UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number: 1-31923

UNIVERSAL TECHNICAL INSTITUTE, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0226984

(State or other jurisdiction of
incorporation or organization)

(IRS Employer Identification No.)

4225 East Windrose Drive, Suite 200

Phoenix, Arizona 85032

(Address of principal executive offices, including zip code)

(623) 445-9500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	UTI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨			Accelerated filer þ
Non-accelerated filer ¨			Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

At ~~January 31, 2022,~~February 1, 2023, there were ~~32,970,033~~33,974,478 shares outstanding of the registrant's common stock.

UNIVERSAL TECHNICAL INSTITUTE, INC.

INDEX TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, ~~2021~~2022


		Page
		Number
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at December ~~31, 2021~~ 3 1 , 202 2 and September 30, ~~2021~~202 2 (Unaudited)	1
	Condensed Consolidated Statements of Operations for the Three Months Ended December ~~31, 2021~~3 1 , 202 2 and ~~2020~~202 1 (Unaudited)	2
	Condensed Consolidated Statements of Other Comprehensive Income for the Three Months Ended December 31, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity as of December ~~31, 2021~~3 1 , 2022 and ~~2020~~2021 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December ~~31, 2021~~3 1 , 2022 and ~~2020~~2021 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2832
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3642
Item 4.	Controls and Procedures	3642

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3844
Item 1A.	Risk Factors	3844
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3844
Item 3.	Defaults upon Senior Securities	3844
Item 4.	Mine Safety Disclosures	3844
Item 5.	Other Information	3844
Item 6.	Exhibits	3844

SIGNATURES		4046

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (“Securities Act”), which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. From time to time, we also provide forward-looking statements in other materials we release to the public as well as verbal forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions (including the negative form of such expressions) intended to identify forward-looking statements, although not all forward looking statements contain these identifying words. Forward-looking statements are based on our current expectations and assumptions, do not strictly relate to historical or current facts, any of which may not prove to be accurate. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Important factors that could cause actual results to differ from those in our forward-looking statements include, without limitation:

•failure of our schools to comply with the extensive regulatory requirements for school operations;

•our failure to maintain eligibility for federal student financial assistance funds;

•continued Congressional examination of the for-profit education sector;

•~~a disruption in~~ our failure to maintain eligibility for or the ability to process federal student ~~loans under the Federal Direct Loan Program;~~financial assistance;

•regulatory investigations of, or actions commenced against, us or other companies in our industry;

•~~the effect of public health pandemics, epidemics or outbreak, including COVID-19;~~

•changes in the state regulatory environment or budgetary constraints;

•our failure to execute on our growth and diversification strategy;

•our failure to realize the expected benefits of our ~~acquisition of MIAT College of Technology;~~acquisitions, including, without limitation, Concorde Career Colleges, Inc.;

•our failure to successfully integrate ~~MIAT College of Technology’s program offerings into~~ our ~~current program offerings;~~acquisitions, including, without limitation, Concorde Career Colleges, Inc.;

•our failure to improve underutilized capacity at certain of our campuses;

•enrollment declines or challenges in our students’ ability to find employment as a result of macroeconomic conditions;

•our failure to maintain and expand existing industry relationships and develop new industry ~~relationships with our industry customers;~~relationships;

•our ability to update and expand the content of existing programs and develop and integrate new programs in a timely and cost-effective manner while maintaining positive student outcomes;

•our failure to effectively identify, establish and operate additional schools, programs or campuses;

•the effect of our principal stockholder owning a significant percentage of our capital stock, and thus being able to influence certain corporate matters and the potential in the future to gain substantial control over our company;

•the impact of certain holders of our Series A Preferred Stock owning a significant percentage of our capital stock, their ability to influence and control certain corporate matters and the potential for future dilution to holders of our common stock;

•a loss of our senior management or other key employees;

•~~failure to comply with~~ the ~~restrictive covenants and our ability to pay the amounts when due under the Credit Agreement;~~effect of public health pandemics, epidemics or outbreak, including COVID-19; and

•risks related to other factors discussed in our 2202 02 12 Annual Report on Form 10-K filed with the SEC on December ~~2, 2021~~12, 2022 (the ~~“2021~~“2022 Annual Report on Form 10-K”).

The factors above are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Many events beyond our control may determine

~~Table of Contents~~

whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated,

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estimated or projected. Among the factors that could cause actual results to differ materially are the factors discussed under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should bear this in mind as you consider forward-looking statements.

Also, these forward-looking statements represent our estimates and assumptions only as of the date of the document containing the applicable statement. Except as required by law, we undertake no obligation to update or revise forward looking statements, whether as a result of new information, future events or otherwise. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q, including the documents that we incorporate by reference herein, by these cautionary statements. You are advised, however, to consult any further disclosures we make on related subjects in our reports and filings with the Securities and Exchange Commission (“SEC”).

iii

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and per share amounts)

(Unaudited)


		December 31, 2021		September 30, 2021			December 31, 2022		September 30, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	99,513	$	133,721	Cash and cash equivalents	$	162,229	$	66,452
Restricted cash	Restricted cash	11,544		12,256		Restricted cash	4,542		3,544

Held-to-maturity investments						Held-to-maturity investments	—		28,918
Receivables, net	Receivables, net	14,796		17,151		Receivables, net	22,252		16,450
Notes receivable, current portion	Notes receivable, current portion	5,522		5,538		Notes receivable, current portion	5,727		5,641
Prepaid expenses	Prepaid expenses	7,584		6,658		Prepaid expenses	11,422		6,139
Other current assets	Other current assets	8,325		8,068		Other current assets	8,871		8,809
Total current assets	Total current assets	147,284		183,392		Total current assets	215,043		135,953
Property and equipment, net	Property and equipment, net	133,061		122,051		Property and equipment, net	240,836		214,292
Goodwill	Goodwill	18,026		8,222		Goodwill	26,992		16,859
Intangible assets		16,302		124
Intangible assets, net						Intangible assets, net	18,895		14,215

Notes receivable, less current portion	Notes receivable, less current portion	32,116		30,586		Notes receivable, less current portion	30,767		30,231
Right-of-use assets for operating leases	Right-of-use assets for operating leases	177,380		159,075		Right-of-use assets for operating leases	199,947		132,038
Deferred tax asset, net						Deferred tax asset, net	6,097		3,365
Other assets	Other assets	9,369		9,120		Other assets	9,496		5,958
Total assets	Total assets	$	533,538	$	512,570	Total assets	$	748,073	$	552,911
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	47,903	$	54,397	Accounts payable and accrued expenses	$	62,855	$	66,680
Dividends payable	Dividends payable	1,323		—		Dividends payable	1,277		—
Deferred revenue	Deferred revenue	50,810		57,648		Deferred revenue	75,328		54,223
Accrued tool sets		3,433		3,292

Operating lease liability, current portion	Operating lease liability, current portion	16,376		14,075		Operating lease liability, current portion	24,206		12,959

Long term debt, current portion		884		876
Long-term debt, current portion						Long-term debt, current portion	1,945		1,115
Other current liabilities	Other current liabilities	2,468		2,430		Other current liabilities	3,601		2,745
Total current liabilities	Total current liabilities	123,197		132,718		Total current liabilities	169,212		137,722
Deferred tax liabilities, net		1,959		674

