankel with Rosenblatt.

Maybe give us an update on what kind of incentives employers are offering these days in terms of tuition payback, working while you're going to school, et cetera. Is that pace continued to climb with more people trying to do that? Or in the current economy, have they backed away from some of those moves?

No, they haven't -- that's a great question. There's a lot of conversation out there right now around student debt and leaving college with large student loan balances and the like. And even there's been things in the press around trade school folks coming out with debt. And so the programs we started in auto diesel a number of years back that have gotten us to a point where somewhere in the neighborhood of 6,000 employers nationwide are offering incentive packages to our graduates to come and work for them are continuing to proliferate as we proliferate our product offerings into the skilled trades, right? This is a new concept to HVAC companies to electronics companies to aviation companies. And so the trip agreements, as we call them, are something that we're working to broaden across the entire portfolio that we have, and we're seeing quite good responses. So we've seen anything other than employers backing away from incentives because the problem is getting more acute.

Great. And any early learnings from Heartland that would lead to the way you might do the next one?

Heartland is -- I don't -- there are no new aha moments there, which is you've got an employer who has become a very strong partner with us, who has a very big problem and is willing to co-invest to solve that problem around the country. And the time it takes to get others to get on the same page is usually tied to them trying to see what the outcomes will be from the partnerships that we already have. And Heartland is very happy. The cohorts that we started were very strong. And we anticipate doing similar deals with other partners very soon.

And then lastly, any early peak into what you think the high school class is going to look like this year?

High school looks good. I mean, again, I think one of the things that we've said over the years is that high school kids tend to gravitate towards the automotive and diesel areas. You just got your driver's license and you're 16, and you don't know that much about HVAC or welding or those sorts of things. And so it's primarily a focus in the auto diesel areas. And we're seeing strong returns from what we've seen. It's a good point to bring up, and we're very -- we feel very, very strong about our guidance that we have and coming in the range on the guidance that we have. But to your point, half of our starts on the UTI side come in the fourth quarter, and it's mostly to high school. And we just want to make sure that those are coming in as strong as the leading indicators show.

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

Thank you, operator. Just some brief remarks. First of all, I'd like to thank everyone who attended today. As always, Bruce, Matt and I are available for follow-up questions. And also, as we've said, every single quarter, we encourage as many of you as possible to come out and visit one of our campuses. If you're interested, please let us know, we'd be happy to host you. Love doing that. And we look forward to speaking with you on our investors call in fiscal third quarter, which will be in August. So thanks, and have a great evening.

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

Good afternoon, and welcome to the Universal Technical Institute First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance and Investor Relations. Please go ahead.

Hello, and welcome to Universal Technical Institute's Fiscal First Quarter 2026 Earnings Call. Joining me today are our CEO, Jerome Grant; and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC.

During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which, by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law.

Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2025. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement and investor presentation.

With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks.

Jerome?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. In just a few minutes, our CFO, Bruce Schuman, will go into more details from a financial perspective. Prior to that, I'd like to share some thoughts in our 3 areas of focus: performance of the company, execution of our North Star strategic plan; and finally, opportunities we're exploring to move beyond that plan. First, performance. As we begin fiscal 2026, we're performing with clarity and momentum against a well-defined strategy. We entered the year on strong operational and financial footing, and the first quarter tracked in line with our plans and exceeded our expectations for disciplined execution. Revenue for the first quarter grew 10% to $221 million. Our baseline adjusted EBITDA was nearly $35 million, including over $7 million in growth investments. Our reported adjusted EBITDA was $27 million. Average full-time active students increased 7%, with total new student starts growing roughly 3% year-over-year, which is right in line with our and broader market expectations.

These results position us well for acceleration as fiscal 2026 unfolds. Overall, we delivered a strong start to the year and the progress we made this quarter reinforces the durability of our North Star Strategy. With that strong performance in the first quarter, we remain confident in our expectations for the full year. To reiterate, in fiscal 2026, we expect revenue to be between $905 million and $915 million, reflecting approximately 9% year-over-year growth at the midpoint. Our baseline adjusted EBITDA is anticipated to be approximately $156 million, with approximately $40 million in growth investments related to launching and scaling new campuses and programs, our reported adjusted EBITDA is expected to range between $114 million and $119 million.

New student starts are also on track and are anticipated to be between 31,500 and 33,000. As Bruce will discuss in more depth, our guidance appropriately reflects the balance between near-term performance and long-term value creation. It is important to note that while driving double-digit growth in revenue and baseline EBITDA as well as strong student start growth in 2026, our team remains intensely focused on delivering the impressive student and employer outcomes that have been the cornerstone of our over 60 years history.

Moving now to our strategic execution during the quarter, which is guided by our North Star Strategy, we are continuing to build and further scale a durable, repeatable growth engine through our disciplined and proven operating model. This approach is guided by a refined and continually evolving playbook for launching campuses, replicating and expanding programs on our existing campuses and optimizing performance, which allows us to reproduce success with consistency as we grow.

Our most recent campus launches, UTI Austin and Miramar are excellent representations of the strategy's success. Both Austin and Miramar continue to meet and exceed our expectations, validating our approach to site selection, program mix, marketing and ramp timing, all while driving strong student outcomes. In Miramar, we have over 600 average full-time active students. We are adding additional sessions for the automotive program and are actively pursuing expansion of the capacity-constrained aviation maintenance technology program at that campus. Austin continues to perform significantly beyond our expectations with over 1,000 average full-time active students, which is 70% higher than we modeled. The performance of our campuses gives us confidence that our new facilities can scale efficiently while generating attractive long-term returns.

As we announced on our Q4 and full year 2025 call, over the next several years, we plan to open a minimum of 2 and up to 5 new campus annually, pending regulatory approval. The first of our fiscal 2026 campuses, our Heartland, Concorde co-branded campus in Fort Myers, Florida, just opened in November. Demand has already exceeded our expectations with programs filling to capacity within 2 weeks of opening. We already have waiting lists in place. In San Antonio, we're approximately a month away from opening the doors to our new skilled trades and aviation focused campus. Our recruiting efforts are going quite well for the initial start in March. As a matter of fact, we already have over 300 students ready to start. There's particularly keen interest in welding and HVACR in San Antonio. To remind you, this campus is slated to train over 600 students annually and generate approximately $32 million in run rate revenue at scale, and it further diversifies UTI's geographic footprint in a high-demand region.

We are also preparing to open our UTI Atlanta location, a comprehensive campus in a greenfield state. This facility will offer a comprehensive collection of our strongest UTI programs, including auto, diesel, aviation and the trades. The UTI division team is projecting to enroll over 1,200 students and generate upwards of $45 million in run rate revenue at scale, and the campus remains on track to launch in the second half of the fiscal year. The Atlanta campus has been actively recruiting for approximately 1 month and student interest is quite impressive, indicating strong interest in that market.

Looking beyond this year, our next wave of campuses slated for fiscal 2027 are also tracking well. To date, for fiscal 2027, we have announced our intention to open comprehensive UTI campus in Salt Lake City as well as Concorde campuses in the Houston, Atlanta and Phoenix metropolitan areas. As always, the exact launch time lines on these are based on securing various regulatory approvals. We look forward to providing further updates on these and our other planned future locations as we continue to execute on our North Star strategy. Alongside new campuses, we continue to scale our rich program portfolio. Throughout Phase 2 of North Star, we plan to launch between 12 and 20 new programs across the UTI and Concorde divisions annually.

