Universal Technical Institute, Inc. (UTI) Earnings

Management highlights

### Strategic Progress & Market Demand - Confirmed long-term confidence in the North Star diversification strategy, which has transformed Universal Technical Institute from a primarily transportation-focused educator to a diversified platform serving transportation, skilled trades, healthcare, and dental markets. - Persistent, widespread skilled worker shortages across all served industries create durable demand; the company is well-positioned to capture growing student interest in trade programs driven by macro tailwinds including infrastructure investment, domestic manufacturing reshoring, energy and data center construction. - New campus launches are outperforming expectations: UTI San Antonio (opened spring 2026) is tracking 40% ahead of launch projections, and UTI Atlanta (opened July 2026) saw first new student starts 30% ahead of expectations, with both on track to exceed projected mature annual student enrollment.

Guidance

- **Fiscal 2026**: Management revised full-year guidance downward from prior levels, driven by softer-than-expected Q4 2026 UTI Division high school channel new starts and faster-than-anticipated mix shift toward shorter-duration skilled trades programs. New fiscal 2026 guidance is: consolidated revenue of $893 million to $900 million (≈7% year-over-year growth at the midpoint), net income of $32 million to $36 million, diluted EPS of 57 to 64 cents, baseline adjusted EBITDA exceeding $135 million, reported adjusted EBITDA of $100 million to $103 million, and total new student starts of 31,900 to 32,300. Full-year 2026 capital expenditures are now expected to be approximately $110 million, up from the original target, due to accelerated spend on fiscal 2027 campus initiatives. - **Long-term targets**: The 2029 fiscal targets of exceeding $1.2 billion in revenue and approaching $220 million in adjusted EBITDA remain unchanged, with management confirming no change to confidence in medium and long-term growth trajectory. - **Fiscal 2027 (preliminary contours, no formal guidance yet)**: Management expects revenue growth higher than fiscal 2026, with modest adjusted EBITDA growth, and more meaningful EBITDA expansion planned for 2028 and 2029. Annual capital expenditures are expected to remain at $100 million or more to support new campus and program launches. Near-term carryover impact from the 2026 Q4 high school shortfall is expected to be offset by strong skilled trades demand and improved capacity utilization.

Segment performance

Consolidated third quarter 2026 revenue increased 7.2% year-over-year to $218.9 million. The UTI Division generated $138 million in revenue, a 5% year-over-year increase, representing 63% of total consolidated revenue. The UTI Division saw 23% year-over-year growth in new student starts, a 4% year-over-year increase in average full-time active students, driven by strong demand for skilled trade programs and growth at new campuses. The Concord Division generated $80.9 million in revenue, an 11.1% year-over-year increase, representing 37% of total consolidated revenue. Concord saw an 8.5% year-over-year increase in average full-time active students, driven by strength in dental programs, though new starts were softer in the quarter due to variable clinical cohort timing that was factored into prior guidance.

Risks & headwinds

- The company understaffed its UTI Division high school channel field admissions team, leading to unprocessed leads and lower-than-expected Q4 2026 new starts, a near-term execution issue that has been addressed via 20% staffing increases completed mid-year. - Faster-than-planned mix shift toward shorter-duration skilled trades programs, which generate lower revenue and margin per student than longer transportation programs like automotive and diesel, created a near-term headwind to 2026 profitability that is expected to be mitigated in future years via capacity expansion and pricing optimization. - Shifting student discovery behavior driven by the rise of AI search creates potential disruption to top-of-funnel marketing, though management notes the company's diversified lead generation model has limited material impact to date. - New field admissions reps require time to build relationships and reach full productivity, which could moderate near-term conversion improvements in the high school channel in 2027, though this has been factored into internal planning.

Analyst Q&A

• Q: What caused the Q4 2026 high school channel start shortfall, and is it related to AI search disruption? /

  A: Management stated the shortfall is not related to AI search at all, as the high school channel relies heavily on in-field presentations and manual follow-up, not digital search. Seventy percent of the shortfall comes from having too few field admissions reps to follow up on the robust existing lead volume, an execution issue that has been resolved by increasing headcount from ~140 to ~170. The remaining 30% comes from an unexpected faster shift in high school student preference to skilled trades over traditional auto/diesel programs, a shift driven by growing market awareness of skilled trade opportunities that happened faster than planned.

• Q: What is the breakdown of the 2026 guidance downward adjustment between the staffing shortfall and mix shift, and can unconvertled leads be recovered? /

  A: Approximately 70% of the $20 million downward baseline adjusted EBITDA revision comes from the auto/diesel high school start shortfall, and 30% comes from the faster-than-planned mix shift to lower-margin shorter skilled trades programs. The mix shift is viewed as a positive long-term strategic development that just occurred early. Unconverted leads from 2026 will be targeted for conversion in the first quarter of 2027 by the newly expanded field team.

• Q: What benefits are expected from unifying UTI and Concord under a single enterprise operating model, including expected cost synergies? /

  A: After three years of operating separately post-acquisition to preserve brand strength, unification completed in July 2026 will simplify operations, enable faster execution, and allow shared investment in core systems (CRM, student information, AI marketing tools) across the entire business. While incremental cost synergies will emerge over time by eliminating duplicated back-office functions, the primary benefit is improved alignment of resources behind the highest-return growth opportunities rather than just cost cutting. Both strong customer-facing UTI and Concord brands will be preserved.

• Q: What is the revenue and margin difference between skilled trades and auto/diesel programs, and can pricing be adjusted to offset mix impacts? /

  A: The primary difference is program length: most skilled trades programs are ~9 months, compared to ~51 weeks to a full year for auto/diesel, leading to lower annual revenue per student, with a small corresponding margin difference. Management notes two actionable mitigations: expanding skilled trades capacity at existing campuses to improve utilization and margins, and exercising modest pricing power as strong demand often sells out cohorts, allowing incremental price adjustments that will improve margin over time.