Operating lease liability	Operating lease liability	171,325		153,228		Operating lease liability	195,730		129,302
Long-term debt	Long-term debt	29,636		29,850		Long-term debt	161,029		66,423
Other liabilities	Other liabilities	4,814		7,570		Other liabilities	4,816		4,067
Total liabilities	Total liabilities	330,931		324,040		Total liabilities	530,787		337,514
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)	0		0		Commitments and contingencies (Note 16)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, $0.0001 par value, 100,000 shares authorized, 32,989 and 32,915 shares issued		3		3
Preferred stock, $0.0001 par value, 10,000 shares authorized; 700 shares of Series A Convertible Preferred Stock issued and outstanding, liquidation preference of $100 per share		—		—
Common stock, $0.0001 par value, 100,000 shares authorized, 34,007 and 33,857 shares issued						Common stock, $0.0001 par value, 100,000 shares authorized, 34,007 and 33,857 shares issued	3		3
Preferred stock, $0.0001 par value, 10,000 shares authorized; 676 shares of Series A Convertible Preferred Stock issued and outstanding, liquidation preference of $100 per share						Preferred stock, $0.0001 par value, 10,000 shares authorized; 676 shares of Series A Convertible Preferred Stock issued and outstanding, liquidation preference of $100 per share	—		—
Paid-in capital - common	Paid-in capital - common	142,719		142,314		Paid-in capital - common	149,016		148,372
Paid-in capital - preferred	Paid-in capital - preferred	68,853		68,853		Paid-in capital - preferred	66,481		66,481
Treasury stock, at cost, 82 shares	Treasury stock, at cost, 82 shares	(365)		(365)		Treasury stock, at cost, 82 shares	(365)		(365)
Retained deficit		(8,497)		(21,996)
Accumulated other comprehensive income (loss)		(106)		(279)
Retained earnings (deficit)						Retained earnings (deficit)	64		(1,307)
Accumulated other comprehensive income						Accumulated other comprehensive income	2,087		2,213
Total shareholders’ equity	Total shareholders’ equity	202,607		188,530		Total shareholders’ equity	217,286		215,397
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	533,538	$	512,570	Total liabilities and shareholders’ equity	$	748,073	$	552,911

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended				Three Months Ended
		December 31,				December 31,
		2021		2020				2022		2021
Revenues	Revenues	$	105,075	$	76,125		Revenues	$	120,004	$	105,075
Operating expenses:	Operating expenses:						Operating expenses:
Educational services and facilities	Educational services and facilities	47,901		39,331			Educational services and facilities	61,408		47,901
Selling, general and administrative	Selling, general and administrative	43,596		36,019			Selling, general and administrative	54,148		43,596
Total operating expenses	Total operating expenses	91,497		75,350			Total operating expenses	115,556		91,497
Income from operations	Income from operations	13,578		775			Income from operations	4,448		13,578
Other (expense) income:
Other income (expense):							Other income (expense):
Interest income	Interest income	12		54			Interest income	823		12
Interest expense	Interest expense	(233)		(2)			Interest expense	(1,423)		(233)

Other income, net	Other income, net	118		282			Other income, net	325		118
Total other (expense) income, net		(103)		334
Total other expense, net							Total other expense, net	(275)		(103)
Income before income taxes	Income before income taxes	13,475		1,109			Income before income taxes	4,173		13,475
Income tax benefit (expense) (See Note 15)		1,347		(26)
Income tax (expense) benefit (See Note 15)							Income tax (expense) benefit (See Note 15)	(1,525)		1,347
Net income	Net income	$	14,822	$	1,083		Net income	2,648		14,822
Preferred stock dividends	Preferred stock dividends	1,323		1,313			Preferred stock dividends	(1,277)		(1,323)
Net income (loss) available for distribution		$	13,499	$	(230)
Income available for distribution							Income available for distribution	1,371		13,499
Income allocated to participating securities							Income allocated to participating securities	(514)		(5,267)
Net income available to common shareholders							Net income available to common shareholders	$	857	$	8,232

Earnings per share (See Note 18 ):
Net income (loss) per share - basic		$	0.25	$	(0.01)
Net income (loss) per share - diluted		$	0.25	$	(0.01)
Earnings per share (See Note 18):							Earnings per share (See Note 18):
Net income per share - basic							Net income per share - basic	$	0.03	$	0.25
Net income per share - diluted							Net income per share - diluted	0.02		0.25

Weighted average number of shares outstanding:	Weighted average number of shares outstanding:						Weighted average number of shares outstanding:
Basic	Basic	32,849		32,658			Basic	33,805		32,849
Diluted	Diluted	33,572		32,658			Diluted	34,408		33,572

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Three Months Ended				Three Months Ended
		December 31,				December 31,
		2021		2020				2022		2021
Net income	Net income	$	14,822	$	1,083		Net income	$	2,648	$	14,822
Other comprehensive income:	Other comprehensive income:						Other comprehensive income:
Unrealized gain on interest rate swap		173		—
Unrealized (loss) gain on interest rate swap, net of taxes							Unrealized (loss) gain on interest rate swap, net of taxes	(126)		173
Comprehensive income	Comprehensive income	$	14,995	$	1,083		Comprehensive income	$	2,522	$	14,995

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Common Stock			Preferred Stock			Paid-in Capital - Common				Paid-in Capital - Preferred				Treasury Stock						Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity						Common Stock							Preferred Stock								Paid-in Capital - Common				Paid-in Capital - Preferred			Treasury Stock								Retained Earnings (Deficit)				Accumulated Other Comprehensive Income				Total Shareholders’ Equity
		Shares	Amount		Shares	Amount								Shares			Amount													Shares					Amount				Shares			Amount						Shares								Amount
Balance as of September 30, 2021		32,915	$	3	700	$	—			$	142,314			$	68,853		(82)			$	(365)			$	(21,996)		$	(279)				$	188,530
Balance as of September 30, 2022																											Balance as of September 30, 2022				33,857					$	3			676			$	—		$	148,372				$	66,481			(82)			$	(365)			$	(1,307)			$	2,213			$	215,397
Net income	Net income	—	—		—	—		—				—				—		—				14,822			—			14,822		Net income				—				—			—				—					—				—			—				—				2,648				—				2,648

Issuance of common stock under employee plans	Issuance of common stock under employee plans	111	—		—	—		—				—				—		—				—			—			—		Issuance of common stock under employee plans				223				—			—				—				—				—			—				—				—				—				—
Shares withheld for payroll taxes	Shares withheld for payroll taxes	(37)	—		—	—		(301)				—				—		—				—			—			(301)		Shares withheld for payroll taxes				(73)				—			—				—				(525)				—			—				—				—				—				(525)

Stock-based compensation	Stock-based compensation	—	—		—	—		706				—				—		—				—			—			706		Stock-based compensation				—				—			—				—				1,169				—			—				—				—				—				1,169

Preferred stock dividends	Preferred stock dividends	—	—		—	—		—				—				—		—				(1,323)			—			(1,323)		Preferred stock dividends				—				—			—				—				—				—			—				—				(1,277)				—				(1,277)

Unrealized gain on interest rate swap		—	—		—	—		—				—				—		—				—			173			173
Balance as of December 31, 2021		32,989	$	3	700	$	—	$	142,719			$	68,853			(82)		$	(365)			$	(8,497)		$	(106)		$	202,607
Unrealized loss on interest rate swap, net of taxes																											Unrealized loss on interest rate swap, net of taxes				—					—				—			—			—					—				—			—				—				(126)				(126)
Balance as of December 31, 2022																											Balance as of December 31, 2022				34,007					$	3			676			$	—		$	149,016				$	66,481			(82)			$	(365)			$	64			$	2,087			$	217,286