This year, we'll be launching over 20 programs with at least 10 coming from each division. Across our UTI campuses in '26, we plan to launch 12 programs, 2 HVACR, 1 aviation maintenance and 9 programs in our electrical suite, which includes industrial maintenance, robotics and automation as well as wind turbine technology. Adding UTI programs continues to optimize the legacy UTI campuses. These in-demand skilled trades programs were brought to us through the MIAT acquisition and are addressing the diverse interest expressed by the nearly 600,000 young people who inquire at UTI annually. One example of this optimization effort is our October announcement, which we outlined the new programs being launched at UTI Dallas campus. At scale, the expanded Dallas campus, which currently offers auto, diesel and welding to nearly 1,200 students annually, will now be able to serve an additional 1,000 students and will offer HVACR, aviation and electrical programs beginning in the coming weeks.

With the Concorde acquisition-related growth restrictions in our rearview mirror, we're now set to launch at least 10 new programs in high-demand areas on the legacy Concorde campuses in 2026. These include 8 radiation technology programs as well as surgical technology program and diagnostic medical sonography program. All of our program replication initiatives are tightly aligned with employer demand and workforce shortages and build on capabilities we already know how to deliver well.

In addition to opening new campuses and replicating programs on existing campuses, we remain focused on executing on our plan to continue to optimize our 33 facilities to enhance operations, maintain high-level outcomes, maximize our resources and ultimately improve margins. Specifically, this work focuses on expanding capacity for popular programs that have waitlist building, programs such as aviation, HVACR and welding on our UTI campuses and dental hygiene on our Concorde campuses.

To recap, the business is performing quite well, and the North Star Strategy is progressing on track due to our continued focus on execution and strong market demand for our graduates. I'll conclude my remarks by addressing a question that we're consistently getting while we're out talking to both new and existing investors. What else? Acknowledging that performing at a high level and executing on our aggressive organic growth strategy needs to remain the primary focus, we're also keeping our eyes on future opportunities we see on the horizon. First, on the regulatory front, with the new level of collaboration in Washington, we're now actively participating in dialogue as rules, guidelines and policies are being developed that foster the opportunity to accelerate closing the gap with respect to the American skilled labor workforce in new and innovative ways.

For example, the success of our Heartland partnership is already spurring evaluation of collaborative expansion opportunities with Heartland and other dental service organizations as well as other large-scale employers across both divisions who are experiencing similar labor shortages. Furthermore, this administration has acknowledged us as a leader in this space and the critical role we play in securing America's workforce for the future. That recognition, combined with the level of engagement in Washington, supports our ability to open new campuses and expand program offerings and innovate thoughtfully within a highly regulated environment with greater speed and consistency.

From an inorganic standpoint, we continue to actively evaluate opportunities that align with our North Star Strategy, particularly in the areas that enhance our healthcare portfolio. In conclusion, we are executing from a strong operational and financial foundation, and we believe fiscal 2026 represents an important year of both investment and execution that sets the stage for accelerated returns in the years ahead as these initiatives take scale.

With that, I'll turn the call over to Bruce, our CFO, to review our first quarter financials and provide you with further details on our guidance. Bruce?

Thank you, Jerome. The fiscal first quarter represented a strong start to the year on average full-time active students, revenue and adjusted EBITDA as we continued executing the priorities of our North Star Strategy. Importantly, these results were delivered while we began deploying the significant growth investments we outlined last quarter. Investments that support new campus launches, program expansions and long-term capacity creation across both UTI and Concorde. In the first quarter, total average full-time active students grew 7.2% year-over-year to 26,858, while total new student starts increased 2.6% to 5,449, in line with the outlook we shared last quarter. As we've mentioned previously, average full-time active students is how revenue is derived and therefore, often a more direct and consistent indicator of revenue and operating performance than new student starts.

Further, prioritizing total new student starts as a company rather than at the divisional level provides us the flexibility to allocate marketing and growth investments where we see the greatest return potential, even if that results in uneven start growth between divisions in a given period. The Concorde division generated a 9.5% increase in average full-time active students. This growth was driven by sustained demand for our programs, particularly across Nursing and Allied Health. The UTI division grew average full-time active students 5.7% year-over-year for the quarter, reflecting continued strength across the division's program suite and employer demand as well as further optimized campus utilization. Shifting to our financial performance. First quarter revenue on a consolidated basis increased 9.6% to $220.8 million. Concorde contributed $78 million, an increase of 11.5% over the prior year quarter, while the UTI division contributed $142.8 million, an increase of 8.6% over the prior year quarter.

Turning to profitability. Consolidated net income for the first quarter was $12.8 million or $0.23 per diluted share. Baseline adjusted EBITDA for the first quarter was $34.7 million, including $7.6 million in growth investments, our SEC reported adjusted EBITDA for the quarter was $27.1 million. At the end of the quarter, we had 55 million shares outstanding. Total available liquidity at the end of the quarter was $233.2 million, including $69.2 million of short-term investments and $70.4 million of remaining capacity on our revolving credit facility.

Year-to-date capital expenditures were $24 million or 24% of our expected spend for the year. As Jerome mentioned, with our solid first quarter results, we are reiterating our fiscal 2026 guidance. We continue to expect consolidated revenue to range from $905 million to $915 million for fiscal 2026 or approximately 9% year-over-year growth at the midpoint. As I shared last quarter, for quarters 2 and 3, we expect mid- to high single-digit revenue growth with Q3 being slightly higher than Q2. Q4 is anticipated to be the highest revenue growth quarter in the low double-digit range.

Net income is expected to be between $40 million and $45 million with diluted earnings per share of $0.71 to $0.80. As I also shared last quarter, while revenue will be up every quarter as we make our significant growth investments this year, net income will contract further in Q2. This will improve slightly in Q3, though we still expect year-over-year contraction. In Q4, we expect low to mid-double-digit growth. Baseline adjusted EBITDA is anticipated to exceed $150 million, including approximately $40 million in growth investments, our SEC reported adjusted EBITDA is expected to be between $114 million and $119 million.

Similar to net income, as we make our significant growth investments this year, adjusted EBITDA will contract more strongly in Q2 than it did in Q1, but then yield mid- to high single-digit growth in Q3 and significantly stronger growth in Q4. As a reminder, growth investments are not added back when calculating our adjusted EBITDA. Total new student starts are expected to be between 31,500 and 33,000. We anticipate low to mid-double-digit starts growth in Q2 and mid- to high single-digit growth in the remaining quarters.

Looking beyond fiscal 2026, our long-term financial framework under our North Star Strategy remains unchanged. We continue to target revenue of more than $1.2 billion by fiscal 2029, representing roughly a 10% revenue CAGR through that period and adjusted EBITDA approaching $220 million by that same year. We expect revenue growth to begin accelerating in fiscal 2027 with marginal EBITDA dollar growth emerging in 2027 and accelerating more significantly in 2028 and 2029. As a reminder, margin expansion will not be linear given the multiyear campus build cycle and upfront investment requirements, and we continue to plan for $100 million or more of annual CapEx to support new campuses and program expansions.

While the majority of the execution on our enrollments and revenue remains to be achieved this year, the first quarter marked a strong and encouraging start to our fiscal 2026. We delivered on our revenue and adjusted EBITDA commitments while advancing critical work for our North Star strategy. Our financial position provides the capacity to execute these expansion efforts without compromising discipline and the early performance indicators from our newest campuses reinforces our confidence in the repeatability of our model. We remain focused on converting these investments into sustainable enrollment growth, operating leverage and long-term shareholder value.