		Common Stock			Preferred Stock			Paid-in Capital - Common				Paid-in Capital - Preferred				Treasury Stock						Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity						Common Stock							Preferred Stock								Paid-in Capital - Common				Paid-in Capital - Preferred			Treasury Stock								Retained Deficit				Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity
		Shares	Amount		Shares	Amount								Shares			Amount													Shares					Amount				Shares			Amount						Shares								Amount
Balance as of September 30, 2020		32,730	$	3	700	$	—			$	141,002			$	68,853		(82)			$	(365)			$	(32,971)		$	—				$	176,522
Balance as of September 30, 2021																											Balance as of September 30, 2021				32,915					$	3			700			$	—		$	142,314				$	68,853			(82)			$	(365)			$	(21,996)			$	(279)			$	188,530
Net income	Net income	—	—		—	—		—				—				—		—				1,083			—			1,083		Net income				—				—			—				—					—				—			—				—				14,822				—				14,822

Cumulative effect from adoption of ASC 326		—	—		—	—		—				—				—		—				1,644			—			1,644

Issuance of common stock under employee plans	Issuance of common stock under employee plans	66	—		—	—		—				—				—		—				—			—			—		Issuance of common stock under employee plans				111				—			—				—				—				—			—				—				—				—				—
Shares withheld for payroll taxes	Shares withheld for payroll taxes	(29)	—		—	—		(178)				—				—		—				—			—			(178)		Shares withheld for payroll taxes				(37)				—			—				—				(301)				—			—				—				—				—				(301)

Stock-based compensation	Stock-based compensation	—	—		—	—		548				—��				—		—				—			—			548		Stock-based compensation				—				—			—				—				706				—			—				—				—				—				706

Preferred stock dividends	Preferred stock dividends	—	—		—	—		—				—				—		—				(1,313)			—			(1,313)		Preferred stock dividends				—				—			—				—				—				—			—				—				(1,323)				—				(1,323)

Balance as of December 31, 2020		32,767	$	3	700	$	—	$	141,372			$	68,853			(82)		$	(365)			$	(31,557)		$	—		$	178,306
Unrealized gain on interest rate swap																											Unrealized gain on interest rate swap				—					—				—			—			—					—				—			—				—				173				173
Balance as of December 31, 2021																											Balance as of December 31, 2021				32,989					$	3			700			$	—		$	142,719				$	68,853			(82)			$	(365)			$	(8,497)			$	(106)			$	202,607

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended December 31,
2021 2020
Cash flows from operating activities:
Net income $ 14,822 $ 1,083
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,679 3,282
Amortization of right-of-use assets for operating leases 4,472 4,445
Bad debt expense 560 389
Stock-based compensation 706 548
Deferred income taxes (1,893) —
Training equipment credits earned, net (147) 10
Unrealized gain on interest rate swap 173 —
Other (losses) gains, net (148) (139)
Changes in assets and liabilities:
Receivables 4,920 8,108
Prepaid expenses (590) (1,651)
Other assets (29) (139)
Notes receivable (1,514) (884)
Accounts payable and accrued expenses (8,853) (8,416)
Deferred revenue (8,666) 1,922
Income tax receivable — 2,783
Accrued tool sets and other current liabilities 486 (234)
Operating lease liability (2,567) (5,301)
Other liabilities (2,955) 1,977
Net cash provided by operating activities 2,456 7,783
Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired (26,142) —
Purchase of property and equipment (10,793) (47,293)
Proceeds from disposal of property and equipment 1 6
Proceeds from maturities of held-to-maturity securities — 9,965
Return of capital contribution from unconsolidated affiliate 75 73
Net cash used in investing activities (36,859) (37,249)
Cash flows from financing activities:
Payments on term loan and finance leases (216) (32)
Payment of payroll taxes on stock-based compensation through shares withheld (301) (178)
Net cash used in financing activities (517) (210)
Change in cash, cash equivalents and restricted cash (34,920) (29,676)
Cash and cash equivalents, beginning of period 133,721 76,803
Restricted cash, beginning of period 12,256 12,116
Cash, cash equivalents and restricted cash, beginning of period 145,977 88,919
Cash and cash equivalents, end of period 99,513 44,212
Restricted cash, end of period 11,544 15,031
Cash, cash equivalents and restricted cash, end of period $ 111,057 $ 59,243


	Three Months Ended December 31,
	2022		2021
Cash flows from operating activities:
Net income	$	2,648	$	14,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,248		3,679

Amortization of right-of-use assets for operating leases	4,120		4,472


Bad debt expense	535		560
Stock-based compensation	1,169		706
Deferred income taxes	1,068		(1,893)


Training equipment credits earned, net	(83)		(147)
Unrealized (loss) gain on interest rate swap	(126)		173
Other (gains) losses, net	(143)		(148)
Changes in assets and liabilities:
Receivables	4,657		4,920
Prepaid expenses	(1,438)		(590)
Other assets	2,079		(29)
Notes receivable	(622)		(1,514)
Accounts payable and accrued expenses	(15,925)		(8,367)
Deferred revenue	4,634		(8,666)



Operating lease liability	(4,963)		(2,567)
Other liabilities	(46)		(2,955)
Net cash provided by operating activities	2,812		2,456
Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired	(16,973)		(26,142)
Purchase of property and equipment	(6,782)		(10,792)


Proceeds from maturities of held-to-maturity securities	29,000		—

Return of capital contribution from unconsolidated affiliate	—		75
Net cash provided by (used in) investing activities	5,245		(36,859)
Cash flows from financing activities:
Proceeds from revolving credit facility	90,000		—
Debt issuance costs related to the revolving credit facility	(484)		—


Payments on term loans and finance leases	(273)		(216)
Payment of payroll taxes on stock-based compensation through shares withheld	(525)		(301)

Net cash provided by (used in) financing activities	88,718		(517)
Change in cash, cash equivalents and restricted cash	96,775		(34,920)
Cash and cash equivalents, beginning of period	66,452		133,721
Restricted cash, beginning of period	3,544		12,256
Cash, cash equivalents and restricted cash, beginning of period	69,996		145,977
Cash and cash equivalents, end of period	162,229		99,513
Restricted cash, end of period	4,542		11,544
Cash, cash equivalents and restricted cash, end of period	$	166,771	$	111,057

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

(Unaudited)


		Three Months Ended December 31,					Three Months Ended December 31,
		2021		2020			2022		2021
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes refunded		$	—	$	(19)

Interest paid	Interest paid	223		2		Interest paid	$	1,465	$	223
Training equipment obtained in exchange for services	Training equipment obtained in exchange for services	221		141		Training equipment obtained in exchange for services	174		221
Depreciation of training equipment obtained in exchange for services	Depreciation of training equipment obtained in exchange for services	238		317		Depreciation of training equipment obtained in exchange for services	198		238
Accounts payable and accrued expenses for capital expenditures	Accounts payable and accrued expenses for capital expenditures	3,651		1,547		Accounts payable and accrued expenses for capital expenditures	2,837		3,651
Dividends payable		1,323		1,313
Preferred dividends payable						Preferred dividends payable	1,277		1,323

CARES Act funds received for student emergency grants (See Note 21)		2,816		—
CARES Act funds disbursed for student emergency grants (See Note 21)		(2,900)		—
CARES Act funds received for institutional costs		—		880
CARES Act funds received for student emergency grants						CARES Act funds received for student emergency grants	—		2,816
CARES Act funds disbursed for student emergency grants						CARES Act funds disbursed for student emergency grants	—		(2,900)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 1 - Nature of the Business

~~Founded in 1965, with approximately 250,000 graduates in its history,~~ Universal Technical Institute, Inc. ~~(“we,~~, which together with its subsidiaries is referred to as the “Company”, “we,” “us” or ~~“our”)~~“our,” was founded in 1965 and is a leading workforce solutions provider of transportation, skilled trades and ~~technical training programs.~~healthcare education programs, whose mission is to serve students, partners, and communities by providing quality education and support services for in-demand careers across a number of highly-skilled fields. We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. As a result of the Concorde Career Colleges, Inc. acquisition on December ~~31, 2021,~~1, 2022 (the “Concorde Acquisition”), beginning with this reporting period we ~~offered certificate, diploma or degree programs at 14 campuses across the United States under the banner of several well-known brands, including~~ have two reportable segments as follows:

Universal Technical Institute (“UTI”),:UTI operates 16 campuses located in nine states and offers a wide range of degree and non-degree transportation and skilled trades technical training programs under brands such as Universal Technical Institute, Motorcycle Mechanics Institute, ~~and~~ Marine Mechanics Institute, ~~(collectively, “MMI”),~~ NASCAR Technical Institute, ~~(“NASCAR Tech”),~~ and MIAT College of Technology (“MIAT”). ~~Additionally, we offer~~UTI also offers manufacturer specific advanced training ~~(“MSAT”)~~ programs, ~~including~~which include student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

~~We work~~ Lastly, UTI provides dealer technician training or instructor staffing services to manufacturers. UTI works closely with over 35 original equipment manufacturers and industry brand partners to understand their needs for qualified service professionals. ~~Revenues generated from~~

Concorde Career Colleges (“Concorde”):Concorde operates across 17 campuses in eight states, offering degree, non-degree, and continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields. Concorde believes in preparing students for their health care careers with practical, hands-on experiences including opportunities to learn while providing care to real patients. Prior to graduation, students will complete a number of hours in a clinical setting or externship, depending upon their program of study. We acquired Concorde on December 1, 2022. See Note 4 on “Acquisitions” for additional information.

“Corporate” includes corporate related expenses that are not allocated to the UTI or Concorde reportable segments. These costs were previously allocated across our ~~schools consist primarily~~former “Postsecondary Education” reportable segment and “Other” category based upon compensation expense. Additional information about our reportable segments is presented in Note 19.

Our primary source of revenues is currently tuition and fees paid by students. To pay for a substantial portion of their tuition, the majority of students rely on funds received from federal financial aid programs under Title IV ~~Programs~~ of the Higher Education Act of 1965, as amended (“HEA”), as well as ~~from various veterans’ benefits~~other federal programs. For further discussion, see Note 212 on “Summary of Significant Accounting Policies - Concentration of Risk” and Note 24 on “Government Regulation and Financial Aid” included in our ~~2021~~2022 Annual Report on Form 10-K filed with the SEC on December ~~2, 2021~~12, 2022 (the ~~“2021~~“2022 Annual Report on Form 10-K”).

We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. This blended learning format has allowed us to continue to offer our programs to our students during the COVID-19 pandemic and aligns with an increasing trend of online education being offered as individuals seek more flexibility and life-long learning opportunities. On-campus labs are designed to meet or exceed the current national guidelines recommended by the Centers for Disease Control (“CDC”) as well as state and local mandates, while still meeting our accreditation and curriculum requirements.

Note 2 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement of the results for the interim periods have been included. Operating results for the three months ended December 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2021.~~2023. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our ~~2021~~2022 Annual Report on Form 10-K.

The unaudited condensed consolidated financial statements include the accounts of Universal Technical Institute, Inc. and our ~~wholly owned~~wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Other than described below, there have been no material changes or developments in our significant accounting policies or evaluation of accounting estimates and underlying assumptions or methodologies from those disclosed in Note 2 of our ~~2021~~2022 Annual Report on Form 10-K.

New Significant Accounting Policy for ~~Goodwill and Intangible Assets~~Retail Installment Contract Receivables

~~We test goodwill~~Concorde currently and ~~indefinite-lived intangible assets~~historically offers certain students retail installment contracts for ~~impairment annually as~~payment of ~~August 1,~~their tuition that is not covered by federal student financial aid or ~~more frequently if events~~other funding sources. The retail installment contracts are due to Concorde from current and ~~circumstances warrant. Under ASC 350,~~ ~~Intangibles - Goodwill~~former students and ~~Other~~are generally due over a period of one, to ~~evaluate~~two years and bear interest ranging from 0 percent to 15 percent. Due to the ~~impairment of goodwill, we first assess qualitative factors, such as deterioration in the operating performance~~fact that there is no interest imposed on certain of the ~~acquired business, adverse market~~

~~Table of Contents~~

~~UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~conditions, adverse changes in~~retail installment contracts, primarily while students are actively completing their selected programs, we calculate the ~~applicable laws or regulations~~imputed interest expense on the retail installment contracts. However, the imputed interest expense is not considered material for such retail installment contracts and ~~a variety of other circumstances,~~therefore not recorded. Retail installment contract receivables are recorded at amortized cost less an allowance for credit losses that are not expected to ~~determine whether it~~be recovered. The allowance for credit losses is ~~more-likely-than-not that the fair value of a~~recognized at inception and is reassessed each reporting ~~unit is less than its carrying amount. To evaluate the impairment~~period. The short-term portion of the ~~indefinite-lived intangible assets, we assess~~retail installment contract receivable and related allowance for credit losses are included in “Receivables, net” while the ~~fair value~~long-term portion of the ~~assets to determine whether they were greater or less than the carrying values. If we conclude that it~~retail installment contract receivable and related allowance for credit losses is ~~more likely than not that the fair value is less than the carrying amount based~~presented in “Other assets” on our qualitative assessment, or that a qualitative assessment should not be performed, we proceed with the quantitative impairment tests to compare the estimated fair value of the reporting unit to the carrying value of its net assets. Determining the fair value of indefinite-lived intangible assets is judgmental in nature and involves the use of significant estimates and assumptions. We believe the most critical assumptions and estimates in determining the estimated fair value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate. The assumptions used in determining our expected future cash flows consider various factors such as historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives. There were no indicators of impairment for our goodwill or indefinite-lived intangible assets as of December 31, 2021.

condensed consolidated balance sheet.

We also have definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs. The definite-lived intangible assets are recognized at cost less accumulated amortization. Amortization is computed using the straight-line method based on estimated useful lives of the related assets.

~~See Note 8 and Note 9 for additional details on our goodwill and intangible assets.~~

Reclassifications

~~Due~~As previously noted, as a result of the Concorde Acquisition, beginning with this reporting period we have two reportable segments: UTI and Concorde. Additionally, “Corporate” includes corporate related expenses that are not allocated to either the ~~acquisition of MIAT on November 1, 2021, which is described in further detail~~UTI or Concorde reportable segments. The segment disclosures presented in Note ~~4, we added a new line to~~19 for the ~~condensed consolidated balance sheet: “Intangible Assets.” We~~three months ended December 31, 2021 have ~~presented the intangible assets arising~~been revised from the ~~MIAT acquisition as well as~~prior year presentation to reflect the ~~previously recorded intangible assets in this line.~~new reportable segments.