In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation and upcoming 10-Q filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives and guidance. Thank you to our students, team, partners and investors for your ongoing support.

I'd now like to turn the call over to the operator for Q&A. Operator?

[Operator Instructions]

Our first question is from Alex Paris with Barrington Research.

Can you hear me?

We can hear you great, Alex.

Okay. Great. I was just switching from my speaker. So congrats on the quarter, better than expected, and we're on target for the full year. And you addressed this in your prepared comments, but I just wanted to dive a little deeper into -- from a color perspective. Starts were pretty much consolidated, starts were pretty much in line with my published estimate with stronger growth on the UTI side and flat on the Concorde side. Again, I hear you in that you're approaching it as on a consolidated basis. And we -- and I absolutely expected some better performance out of UTI starts because, I believe, more emphasis on it. I think you talked on the last conference call about perhaps shifting some marketing dollars to UTI adult and UTI High School. I was just wondering what sort of additional color you could offer?

Sure. Well, thanks for confirming. I think the quarter in terms of starts came in exactly what we guided to. And frankly, it came in exactly what we expected in both of the divisions. I think the most important thing to consider when we looked at Concorde starts for the quarter was they had an over 26% increase in the first quarter of last year. So their compare last year in the first quarter was very, very high. And so we expected them to be about flat this quarter. We have been investing more aggressively in UTI in front of the launches of both Atlanta and San Antonio to be prepared for that, and we're starting to see the benefits. And as Bruce said in his comments, we're absolutely on track to get what we expected in terms of high single-digit growth for the year with double-digit growth in the second quarter and then mid- to high single-digit growth in the last quarter.

So the teams are set. You heard my comments, the enrollments are rolling in right now on both of the campuses, over 300 kids ready to start down in San Antonio. And I'll remind you that we said at peak, we -- our plan was to have a run rate of around 600 students on average in the building. And so we feel great about our ability to meet or exceed that campus. We're just getting in the water on Atlanta, but signs are very, very positive initially there as well.

Great. And then what about investment into high school in terms of...

Yes, we added a number of high school reps. We added a number of high school reps in the fall, and that's -- you won't really see that pay off until next fall, right, because they're focused on the kids who are juniors and seniors right now, mostly seniors and are going to be graduating in May. But the pipeline is filling quite, quite well as we head towards that May, June, July time period. So we really think we're going to get the bang for the buck out of that investment.

The other encouraging thing, Alex, this is Bruce, on the UTI starts. It was really nice kind of across the board. Pretty much every channel was kind of that nice mid-single digits. So we're encouraged about the start to Q1, as Jerome said.

Okay. And then while I have you, Bruce, just to recap on the CapEx comments, you said you're at $24 million year-to-date for the first quarter, and that's about 24% of full year expectations. So you're expecting $100 million this year, I think you said that, too, right?

That's correct. Our expectation is about $100 million for the full year. And just another quick note of that $24 million, a full $19 million of that was growth CapEx. So similar to kind of that roughly $8 million of OpEx, we had about $19 million of CapEx purely focused on getting these new campuses, new programs rolled out that Jerome was talking about. So yes, that's correct.

And we should expect $100 million again in 2027. You've got 4 new campuses planned already at this point for 2027.

Yes, it's going to be probably at least $100 million. It could be slightly higher, but it's in that general quantum of $100 million, that's right.

The next question is from Steve Frankel with Rosenblatt.

I'd like to ask a couple of questions about the Heartland Fort Myers campus. When you first announced this, one of its unique characteristics was it was going to be cash pay because you hadn't had the growth restrictions removed. Now that those have been removed, is this ending up being a combination of government loans and cash pay? Or is it still cash pay at this point?

No, absolutely. Rolling forward, it's going to operate like every other campus. There are support programs associated with Heartland, but then also students have options to do government loans, Pell grants and the like. My commentary around how the approval machine is working right now with the Department of Education is underscored by the Heartland situation, whereby we submitted and received our approval for Title IV funding there after getting accreditor approval. We've submitted and achieved our approval within 72 hours. And so the lines of communication are wide open, and we're aligned on our ability to move quickly to try to solve this workforce gap.

And in terms of the quick response from regulators, is the same true on the state level in the states where you're operating? Or are you still battling some bureaucracy there?

Well, no, not the same, not all the state levels. The state levels are operating as they always have, right? And sometimes as you enter new states, et cetera, it's one of the reasons why we talk about the timing of launching the 4 campuses that we've announced already for 2027 is sometimes state governments will only meet on a topic like this once every 6 months. And you've got to wait in line. And if you get on that docket you do or you got to wait 6 months, and that can affect your start of a campus. So far, for Fort Myers, for Atlanta and for San Antonio, we're absolutely where we want to be. Our planning was in place. The time lines are holding, and we're happy to see what's happening.

But with the regulatory environment in states, accreditors and the federal government, there sometimes can be some sway. I guess what we're signaling is one of the biggest pieces of sway over time was Title IV funding in the federal government, and that's something that's operating quite well.

Okay. And then I know the divisional profitability can swing around a lot period to period, but the margin pressure in the quarter at Concorde, what do we attribute that to? And do you expect margins to bounce back there fairly quickly?

Yes, Steve, this is Bruce. So really, a little bit of a decline there in EBITDA margins, frankly, on both sides on the Concorde and the UTI side, that's directly attributable to these growth investments, right? We're going to have kind of this profitability dip here this year that we're navigating through as we execute on these growth investments. That's all it is. There's nothing structurally wrong or something going on at the division level. It's really just the growth investment being applied appropriately as we navigate through that. That's what drove the decline.

I was just checking in on that.

The next question is from Jasper Bibb with Truist.

Just wanted to ask like, I guess, gives you confidence in the reacceleration for starts over the balance of the year. It sounds like in your framework, the fiscal second quarter starts would be particularly strong versus fiscal first quarter. So I guess, just hoping to get some more color on the drivers of that improvement. Is it easier comps? Is it more marketing dollars?

Well, it's a combination of things. First of all, just to underscore, the first quarter starts were exactly where we guided to and give us at least more confidence in the fact that the momentum continues to build. The second quarter you start to build the momentum around some of the new programs that are starting, the campuses in the Dallas expansion, which is coming to life in the second quarter and then the San Antonio campus, which opens. And so that's where you start to see the acceleration of start growth in that quarter, which leaves only Atlanta in the end of the third, beginning of the fourth quarter to open. And so that's what we mean when we're talking about momentum.

That makes sense. And then can you remind us or frame for us how large those first start cohorts at San Antonio and Atlanta might be in the second quarter and the third quarter?

Well, they're quite small. But remember, look at UTI, the first 3 quarters of the year are only half of the starts for the year and then the fourth quarter is half, right? And so any swing of 25 or 30 students, which is maybe a cohort for starting a new aviation program, et cetera, can -- is sort of a law of small numbers, swings the numbers pretty significantly.

And remember, we're going to be opening over 20 programs this year, and they're all starting to come to life in the second, third and fourth quarter. And so -- and each one of them is individually small, but when you start putting them together, it starts to move the needle.

That makes sense. Last one for me. I just want to ask what you're seeing on marketing yields and student acquisition costs.

We're continuing to see improvement. We're continuing to see that the tools we're putting into place are finding us efficiency and effectiveness in the channel. I think that a lot of the experiments we're doing with AI-driven technology, et cetera, is helping us quite a bit in the channel. Our targeting is much more precise. And therefore, we're able to get more leads for the buck in this space. So we're very happy with what we're seeing so far.