Additionally, starting with the three months ended December 31, 2022, we have reclassified “Accrued tool sets” into “Accounts payable and other accrued expenses” for reporting purposes. As of September 30, ~~2021, $0.1~~2022, $3.2 million ~~of intangible assets~~ was reclassified from ~~“Other assets”~~“Accrued tool sets” to ~~“Intangible assets”~~“Accounts payable and other accrued expenses” on the condensed consolidated balance sheet for comparable presentation. The breakout of accrued tool sets is now disclosed in Note 12. Further, the activity related to the accrued tool sets balance is now reported in the “Accounts payable and other accrued expenses” line on the condensed consolidated statement of cash flows for the three months ended December 31, 2022. We reclassified $0.5 million from “Accrued tool sets” to “Accounts payable and other accrued expenses” on the condensed consolidated statement of cash flow for the three months ended December 31, 2021 for comparable presentation.

Note 3 - Recent Accounting Pronouncements

Effective in Fiscal ~~2022~~

~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ (“ASU 2019-12”). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We have evaluated the new guidance and determined that there is no material impact on our results of operations, financial condition or financial statement disclosures.

~~In October 2021, the FASB issued ASU 2021-08,~~ ~~Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~ (“ASU 2021-08”). The amendments in ASU 2021-08 require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, ~~Revenue from Contracts from Customers~~ (“ASC 606”). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree financial statements were prepared in accordance with generally accepted accounting principles). For public business entities, the amendments in ASU 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of ASU 2021-08 is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. Due to the MIAT acquisition on November 1, 2021, we have elected to early adopt ASU 2021-08 as of October

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~~UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~1, 2021 and have applied the guidance in ASU 2021-08 to the deferred revenue recorded for MIAT. See Note 4 for further information on the acquisition of MIAT.~~

~~Other~~2023

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met. This new guidance only applies to contracts and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The amendments in ASU 2020-04 do not apply to contract modifications made after December 31, 2022. Given the interest rate for our Avondale term loan (which is further described in Note 13) references LIBOR, we are currently evaluating the new reference rate reform practical expedients and will consider adopting this guidance when we are required to modify our contract for the discontinuation of LIBOR. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset date of Topic 848 (ASU 2022-06), the amendment in this update defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 4 - ~~Acquisition of MIAT College of Technology~~Acquisitions

Concorde Career Colleges

On ~~November~~December 1, ~~2021,~~2022, we completed the Concorde Acquisition. Concorde operates 17 campuses across eight states with approximately 7,600 students, and offers its programs via in-person, hybrid and online formats. Concorde offers more than 20 programs across the allied health, dental, nursing, patient care, and diagnostic fields. The acquisition ~~contemplated by~~expands our portfolio of offerings into the ~~previously announced~~higher-growth healthcare arena and creates the opportunity to bring workforce educational solutions to a broader array of students and employers.

Under the terms of the Stock Purchase Agreement (the “Purchase Agreement”), dated ~~March 29, 2021,~~May 3, 2022, by and among ~~UTI, HCP Ed~~the Company, Concorde, Liberty Partners Holdings 28, L.L.C., a Delaware limited liability company, and Liberty Investment IIC, LLC, a Delaware limited liability company ~~(“Seller”~~(each a “Seller,” and collectively, the “Sellers”)~~, HCP Ed Holdings, Inc.~~; and Liberty Partners L.P., a Delaware ~~corporation and wholly owned subsidiary of Seller (“HCP”), and Michigan Institute of Aeronautics, Inc. d/b/~~limited partnership, in its capacity as a MIAT, a Michigan corporation and wholly subsidiary of HCP. MIAT is a post-secondary school that offers vocational and technical certificates and degrees across aviation maintenance, energy technology, wind energy technology, robotics and automation, non-destructive testing, heating ventilation air conditioning and refrigeration (“HVACR”), and welding disciplines. HCP is MIAT’s holding company that owns no assets other than the issued and outstanding shares of MIAT.

The acquisition is part of our growth and diversification strategy and will allow us to expand MIAT programs throughout UTI brand campuses and extend UTI’s presence and programs into the Canton, MI market where MIAT has been for over 50 years. Other expected synergies include operating and purchasing cost efficiencies and broadening the opportunity for student growth at the acquired MIAT campuses by leveraging our high school and national marketing and admissions infrastructure.

~~Under the terms~~representative of the ~~Purchase Agreement,~~Sellers, we acquired all of the issued and outstanding shares of capital stock of ~~HCP from the Seller~~Concorde for ~~$26.0 million~~a base purchase price ~~plus $2.4~~of $50.0 million, ~~working capital surplus~~less $1.3 million of net adjustments, for total cash consideration paid of ~~$28.4~~$48.7 million. The final cash consideration paid is subject to closing working capital and other customary adjustments. As a result ~~HCP~~of the transactions contemplated by the Purchase Agreement, Concorde is now a wholly-owned subsidiary of ~~UTI and MIAT remains as a wholly-owned subsidiary of HCP. The~~the Company. We funded the consideration paid ~~was funded~~for the Concorde Acquisition by ~~available operating cash.~~

the Credit Facility entered into on November 18, 2022. (See Note 13 for further details on the Credit Facility)

In connection with ~~this acquisition,~~the Concorde Acquisition, we incurred total transaction costs of ~~$1.4~~$3.8 million, of which ~~$0.6~~$3.0 million ~~were~~was incurred during the year ended September 30, 2022 and $0.8 million was incurred during the three months ended December 31, ~~2021 and $0.8 million during the year ended September 30, 2021. In both periods, these~~2022. These costs are included in “Selling, general and administrative” expenses in the condensed consolidated statements of ~~operations. The results of operations for MIAT were not material to our condensed consolidated statement of~~ operations for the ~~two months ended December 31, 2021.~~applicable period.

Allocation of the purchase price

Under the acquisition method of accounting, the total purchase price was allocated to the identifiable assets acquired and the liabilities assumed based on our preliminary valuation estimates of the fair values as of the acquisition date. The ~~acquisition accounting~~fair value and allocation isof the business combination are preliminary, are based upon management’s best estimates and assumptions, and are subject to ~~adjustments for~~future revision. We will continue our analysis under the ~~final working capital~~provisions of ASC 805 which allows companies one year to complete acquisition related adjustments ~~and tax analysis,~~ which may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, and the determination of any residual amount that will be allocated to goodwill.

The preliminary allocation of the purchase price at December 1, 2022 is summarized as follows:


Assets acquired:
Cash and cash equivalents	$	30,064
Restricted cash	1,689
Accounts receivable, net	10,814

Prepaid expenses	3,490
Other current assets	828
Property and equipment	26,829
Right-of-use assets for operating leases	71,912
Goodwill	10,133
Intangible assets	4,800
Deferred tax assets	3,799
Other assets	4,997
Total assets acquired	$	169,355

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

~~The preliminary allocation of the purchase price at November 1, 2021 is summarized as follows:~~


~~Assets acquired:~~
~~Cash and cash equivalents~~	$	~~2,301~~
~~Accounts receivable, net~~	~~3,228~~
~~Prepaid expenses~~	~~268~~
~~Other current assets~~	~~507~~
~~Property and equipment~~	~~3,043~~
~~Goodwill~~	~~9,804~~
~~Intangible assets~~	~~16,200~~
~~Right-of-use assets for operating leases~~	~~15,320~~
~~Other assets~~	85
~~Total assets acquired~~	$	~~50,756~~
Less: Liabilities assumed
Accounts payable and accrued expenses	$	~~(1,799)~~15,762
Deferred revenue	~~(1,828)~~16,471
Operating lease liability, current portion	~~(1,005)~~11,720
Long-term debt, current portion (1)	630
~~Deferred tax~~Other current liabilities ~~net~~	~~(3,178)~~208

Long-term debt (1)	5,037
Operating lease liability	~~(14,503)~~70,801

Total liabilities assumed	~~(22,313)~~120,629
Net assets acquired	$	~~28,443~~48,726

(1) Long-term debt consists of one lease classified as a finance lease under ASC 842.

Due to the timing of the acquisition, the following are considered preliminary and are subject to change:

•amounts for intangible assets, property and equipment, other current assets, current liabilities, and other long-term liabilities pending finalization of the valuation;

•amounts for operating and finance lease assets and liabilities pending finalization of the valuation due to changes in the incremental borrowing rates;

•amounts for income tax liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and

•amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.

The Company will finalize these amounts no later than one year from the acquisition date, once it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified.

The goodwill of ~~$9.8~~$10.1 million, ~~arising from~~which represents the ~~acquisition consists largely~~excess of the ~~growth~~purchase price over the fair value of the net assets acquired, was all assigned to the Concorde reporting unit and ~~operating synergies expected from integrating MIAT into UTI. The total amount~~reportable segment (see Note 19). None of the goodwill is expected to be deductible for tax ~~purposes~~purposes. Factors that contributed to a purchase price resulting in the recognition of goodwill includes Concorde’s strategic fit into our growth and diversification strategy, which is ~~approximately $0.6 million. See Note 8~~focused on offering a broader array of high-quality, in-demand workforce education solutions which both prepare students for ~~additional details on goodwill.~~

a variety of careers in fast-growing fields and help close the country's skills gap by leveraging key industry partnerships.

The ~~preliminary~~ purchase price allocation requires subjective estimates that, if incorrectly estimated, could be material to our condensed consolidated financial statements including the amount of depreciation and amortization expense. The fair value of the ~~tangible assets~~property and equipment was estimated using the cost ~~approach.~~and market approaches as of the valuation date. The fair value of the leases were estimated using the income and market approaches to determine if there was any favorable or unfavorable terms in place. The intangible assets acquired, which primarily consists of the accreditations and regulatory approvals, trademarks and trade names, and curriculum, were valued using different valuation techniques depending upon the nature of the intangible asset ~~acquired.~~acquired, all of which are considered level 3 as defined in Note 7. The accreditations and regulatory approvals were valued using the ~~multiperiod~~multi-period excess earnings method (“MPEEM”) under the income approach. The MPEEM is a variation of discounted cash-flow analysis. Rather than focusing on the whole entity, the MPEEM isolates the cash flows that can be associated with a single intangible asset and measures fair value by discounting them to present value. The trademarks and trade names were valued using the relief from royalty method. The value of the trade name encompasses all items necessary to generate revenue utilizing the trade name. The curriculum was valued using the cost approach. ~~See Note 9 for further details on~~The table below presents a summary of the intangible assets ~~recorded. As previously discussed in Note 3, we early adopted ASU 2021-08 and applied the new guidance when recording the initial deferred revenue.~~

Pro forma financial information is not presented as the fiscal 2021 revenues and earnings of MIAT are not material to our condensed consolidated statements of operations. MIAT’s principal business is providing postsecondary education and is included in our “Postsecondary Education” reporting unit disclosed in Note 19 on Segments. MIAT’s corporate expenses are allocated to “Postsecondary Education”acquired and the ~~“Other” category based on compensation expense.~~

useful lives of these assets:

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Intangible Asset

Useful life

Amount

Accreditations and regulatory approvals

Indefinite

2,800

Trademarks and trade names

10 years

500

Curriculum

5 years

1,500

Total

4,800

See Note 9 and Note 10 and for additional details on goodwill and intangible assets.

Student receivables

When financial assets are acquired in connection with a business combination we evaluate whether those acquired financial assets have experienced a more-than-insignificant deterioration in credit quality since origination. Financial assets acquired with evidence of such credit deterioration are referred to as purchased credit deteriorated (“PCD”) assets and reflect the acquirer’s assessment at the acquisition date. The student receivables acquired in the Concorde Acquisition were reviewed to determine if any had experienced a more-than-insignificant deterioration in credit quality since origination. Student receivables of approximately $2.3 million met the established criteria to indicate a more-than an insignificant deterioration in credit quality and were identified as PCD assets. Using our best estimate of projected losses over the term of the contracts, we calculated an allowance for credit losses on these PCD assets of approximately $1.0 million.

Pro forma financial information

The following unaudited pro forma financial information summarizes our results of operations as though the acquisition occurred on October 1, 2022:


	Three Months Ended		Three Months Ended
	December 31, 2022		December 31, 2021
Revenue	$	156,025	$	155,196
Net income	2,941		17,193

The unaudited pro forma financial information includes adjustments to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets and the finance lease asset had been applied from October 1, 2021, with the related tax effects. The unaudited pro forma financial information also includes adjustments to reflect the additional interest expense on the new revolving credit facility issued to fund the acquisition (see Note 13 for further details on the Credit Facility). Lastly, the unaudited pro forma financial information includes adjustments to reflect the reduction in depreciation expense assuming the fair value adjustments to property and equipment assets had been applied from October 1, 2021.

This unaudited pro forma financial information is for informational purposes only. It does not reflect the integration of the business or any synergies or incremental costs that may result from the acquisition. As such, it is not indicative of the results of operations that would have been achieved had the acquisition been consummated on October 1, 2022. In addition, the unaudited pro forma financial information amounts are not indicative of future operating results.

MIAT College of Technology

On November 1, 2021, using available operating cash, we acquired all of the issued and outstanding shares of capital stock of MIAT for $26.0 million base purchase price plus $2.8 million working capital surplus for total cash consideration paid of $28.8 million. MIAT is a post-secondary school that offers vocational and technical certificates and degrees across aviation maintenance, energy technology, wind energy technology, robotics and automation, non-destructive testing, heating ventilation air conditioning and refrigeration, and welding disciplines.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

The acquisition, as part of our growth and diversification strategy, allows us to expand MIAT programs throughout UTI brand campuses and extend UTI’s presence and programs into the Canton, Michigan market where MIAT has been for over 50 years. Other expected synergies include operating and purchasing cost efficiencies and broadening the opportunity for student growth at the acquired MIAT campuses by leveraging our high school and national marketing and admissions infrastructure.

In connection with this acquisition, we incurred total transaction costs of $1.7 million of which $0.9 million were incurred during the year ended September 30, 2022 and $0.8 million during the year ended September 30, 2021. These costs are included in “Selling, general and administrative” expenses in the condensed consolidated statements of operations for the applicable period.