Yes. I would agree, Jasper. I would just add quickly. If you look at our marketing dollar efficiency as a percent of revenue, it is up a little bit, Q1 '26 versus Q1 '25, about 1 point or so, and that's directly tied to these new campus openings in new locations, new programs. And that's why it's ticked up a little bit, but it's for the right reason to make sure we drive those enrollments.

The next question is from Griffin Boss with B. Riley Securities.

I appreciate all the color and transparency. So just one for me. I don't think I heard anything about this in the prepared remarks. On the last earnings call back in November, you discussed adjusted free cash flow expectations for fiscal '26 of $20 million to $25 million. I don't think I heard a reiteration of that. Just curious if you could -- if you had anything to update there, if you're still looking at that same level of free cash flow for the year.

Yes. Thanks, Griffin. This is Bruce. So yes, we're definitely reiterating that same level kind of in the $20 million to $25 million range for the year. And again, that's just directly attributable. You look at that sort of $100 million CapEx build for this year, a full $75 million of that is growth CapEx. So that's what's driving kind of that dip in free cash flow. But yes, we're reiterating that same range. We feel really good about our execution, frankly, the first quarter kind of right on spending 24% of the year. We feel really good about how that's playing out, and we are definitely reiterating that same range.

The next question is from Eric Martinuzzi with Lake Street Capital.

You talked about the positive momentum out of the gate at the Fort Myers Heartland campus. Curious to know if there's any appetite for other Heartland locations and what the time line might be for that?

Well, I mean, we have no new locations to announce, but we are in active conversations with them. They're happy. We're happy. We're seeing the signs pointing in the right direction. It's early in the cycle. The first 2 cohorts did sell out. We have waiting lists associated with them, and their needs are not declining. So Heartland and other DSOs are very keenly interested in what we have, which is a very large dental hygiene program that can be scaled upon. So nothing to announce today, but we're having some very healthy conversations.

Okay. And then on the UTI side, as far as partner initiatives, anything new to report, and this can be across auto, diesel, aviation, partners pulling you or asking more of you in calendar 2026.

Yes. I mean one of the things that we've tipped to, and we don't -- again, we don't have anything to announce today on the UTI side for that is that the Heartland model has piqued a lot of keen interest from major manufacturers and employers on the UTI side as well, right, is -- and as we've also said, some people are in sort of a wait-and-see mode. Let's see what you get out of it. But I think us selling out the first 2 cohorts has accelerated some of those conversations because there are other sectors where the needs are just as high as they are in the dental areas. And so our business development team is actually working quite hard to work on some of those deals as well.

The next question is from Raj Sharma with Texas Capital Bank.

Congratulations on a beat and reiterating the year. I had a couple of questions on the -- just the EBITDA, noticing the EBITDA margins, even after adjusting the growth OpEx, it seems like the margins are slightly lower than last year. Any sort of color there?

Well, I mean, thanks, Raj. This is Bruce. The vast majority of that decline year-over-year is the growth investment. I mean there could be some timing variability. For example, in Q1, like I mentioned before, our sales and marketing has ticked up a little bit as we get ready for some enrollments here in our new campuses. But by and large, the vast majority of our decline this year is due to the growth investments. The underlying base business, we are still expanding margins on the core if it weren't for the growth OpEx.

Yes. I think the modeling is important to lay out here, which is after growth investments last year or without growth investments, we would have printed around $133 million in adjusted EBITDA. Our baseline pointer right now for this year is somewhere in the mid-$150 million range.

$156 million.

That's the core business margin growth. So you're definitely going to see it.

That's right.

Right. So it's the timing through the year, the baseline core EBITDA is going to move up.

Exactly.

Got it. Right. So on starts, do you break out the old -- can you give more -- some color on the old campuses versus the new campuses? Are they performing consistently? I mentioned -- I think, Bruce, you mentioned consistently mid-single digits across. Is that true for the old all of the campuses across? Anything stands up?

We're now in year 3 at Austin and Miramar. And so they're not considered new campuses anymore. We're just -- we wanted to outline for you so that folks can have confidence in the models we're putting together for all the new campuses that we're launching that both of them are performing at and significantly above what those models were. But the new campuses are just coming online right now, and we won't have the ramp rates on those probably until next year to be able to talk about. So I don't like to call them old, but every campus right now is in the same boat. They're all at run rate. And so no, we don't have any variation to report.

Got it. And you also -- you don't break out the young adults versus the high school students. Is there any sort of...

Well, I mean, we've always talked at UTI about the 3 different tributaries of our -- of the UTI piece. Now it's inconsequential on the Concorde side. The average demographic is somewhere between 25 and 35 years old. So there's no such thing as young adults versus older adults. But on the UTI side, somewhere in the around 35% of the students come right out of high school. You're not going to see any of those until the fall, right? And then the balance, 15% come from military and then the balance are people who, as I've always said, are people who should have come right after high school, but went out into the unskilled labor market and are now looking for a career. And so just about everything you're seeing right now in Q1, 2 and 3 is that adult population. And so that's probably the best contour I can give to you for right now.

Got it. Got it. So consistently, the different campuses are performing consistently, they're going to grow, the EBITDA is going to -- the core EBITDA is going to improve. There is no sort of changes business as usual.

I mean the variation on the legacy campuses over the next 4 years is going to be variation driven by the time line for implementing new program replications on those campuses. We're opening 5 new programs in Dallas with -- 4 new programs in Dallas with the expansion that we put into it. So Dallas is going to grow at a higher rate than putting one program on another campus. But -- so you sort of have to look at how we're distributing the program replications, which is over 20 this year across the 33 campuses. And those are really the only variations you're going to see off of sort of the normal run rates that we've given you.

That's right, Raj. But like-for-like programs, there's a very high degree of consistency between campuses and how they perform.

Got it. Got it. And then one last question for me. Are you at all concerned that there could be DOE or regulatory changes if the Democrats take the midterms? And especially new school approvals as you move forward?

No. And the reason is, is that new school approvals and the regulations associated with that are directly associated with the Department of Education and those regulatory bodies. They are not legislatively approved. They're approved by that department. And so we don't anticipate any changes in what's going on with the department. Now that being said, I just want to be clear, we operated and grew quite well during the Biden administration, right, is that, yes, approvals move more slowly. There were more regulations on the channel in that time frame. But when you graduate 70% of your students and 85% get jobs in market within a year, you're operating above the fray of anybody that anybody is keeping their eye on as a bad player. And so regardless of a red or blue administration, our plan operates quite well.

Congrats on the solid results.

The next question is from Mike Grondahl with Northland Securities.

First question, just peeling the onion back a little bit on San Antonio and Atlanta. It sounds like those are off to good starts. Would you say you spent the marketing dollars you expected to help those? Did you spend a little less? Just kind of curious in this demand environment, how that went?

So I'll give you my perspective, Mike. Yes, we did spend some incremental marketing on those. We feel very good about sort of the initial signals we're getting on enrollment pipeline is quite good. Frankly, a lot of our $8 million even we talked roughly $8 million of growth OpEx was very focused on San Antonio, Atlanta, getting those ready to open well and make sure the expansions even and the program expansions were done on those campuses. So yes, we did spend some more, and we feel good about the initial yield we're getting from that investment.

Got it. And then maybe for Jerome, it seems like the macro backdrop from 2 years ago has gotten a lot better. And I'm talking one sort of 4-year college return versus trade schools and just job demand helping. Where do you see the backdrop going from here the next couple of years? Can it continue to get better? Do you just want it to stay where it's at? I don't know, Jerome, I'd love your thoughts there.

I mean it took decades to in a sense, atrophy the sort of cultural divide between the trades and 4-year education, right, starting in the '80s when high schools started drying up their CTE programs and adding more academic subjects because we felt like we were falling behind in terms of academics in America. It took decades for that to atrophy. I don't think that there's a switch that flips overnight that suddenly alternatives to a 4-year education become much more popular for a lot of students than a 4-year education, right?

That being said, you are seeing an inflection point where there's significantly more energy being applied towards the awareness that we need a lot of tradespeople. The CEO of AI companies saying, AI is one thing, but I can't build data centers because I don't have electricians and welders, and my data centers are falling behind. Those are the kind of things that are making people say, well, wait a minute.

Everybody doesn't have to be a sociologist or a teacher, et cetera. Being a welder is a great thing to do. Being an electrician is a great thing to do. And so we're seeing the movement, and we're seeing that in the interest, and we're seeing that in our relationship in Washington as being much more collaborative around, okay, what else can we do to encourage this -- but I don't -- and I do think that, that's going to continue because a lot of the changes that made are durable changes about what we're going to build here in the United States and what we're not going to build here in the United States, and that means the demand is going to continue to increase. But there's not a light switch that flips and the whole thing moves. We're going to continue to fight the fight, get the message out. And I do think that the environment is going to continue to evolve in this direction.

Got it. And then maybe just lastly quick, any updated thoughts on acquisitions?

We've spent a lot of time in the last quarter really sort of getting the engine ready to execute on this aggressive plan with 3 campuses in the chute to open up in the next few months, 20-some programs opening in the next few months. That's taken a lot of our attention. And as I've said, I think, on other calls, frankly, because of the macro environment we talked about in the question before this, there isn't that much inventory out there. There aren't that many people in the space who are saying, I've got to get out of this business because they're seeing what we're seeing, which is the ability to navigate more freely, the ability to move more quickly and the ability to attract students in many, many, many major metropolitan areas. And so exiting has not been strong on the minds of many of the people that we see in the space.

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

Well, thank you, operator. I appreciate that. I'd like to thank everyone for attending the call today. Now as always, Bruce, Matt and I are available for follow-up questions, and we encourage everyone, as always, to visit one of our campuses. We had a lot of visits this last quarter from investors, and we really appreciate that interest. So if you're interested, we'd be happy to host you. We look forward to speaking to you at our next quarterly output, which will be in May. So thank you very much, and have a wonderful evening.

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

Good afternoon, and welcome to the Universal Technical Institute Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Matt Kempton, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Hello and welcome to Universal Technical Institute's Fiscal Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are our CEO, Jerome Grant; and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC.

During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which, by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law.

Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2024. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement and investor presentation.

With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute, for his prepared remarks. Jerome?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. We launched our North Star strategy in 2020 with a focus on growth, diversification and optimization. The first phase of this strategy successfully concluded with the close of fiscal year 2024. In that first phase, we saw our student population more than double from 10,000 to over 22,000. Revenue grew from just over $300 million to $733 million, and adjusted EBITDA increased from $14 million to $103 million. All of this was accomplished while improving student outcomes and employer satisfaction.

Fiscal 2025 marked the first year of the next phase of our North Star strategy, a year that demonstrated the strength of our strategy, the depth of our execution and capitalized on the momentum we built as a diversified, growth-oriented education company. We entered the first year of our North Star strategy Phase II with high expectations, and we delivered results that exceeded such expectations. Revenue surpassed our twice raised guidance range, reaching $836 million or 14% year-over-year growth. To reiterate, we raised our top line guidance twice throughout the first half of the year and raised the lower end of our range in the last quarter. So the BEC today isn't just against our original forecast, it's against numbers we already raised intra-year.

Our baseline adjusted EBITDA for the year was $133 million before incurring strategic growth investments of $6.5 million, netting us a reported adjusted EBITDA number of $126.5 million. As important, average full-time active students rose more than 10%, with new student starts increasing nearly 11% year-over-year. These results underscore both the resiliency of demand for skilled trades and health care careers and the effectiveness of our multidivisional model. In just a few minutes, Bruce will delve further into the details of our Q4 and full fiscal year 2025 performance.

Operationally, fiscal 2025 was equally strong. Once again, we executed at a high level on all 3 pillars of our growth, diversification and optimization strategy. As committed, we successfully launched 19 new programs across our 2 divisions, extending our reach into fast-growing sectors and expanding access for students nationwide. These included 9 full length programs, 8 within UTI and 1 within Concorde, along with 10 shorter [ cash pay ] courses designed to serve working adults and regional employers seeking rapid training options.

We also further enhanced our operational foundation, aligning brands, streamlining marketing and admissions and optimizing our campuses, such as the UTI Dallas campus and Concorde Denver location. Together, these initiatives have delivered meaningful efficiency gains while enabling us to scale faster and smarter in the future.

This first year of the second phase of our North Star strategy proved that our platform works, our transformation is durable and that we are ready for the next chapter of UTI's evolution, exactly as we drew it up years ago. With an outstanding year of execution laying the foundation, we are set up to deliver strong growth over the next 4 years. Frankly, we couldn't be in a better position to kick off fiscal 2026, which will be the true inflection point for our continued growth as accelerated by our North Star strategy.

As we transition our focus to 2026, I'd like to take a moment to express my gratitude to our team, our students and our partners around the country. Without all of you, none of these successes would be possible. As we now enter fiscal 2026, our operational priorities are clear: expand our campus footprint, launch new programs at scale and continue to grow our student base while maintaining quality and performance discipline.

We are on track to open 3 new campuses during fiscal 2026. First, the Heartland Dental co-branded campus in Fort Myers, Florida, which expands Concorde's health care reach and will serve as a model for future co-branded opportunities, is set to open next week. The UTI Atlanta campus is a comprehensive greenfield site that will serve one of the nation's fastest-growing metropolitan areas and support programs in automotive, diesel, skilled trades and aviation technologies. The UTI San Antonio Campus, which is our first skilled trades and aviation-focused location, adds capacity in a state where demand for technical education continues to significantly outpace supply.

Alongside those openings, now that the path is clear to execute Concorde's growth strategy, we expect to launch approximately 20 new programs across our 2 divisions in fiscal 2026, which is significantly more than previously planned. These additions are tightly aligned with employer demand and will build on the success of our fiscal 2025 North Star Phase II rollout.

Financially, we expect revenue for fiscal year 2026 to be between $905 million and $915 million, representing approximately a 9% year-over-year growth at the midpoint. I want to be deliberate here. Without our planned growth investments this year, our baseline adjusted EBITDA guidance is expected to be north of $150 million. Yet as we will be including approximately $40 million in planned growth investments as part of our now accelerated growth time line, we project that we will be printing adjusted EBITDA between $114 million and $119 million.

To you, our investors, the scale of these growth investments should not come as a surprise, as we've been signaling our advantageous position to accelerate our growth throughout the past year. These investments represent the front-loaded expenses of launching campuses, hiring faculty and building capacity for long-term scale. To move on, new student starts are expected to range between 31,500 and 33,000. This near double-digit growth is driven by healthy demand trends, expanding program capacity and improved marketing and admissions ecosystem that's producing higher quality leads and better conversion rates.