The final allocation of the purchase price at November 1, 2021 is summarized as follows:


Assets acquired:
Cash and cash equivalents	$	2,301
Accounts receivable, net	3,230
Prepaid expenses	268
Other current assets	507
Property and equipment	3,043
Goodwill	8,637
Intangible assets	16,200
Right-of-use assets for operating leases	14,979
Other assets	314
Total assets acquired	$	49,479
Less: Liabilities assumed
Accounts payable and accrued expenses	$	1,720
Deferred revenue	1,843
Operating lease liability, current portion	817
Deferred tax liabilities, net	1,975
Operating lease liability	14,216
Other liabilities	93
Total liabilities assumed	20,664
Net assets acquired	$	28,815

The goodwill of $8.6 million arising from the acquisition consists largely of the growth and operating synergies expected from integrating MIAT into UTI. The total amount of goodwill expected to be deductible for tax purposes is approximately $0.6 million. See Note 9 for additional details on goodwill.

The accreditations and regulatory approvals were valued using the multi-period excess earnings method (“MPEEM”) under the income approach. The trademarks and trade names were valued using the relief from royalty method. The curriculum was valued using the cost approach. The table below presents a summary of the intangible assets acquired and the useful lives of these assets:

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Intangible Asset

Useful life

Amount

Accreditations and regulatory approvals

Indefinite

12,800

Trademarks and trade names (1)

Indefinite

3,000

Curriculum

5 years

400

Total

16,200

(1) During the fourth quarter of 2022, in conjunction with our growth and diversification initiatives, we completed a branding study and determined that the useful life of the MIAT trademarks and trade name was no longer indefinite and a four-year finite useful life was more appropriate. We completed the required impairment testing when changing from an indefinite to a finite useful life for an intangible asset and determined that the carrying value of the MIAT trademarks and trade name exceeded its fair value. We determined the fair value of intangible asset to be $1.0 million as of September 30, 2022 using the relief from royalty method and recorded an intangible asset impairment charge of $2.0 million during the year ended September 30, 2022.

Pro forma financial information is not presented as the fiscal 2021 revenues and earnings of MIAT were not material to our condensed consolidated statements of operations. MIAT is included in the “UTI” reporting unit and reportable segment disclosed in Note 19 on Segments.

Note 5 - Revenue from Contracts with Customers

Nature of Goods and Services

~~Postsecondary Education~~

Revenues across UTI and Concorde consist primarily of student tuition and fees derived from the programs we provide after reductions are made for discounts and scholarships that we sponsor and for refunds for students who withdraw from our programs prior to specified dates. We apply the five-step model outlined in ASC 606. Tuition and fee revenue is recognized ratably over the term of the course or program offered.

The majority of ~~our~~the UTI programs are designed to be completed in 36 to 90 weeks while ~~our~~the MIAT programs are completed in 3028 to ~~104~~96 weeks. ~~Our~~The UTI advanced training programs range from 12 to 23 weeks in duration. ~~We supplement our~~UTI also provides dealer technician training or instructor staffing services to manufacturers. Revenues are recognized as transfer of the services occurs.

The majority of Concorde’s core programs are nine to ten months in duration and are billed in full at the start of the program. Clinical programs are 12 to 24 month programs that are billed by academic term. Clinical programs may have up to nine academic terms that last two to three months.

In addition to revenue from tuition and fees, UTI and Concorde derive supplemental revenues ~~with~~from sales of textbooks and program supplies and other revenues, which are recognized as the transfer of goods or services occurs. Deferred revenue represents the excess of tuition and fee payments received as compared to tuition and fees earned and is reflected as a current liability in our condensed consolidated balance sheets because it is expected to be earned within the next 12 months.

~~Additionally, certain~~All of our revenues are generated within the United States. The impact of economic factors on the nature, amount, timing and uncertainty of revenue and cash flows is consistent across our various programs for both UTI and Concorde. See Note 19 for disaggregated segment revenue information.

Proprietary Loan Program Notes Receivable

Certain UTI students participate in a proprietary loan program that extends repayment terms for their ~~tuition.~~tuition beyond the time that they are in school. We purchase said loans from the ~~lender and, based~~lender. Based on historical collection rates, we believe at least a portion of these loans are collectible. Accordingly, we recognize tuition and loan origination fees financed by the loan and any related interest revenue under the effective interest method required under the loan based on the amount we expect to collect, and we recognize these revenues ratably over the term of the course or program offered. These amounts are presented as “Notes receivable, current portion” and “Notes receivable, less current portion” on our condensed consolidated balance sheet.

~~Other~~

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~~We provide dealer technician training~~

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Retail Installment Contract Receivables

Concorde currently and historically offers certain students retail installment contracts for payment of their tuition that are not covered by federal student financial aid or ~~instructor staffing services~~other funding sources. The retail installment contracts are due to ~~manufacturers. Revenues~~Concorde from current and former students and are ~~recognized as transfer~~generally due over a period of one to two years and bear interest ranging from 0 percent to 15 percent. Due to the fact that there is no interest imposed on certain of the ~~services occurs.~~

~~We provide postsecondary education and other services in~~retail installment contracts, primarily while students are actively completing their selected programs, we calculate the ~~same geographical market, the United States. The impact of economic factors~~imputed interest expense on the ~~nature, amount, timing~~retail installment contracts. However, the imputed interest expense is not considered material for such retail installment contracts and ~~uncertainty~~therefore not recorded. The short-term portion of ~~revenue~~the retail installment contract receivable and ~~cash flows~~related allowance for credit losses are included in “Receivables, net” while the long-term portion of the retail installment contract receivable and related allowance for credit losses is ~~consistent among~~presented in “Other assets” on our ~~various postsecondary education programs. See Note 19 for disaggregated segment revenue information.~~condensed consolidated balance sheet.

Contract Balances

Contract assets primarily relate to our rights to consideration for a student’s progress through our training program in relation to our services performed but not billed at the reporting date. The contract assets are transferred to the receivables when the rights become unconditional. Currently, we do not have any contract assets that have not transferred to a receivable. Our deferred revenue is considered a contract liability and primarily relates to our enrollment agreements where we received payments for tuition, but we have not yet delivered the related training programs to satisfying the related performance obligations. The advance consideration received from students or Title IV funding is deferred revenue until the training program has been delivered to the students.

The following table provides information about receivables and deferred revenue resulting from our enrollment agreements with students:


		December 31, 2021		September 30, 2021			December 31, 2022		September 30, 2022
Receivables, which includes tuition and notes receivable		$	46,582	$	46,489
Receivables (1)						Receivables (1)	$	56,234	$	46,826
Deferred revenue	Deferred revenue	50,810		57,648		Deferred revenue	75,328		54,223

(1) Receivables includes tuition receivables, retail installment contract receivables and notes receivable, both current and long term.

During the three months ended December 31, ~~2021,~~2022, the deferred revenue balance included decreases for revenues recognized during the period and increases related to new students who started their training programs during the ~~period.~~period and the addition of deferred revenue from the Concorde Acquisition.

Note 6 - Investments

In July 2022, we invested a portion of our cash and cash equivalents in short-term investments which primarily consist of corporate and municipal bonds with a minimum credit rating of A. We had the ability and intention to hold these investments until maturity and therefore classified these investments as held-to-maturity and recorded them at amortized cost and presented them in “Held-to-maturity investments” on our consolidated balance sheet as of September 30, 2022. As of December 31, 2022, there were no outstanding held-to-maturity investments as all of the securities matured and there were no new purchases of held-to-maturity investments during the three months ended December 31, 2022.