In short, fiscal 2026 will be a year of investment, expansion and activation. We're taking the platform we've built over the last 3 years and moving it fully into growth mode. While these investments, as we've outlined in the past, will temporarily moderate our reported margins, they are essential to establishing the next level of scale. We've often said that UTI's growth story is not linear, and that remains true. Fiscal 2026 and 2027 are our build years. The returns begin ramping quite rapidly in fiscal 2028 and beyond.

Years 2 through 5 of our North Star Phase II represent the next chapter of UTI's transformation, focused on accelerating growth, expanding access and scaling impact. And to remind everyone here, thanks to our diligent execution and new level of collaboration in Washington, we're actually 1 year ahead of schedule. This gives us an additional year to build momentum and execute.

As a result, this means that operationally over the next several years, we now plan to open a minimum of 2 new campuses and up to 5 new campuses annually, as well as launching approximately 20 new programs annually across both UTI and Concorde divisions, depending on regulatory approvals. With respect to campus locations, I'm sure you all read our recent announcement outlining the first 3 campuses we plan to launch in 2027. As our 2027 plans continue to evolve, you'll hear more from us.

The programs we launch will continue to target areas of national workforce shortage, from nursing and dental hygiene to diesel, renewable energy and advanced manufacturing, reinforcing UTI's position as a leader in closing America skill gap. We expect the financial impact of these initiatives to compound steadily and show strong momentum by the end of fiscal 2029.

As previously noted, revenue growth should continue to average about 10% over this time period. Strategic operating and capital investment should be relatively consistent between 2026 and 2029, enabling margin expansion to begin slowly in 2027 before ramping more rapidly in 2028 and especially 2029. As a result of this acceleration, we now anticipate generating more than $1.2 billion in annual revenue and approaching $220 million in adjusted EBITDA in fiscal 2029. This rapid expansion in the last 2 years of the phase is driven by both maturity of our campuses and program replications launched in 2026 and 2027. Please refer to our investor deck for more details.

To put that scale into perspective, by the end of fiscal year 2029, we now expect our revenue to nearly double and our adjusted EBITDA to be more than double what they were in 2024. Phase II is not just an extension of our growth story, but a transformation of our scale, reach and impact. And it sets the stage for what comes next. Even by 2029, we won't have made more than a dent in America's skilled workforce gap, which means there's still an enormous runway in front of us. As Ford's CEO just last weekend noted, the industry is struggling to fill thousands of high-paying technician roles, underscoring how substantial the demand remains.

So as I look ahead, I couldn't be more confident in where we're headed. We're executing from the strongest operational and financial position in our company's history, and we're building something that's designed to endure, thrive and grow well past 2029. In fact, we're already starting to think about 2030 and beyond, building on that durable, repeatable growth engine that we've created. That could mean continuing our organic expansion, accelerating structured B2B partnerships with employers, the military and state workforce initiatives, including opportunities around AI-enabled training and automation, or even pursuing strategic acquisitions that broaden our reach into new geographies and product sets. We have the platform, the balance sheet and the team to do all of it.

With that, I'll turn the call over to Bruce, our CFO, to review our fiscal 2025 financials and provide you with further details on our guidance.

Thank you, Jerome. Fiscal 2025 was another year of exceptional growth. We met or surpassed all of our raised top line guidance metrics for the year, demonstrating the scalability of our model and giving us a solid foundation to accelerate the next phase of our North Star strategy.

In the fourth quarter, total average full-time active students grew 8.1% year-over-year to 25,049, while total new student starts increased 5.4% to 12,109. For the full year, average full-time active students increased 10.5% to 24,618 and new student starts increased 10.8% to 29,793, coming in on the upper end of our raised guidance range. The Concorde division drove a 14.5% increase in both average full-time active students and new student starts for fiscal 2025. These increases are a result of continued marketing and admissions investments and robust demand for Concorde's programs.

The UTI division generated an 8% increase year-over-year in average full-time active students for the full year, and new student starts grew 7.9%. The growth in average full-time active students reflects the sustained demand for the skilled trades and the 8 new programs launched throughout the year.

Turning to our financial performance. Fourth quarter revenue on a consolidated basis increased 13.3% to $222.4 million. Concorde contributed $77.8 million, an increase of 18.2% over the prior year quarter, while the UTI division contributed $144.6 million, an increase of 10.8% over the prior year quarter. For the full year, consolidated revenue grew 14% to $835.6 million, exceeding the upper end of our guidance range, which, as Jerome mentioned, we raised multiple times throughout the year. Concorde contributed $293.8 million, an increase of 19.3% over the prior year, while the UTI division contributed $541.8 million, representing an 11.4% increase over the prior year.

Shifting to profitability. Consolidated net income for the fourth quarter was $18.8 million, or $0.34 per diluted share, and $63 million, or $1.13 per diluted share, for the full year. Adjusted EBITDA for the fourth quarter was $36.8 million and $126.5 million for the full year. Full year net income and earnings per share exceeded the upper end of our guidance range, and adjusted EBITDA was in the middle of our projected range. These results included over $6 million in growth investments related to new program launches and new campus buildouts.

At the end of the year, we had 54.4 million shares outstanding. Total available liquidity at the end of the quarter was $254.5 million, including $41.8 million of short-term investments and $85.4 million of remaining capacity on our revolving credit facility. Fiscal 2025 cash flow from operating activities was $97.3 million, and capital expenditures were $42 million.

Regarding free cash flow, due to the Department of Education's strategy to intensify the verification process for students, cash disbursements were temporarily delayed. The result of these timing impacts was our fiscal 2025 adjusted free cash flow was $56 million, slightly below our expectations. We expect the remainder of these impacts and delayed accounts receivable to be worked through within the next few months.

Looking forward, our results in fiscal 2025 give us real confidence in the road ahead. We finished the year with strong momentum across both divisions due to the ongoing demand for education in the skilled trades. Fiscal 2026 is about turning the momentum we've driven by our first year of North Star Phase II into measurable expansion through disciplined execution.

Starting with revenue, we expect to generate between $905 million and $915 million for fiscal 2026 or approximately 9% year-over-year growth at the midpoint. For the first 3 quarters, we expect mid- to high single-digit revenue growth, with Q2 being the lowest. Q4 is anticipated to be the highest growth quarter in the low double-digit range. Total new student starts are expected to range between 31,500 and 33,000. For the first quarter, we expect low single-digit growth, then low to mid-double-digit growth in Q2 and mid- to high single-digit growth in the remaining quarters.

For fiscal 2026 net income, we expect a range of $40 million to $45 million and diluted earnings per share ranging between $0.71 and $0.80. While revenue will be up every quarter as noted, as we begin to make our significant growth investments this year, net income growth will be strongly negative for the first 2 quarters, improving slightly, though still negative in Q3, turning positive to low double-digit growth in Q4. As a point of clarity, we've seen no impact in our first quarter due to the recently resolved government shutdown.

We expect our full year baseline adjusted EBITDA to exceed $150 million and our SEC reported adjusted EBITDA to range from $114 million to $119 million. Embedded in this guidance and bridging from that baseline to our reported adjusted EBITDA is approximately $40 million in growth investments primarily related to the following 2 items. The first is campus expansions, which includes the preopening and launch costs for the 3 new campuses opening in fiscal '26, and preparatory work for even more campuses opening in fiscal '27.

The second item is program development, which includes faculty recruitment and educational tools needed for 20-plus new programs opening in fiscal year 2026, with more coming the year after. In terms of the quarterly profile for the year for adjusted EBITDA, similar to net income as we begin to make our significant growth investments this year, growth will be strongly negative for the first 2 quarters, with high single-digit growth expected in Q3 and significantly stronger growth in Q4. As a reminder, growth investments are not added back when calculating our adjusted EBITDA.

These are investments we've been building a plan for and signaling throughout the year and are not previously unaccounted for impacts. We will be deliberately and strategically reinvesting more heavily beginning in fiscal 2026 to position the company for accelerated returns in the coming years. As a result, we expect to see marginal growth in adjusted EBITDA beginning in fiscal 2027, which will begin to accelerate more significantly in 2028 and even further into 2029 as our array of new campuses and programs ramp and yield higher returns.

We anticipate 2026 full year adjusted free cash flow to range between $20 million and $25 million, which assumes approximately $100 million in CapEx spend, consistent with our multiyear plan to support campus growth and modernization. We expect the bulk of our cash generation and year-over-year growth to materialize in the fourth quarter, consistent with our historical cadence.

I want to reiterate what we expect to deliver at the conclusion of this next phase. As a result of North Star Phase II, we expect to achieve more than $1.2 billion in revenue, equating to roughly a 10% compound annual revenue growth rate, and to approach $220 million in adjusted EBITDA by fiscal 2029. Driving these results will be approximately $100 million of total CapEx invested in new campuses and program expansions each year. These investments will fuel our next wave of growth and position us to deliver stronger returns, higher margins and a diversified, durable and repeatable growth engine over time.

We remain confident in our ability to fund this growth strategy from cash on hand and cash generated from operations in the coming years. Again, we're thrilled with what the team has delivered in 2025 and are excited for 2026 and how this inflection point for the company will drive even stronger growth in the years to come. In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation and upcoming 10-K filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives and guidance. Thank you to our students, team, partners and investors for their ongoing support.

I'd now like to turn the call over to the operator for Q&A. Operator?

[Operator Instructions] The first question today comes from [ Josh Bebe ] with Truist.

Yes. It's Jasper Bibb with Truist. Just hoping you could give a little bit more detail on what you're expecting for start growth in '26 between the UTI and Concorde segments. Should we expect the start growth to be relatively even between the two segments? Or maybe is there a differential there?

Yes. Jasper, it's Bruce. Yes, like we said on the call, we're expecting roughly about 8%, 8% to 9% starts growth for '26. It's going to be very similar in kind of profile to this year, and we're investing to make sure we can make that happen and feel good about the growth for starts in '26. And is that going to be a very similar segment profile, to follow up on your question, too, as we saw in '25. It's going to be a very similar profile for a segment.

Okay. No, that makes sense. And then I just wanted to clarify something from the press release. Was this comment about as much as 5 campus openings annually between the two divisions or on a combined basis? I guess my question is -- I don't think there'll be a scenario where you do like 10 campus openings in a year, but I just wanted to make sure I understood the point.

Yes. Just to clarify, it means between the two divisions. We have previously said that we would likely open 2 to 3, and now it will be somewhere between 2 and 5 per year.

Okay. Understood. Last one for me. You mentioned the cash impact of the Department of Ed's ID verification measures, which makes sense. Just hoping you could comment on if you see any productivity impact on the front end, just bringing on new students. Is that taking longer? Is there additional processes they're making you go through as part of that program?

Yes. Thanks, Jasper. No, we've seen no impact at all on the front end. This was simply a temporarily -- as the department kind of increased their focus on verifications, legal status, that type of thing, just basically getting through that backlog of verifications caused a little bit of a slowdown in cash collection, but it was temporary. Frankly, we're already seeing it kind of come back to normal here as we start the quarter. So we don't think it's going to be a long-term drag or anything like that on free cash flow.

The next question is from Mike Grondahl with Northland Securities.

Congrats on a nice quarter. Could you talk a little bit about how your high school recruiting efforts went kind of compared to your expectations?

Sure. Mike, I've talked a lot. I always want them to go better. I think they went about where we expected them to. We didn't add high school resources this last year. We will for 2026. We chose to put sort of the additional strategic investment in Concorde. We saw an opportunity to significantly ramp the Concorde enrollment, specifically around the higher value clinical courses this year. And so as we are balancing additional strategic investment, rather than adding resources in the high school for UTI, we put more money into Concorde.

Also with the program launches that we've got at UTI, which are highly concentrated in the skilled trades, we're seeing that the skilled trades tend to appeal more to the adult population. And so tilt a little more investments in marketing to the adult population this year as well. Now as we're opening new campuses, Atlanta, San Antonio and move forward, there'll be more of a balance between high school and adult, and so that's why we're adding more resources into the high school channel for 2026.

Got it. Got it. And then can you talk a little bit about tuition increases kind of embedded in your 2026? And how are you thinking about pricing power? With demand as strong as it is, what's kind of your current thinking there?

Well, number one, we assume somewhere between a 2% and a 3% price increase. It varies by program and by market in some instances, but our numbers assume somewhere between 2% and 3%. And when you think about pricing, when inflation spiked in 2022 and 2023, people were saying, why don't you take a 10% price increase. And the way you have to look at it is really around student funding. There wasn't a significant increase in Pell grants and student loan qualifications at that time frame. Which means every dollar above that 2% or 3% that we have, it really adds to the gap that the student has to pay out of their own pocket. Right? So there is an unlimited upside pricing power to be able to do that.

Should there be significant increases in student funding, we might be able to see a little bit more in pricing. And some areas where the demand is high and we may be seeing really stiff demand, we may see a little more. But on average, it's going to average between 2% and 3%.

Got it. And then maybe lastly, how will you, I don't know, choose between at least 2 and up to 5? Are you -- help us think for the low end and the high end of that range.

Yes. I mean, the low end is conservative. One of the things we already said was you could pretty much count on us for launching 2 UTI campuses a year. And that was prior to Concorde's growth restrictions falling by the wayside and us getting into the game with them as well. So we hold open the opportunity in the years to come that we could slow it down a little bit.

But right now, the opportunity is so great. I mean, the demand is so high for what we're doing in many geographies around the country that -- we've announced our first 3 campuses for 2027. We had hoped to be able to get a Concorde campus or 2 open in '26, but due to a creditor approval, real estate and building and things like that, it likely won't be until '27. We announced 2 of those. We've announced the first campus for 2027 for UTI in Salt Lake City. And frankly, we're working on more. So we want to make sure that we're moving both prudently but aggressively to solve this problem out there.

[Operator Instructions] The next question is from Griffin Boss with B. Riley.

So I'll just start off for Bruce. Near the end of your prepared remarks, you talked about expectations for marginal growth and adjusted EBITDA starting in 2027. Can you just clarify here for me, is that implying marginal growth over 2026 numbers? Or marginal growth over what you did in '25?

Yes. Thanks, Griffin. Yes, to be clear, that's marginal growth in over '26 numbers. We've always said '26-'27 are really our investment years. You're going to kind of see this dip, which you're seeing here in our '26 guide. We're not giving a specific '27 guide, obviously, but you'll start to see some marginal EBITDA growth in '27, and then it will really take off in '28, '29. That's when you'll start to see the return from these new campuses and investments really pay off and add to the bottom line.

Understood. Yes, that's what I thought. I just wanted to make sure I had it correct. And then just shifting to the CapEx cadence going forward. Bruce, you also talked about that. I missed specifically what you said, but I did want to just discuss what happened in '25. Obviously, that came. You talked about free cash flow, and CapEx came in below what you had expected as well. Is that -- is the gap there, the delta, is that also just because of the Department of Ed and the cash collections coming in, you kind of tempered your CapEx spend this year? And then along those same lines, should we expect 2026 CapEx to be that much greater? It was about, what, [indiscernible]?

On an accrued basis, it was actually closer to 54, almost right on our guide. Cash, we didn't quite hit it. It was about $42 million on a cash basis. So really, it's a timing issue. It's accruals, and we're seeing that just -- it really happened towards the end of the year as we really pushed our teams to get that CapEx spent and stay on schedule.

Okay. Okay. Got it. Understood. And then last one for me, just on the 3 new campuses that you guys announced yesterday, that's the growth is great to see. Is there anything -- can you just remind us maybe or tell us kind of how you look at revenue potential of these different campuses once they've scaled? You've talked in the past about UTI, Atlanta campus, maybe I think, if I remember correctly, $45 million revenue contribution when it scaled, and then San Antonio for UTI is $23 million. So is there anything you can just talk about it across these Concorde campuses and UTI Salt Lake expectations when you reach these scaled student numbers you talked about?

So first of all, from Salt Lake -- this is Jerome. Thanks for the question. Salt Lake City is going to -- we think it's going to behave a lot like Atlanta. It's a full comprehensive campus, transportation, skilled trades and energy, aviation on that campus. So we think you're talking about 1,200, 1,300 students in the $40 million to $45 million range at peak. That's our current version of the optimized campus.

And again, we're never satisfied with this notion of optimization. We'll keep looking for more, whether it's new programs or new ways to teach. So Salt Lake City is going to behave a lot like Atlanta. Now these are the first Concorde campuses that are coming to market. And generally speaking, what we're looking at at Concorde is a full line of the Concorde offerings on each of the campus, which tends to come somewhere in the neighborhood of 600, 700 students, slightly less revenue per student. And so you're looking at about $20 million to $25 million in revenue. And again, we'll continue to look at our program offerings there and see what we can fit in beyond that.

But we don't have a variable model in terms of Concorde that we're putting out because the demand in the health care space and in the dental space is just so high everywhere that it's hard to find a market where you would look at it and say, I'm not going to put dental in there or I'm not going to put radiology tech in or some of the clinical courses is that we're going to market with full comprehensive health care programs in all of ours. And like I said, we wanted to get the news out that we've signed our leases in Salt Lake City and Houston and Atlanta for Concorde, and we're continuing to work on more locations. Whether at the end of '27 or into '28, we're working on those right now.

And then Griffin, just to add one thing to underscore what Jerome said. You are exactly right. That full campus in Salt Lake City, those are typically $40 million to $45 million revenue campuses. IRR is north of 30%, return on invested capital north of 30%. So I just wanted to answer that question. You are correct in the revenue expectations.

The next question is from Raj Sharma with Texas Capital.

I wanted to ask you about the starts that you -- starts projected for '26. I think that you already addressed a part of it. You said the start close being equivalent in UTI and Concorde. Any sort of breakdown amongst young adults, high school or military veteran that you've seen that you're contemplating for '26? And then how much of the starts is going to be new campuses and program? Getting -- trying to get a sense of what your same-store starts [indiscernible] for '26.

Yes. Well, there's a couple of dynamics at play is as we continue to diversify the UTI campuses to be a full line of transportation, skilled trades and energy, the student population tends to be getting a little older, right? And that doesn't mean that we're not going to add resources in the high schools, we absolutely are because we're opening new campuses. We need people in new locations. We need to intensify our efforts in places like as we opened in Atlanta and San Antonio and as we get ready for Salt Lake City. So we will be adding resources in the high school, but the skilled trades tend to appeal to an older audience.

Kids in high school tend to know about fixing cars. They don't know about wind energy. They don't tend to know about HVAC and welding and the like. And so they tend to really gravitate towards the transportation areas. Whereas people who have been out in the world for a couple of years, 19, 20, 21, 22-year-olds often gravitate towards the skilled trades, which is balancing out the population now on the UTI campus.

The other factor that's at play or the other aspects that are at play is that the skilled trades also tend to attract people who are more local and give us more opportunity to dig deeper into the local markets. And as we've said over the past, the local student tends to start faster, tends to make a decision faster and tends to get going, whereas someone who has to relocate has to find somewhere to live, and there's a longer time line. And so what we're seeing is shorter time lines from contract start. And we're seeing higher show rates out of the local population. So we're -- these are all things that are helping both our revenue and our margin improve.

Got it. Also, I wanted to get a sense of what the employment trends across programs, can you see any sort of a slowdown? Or -- and even geographically speaking, are you seeing a consistent employment at graduation mark that you have seen in the past? Or has that changed?

Yes. If anything, it's intensifying. I mean we're continuing to get more B2B inquiries around government contracts that have been signed around airplane building, shipbuilding, data centers. Our industrial maintenance technology courses are doing quite well because of the number of areas that are being built in there. So if anything, we're seeing the demand intensified.

On the transportation side, I mean, you heard the CEO of Ford just this last week, he's got 5,000 openings he can't fill. Right? He is offering upwards of $120,000 to try to get these folks. And so there's no slowing down in the transportation business at all.

Fantastic. And then just on -- just a hypothetical question, there's been a talk at the Department of Education totally getting disbanded. Any sort of impact on you, on the approvals on FAFSA that you foresee? Or do you think that it will just be given out to the different divisions, different departments of the government?

Yes, I think great question. Thanks for asking. I know that news came out yesterday, obviously. And this is something that, frankly, this administration who's been dramatically more collaborative with us over the tenure in office has been foreshadowing since they took over. And to put a point on your question, is there really are two, in a sense, pieces of the Department of Education that are most relevant to us. One being the entity or frankly, the bank that administers Title IV funding. That's something that's perpetually funded, it's self-contained. It wasn't part of the announcement yesterday.

What we've seen is [ FAFSAs ] are now moving quite well. There isn't all the glitches they had with the new electronic FAFSA, et cetera, seem to be behind them, and we're seeing that progressed quite well. If that were to be picked up as a chunk and moved over to another department within the government, we don't anticipate that we would see any real disruption along those lines. And then the other entity is really what you started with was the entity of approvals. And that was announced that the intention was to pick that up and move it over under the Department of Labor. Same group of people, same leadership, et cetera, but under the Office of the Department of Labor.

What I can tell you now is that our approval process is far more streamlined, much less friction and much more collaborative than it has ever been since I've been with this company for the last 8 years. The agreements are moving quite rapidly. I'm signing new PPA agreements, 5 in the last week, that as we think about renewals and new campuses and new programs, et cetera.

And so we're quite pleased with the collaboration we're seeing from Washington and the lines of communications we've even started to open with the Department of Labor around how we might be able to solve these huge labor problems in the U.S. So, so far, the two entities we see are working out quite well.

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

Thank you, operator. Really appreciate it. I'd like to thank everyone who attended today. Big day in the market for people reporting. So we like that you prioritized us. As always, Bruce, Matt and I are available to follow up with any questions. We encourage -- once again, as we always have, people to visit our campuses. You've really got to see what we're doing, especially the new ones that we'll be opening in Atlanta, San Antonio and the Concorde Heartland campus down in Florida. If you're interested, please give us a call.

So we look forward to speaking with you again when we report our first fiscal quarter of '26, which will be sometime in February. Until then, I'd like to wish you all a very happy holiday season. Thank you.

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