The amortized cost, gross unrealized gains or losses, and fair value of investments classified as held-to-maturity at September 30, 2022 were as follows:


	September 30, 2022
			Gross Unrealized				Estimated Fair
Due in less than 1 year:	Amortized Cost		Gains		Losses		Market Value
Corporate and municipal bonds	$	28,918	$	—	$	(19)	$	28,899

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Investments are exposed to various risks, including interest rate, market and credit risk. As a result, it is possible that changes in the values of these investments may occur and that such changes could affect the amounts reported in the condensed consolidated financial statements.

Note 67 - Fair Value Measurements

The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers:

Level 1: Defined as quoted market prices in active markets for identical assets or liabilities.

Level 2: Defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Defined as unobservable inputs that are not corroborated by market data.

Any transfers of investments between levels occurs at the end of the reporting period. Assets measured or disclosed at fair value on a recurring basis consisted of the following:


				Fair Value Measurements Using									Fair Value Measurements Using
		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	Money market funds(1)	$	62,104	$	62,104	$	—	$	—	Money market funds(1)	$	52,768	$	52,768	$	—	$	—
Notes receivable(2)	Notes receivable(2)	37,638		—		—		37,638		Notes receivable(2)	36,494		—		—		36,494

Total assets at fair value on a recurring basis	Total assets at fair value on a recurring basis	$	99,742	$	62,104	$	—	$	37,638	Total assets at fair value on a recurring basis	$	89,262	$	52,768	$	—	$	36,494

Fair Value Measurements Using
September 30, 2021 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Money market funds(1)
$ 62,100 $ 62,100 $ — $ —
Notes receivable(2)
36,124 — — 36,124
Total assets at fair value on a recurring basis $ 98,224 $ 62,100 $ — $ 36,124


			Fair Value Measurements Using
	September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds(1)	$	23,439	$	23,439	$	—	$	—
Notes receivable(2)	35,872		—		—		35,872

Corporate bonds, municipal bonds, and other(3)	28,899		28,899		—		—
Total assets at fair value on a recurring basis	$	88,210	$	52,338	$	—	$	35,872

(1) Money market funds and other highly liquid investments with maturity dates less than 90 days are reflected as “Cash and cash equivalents” in our condensed consolidated balance sheet as of December 31, ~~2021~~2022 and September 30, ~~2021.~~2022.

(2) Notes receivable relate to our proprietary loan ~~program.~~program and are reflected as “Notes receivable, current portion” and “Notes receivable, less current portion” in our consolidated balance sheets as of December 31, 2022 and September 30, 2022

(3) Corporate bonds, municipal bonds and other are reflected as “Held-to-maturity investments” in our consolidated balance sheet as of September 30, 2022.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 78 - Property and Equipment, net

Property and equipment, net consisted of the following:


		Depreciable Lives (in years)	December 31, 2021		September 30, 2021			Depreciable Lives (in years)	December 31, 2022		September 30, 2022
Land	Land	—	$	8,355	$	8,355	Land	—	$	16,603	$	16,603
Buildings and building improvements	Buildings and building improvements	3-35	71,048		71,036		Buildings and building improvements	3-30	126,373		126,244
Leasehold improvements	Leasehold improvements	1-28	64,813		63,502		Leasehold improvements	1-20	107,440		86,751
Training equipment	Training equipment	3-10	91,911		91,191		Training equipment	3-10	106,240		96,907
Office and computer equipment	Office and computer equipment	3-10	32,207		31,718		Office and computer equipment	3-10	36,238		31,900
Curriculum development	Curriculum development	5	19,692		19,692		Curriculum development	5	20,200		20,130
Software developed for internal use	Software developed for internal use	1-5	12,540		12,524		Software developed for internal use	1-5	12,307		12,150
Vehicles	Vehicles	5	1,409		1,436		Vehicles	5	1,406		1,458
Right-of-use assets for finance leases	Right-of-use assets for finance leases	2-3	215		215		Right-of-use assets for finance leases	2-3	2,976		215
Construction in progress	Construction in progress	—	19,494		10,171		Construction in progress	—	5,711		16,359
			321,684		309,840				435,494		408,717
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization		(188,623)		(187,789)		Less: Accumulated depreciation and amortization		(194,658)		(194,425)
			$	133,061	$	122,051			$	240,836	$	214,292

Depreciation expense related to property and equipment was $5.1 million for the three months ended December 31, 2022, and $3.7 million for the three months ended December 31, 2021.

Note 89 - Goodwill

Our goodwill balance of ~~$18.0~~$27.0 million as of December 31, ~~2021~~2022 represents the excess of the cost of an acquired business over the estimated fair values of the assets acquired and liabilities assumed. The changes in the carrying value of goodwill are presented in the table below.


		December 31, 2021		September 30, 2021			December 31, 2022		September 30, 2022
Balance at beginning of period	Balance at beginning of period	$	8,222	$	8,222	Balance at beginning of period	$	16,859	$	16,859
Additions to Goodwill for acquisition of MIAT		$	9,804	—
Additions to Goodwill for acquisition of Concorde						Additions to Goodwill for acquisition of Concorde	10,133		—
Balance at end of period	Balance at end of period	$	18,026	$	8,222	Balance at end of period	$	26,992	$	16,859

Of the ~~$18.0~~$27.0 million recorded as goodwill as of December 31, 2022, $10.1 million resulted from the acquisition of Concorde, $8.6 million relates to the acquisition of MIAT as of November 1, 2021, and $8.2 million resulted from the acquisition of our motorcycle and marine education business in Orlando, Florida in ~~1998 and $9.8 million relates to the acquisition of MIAT as of November 1, 2021 as previously described~~1998. As indicated in Note ~~4. All~~1, as a result of the Concorde Acquisition, beginning with this reporting period we have two reportable segments. Prior to this reporting period, all goodwill ~~relates~~related to our Postsecondary Education reportable operating segment. The table below summarizes the goodwill balance by reportable segment:


	December 31, 2022		September 30, 2022
UTI	$	16,859	$	16,859
Concorde	10,133		$	—
Total	$	26,992	$	16,859

Goodwill is reviewed at least annually for impairment, which may result from the deterioration in the operating performance of the acquired businesses, adverse market conditions, adverse changes in applicable laws or regulations and a variety of

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

other circumstances. ~~Historically, this testing has been performed as of September 30 of each fiscal year. Effective as of October 1, 2021, we determined that our~~Our goodwill ~~will be~~is tested annually for impairment as of August 1 and more frequently if events or circumstances lead to a determination that it is more likely than not that the fair value of a ~~reporting~~report unit is less than its carrying amount. We do not consider this change to be material and believe that the timing is preferable as it allows additional time to complete the annual assessment in advance of the annual reporting deadline. This change in assessment date did not delay, accelerate, or cause avoidance of a potential impairment charge. There were no indicators of goodwill impairment as of December 31, ~~2021~~2022.

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~~UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

Note 910 - Intangible Assets

The following table provides the gross carrying value, accumulated amortization, net book value and remaining useful life for those intangible assets that are subject to amortization as of December 31, 2022:


	Gross Carrying Value		Accumulated Amortization		Net Book Value		Weighted Average Remaining Useful Life (Years)
Accreditations and regulatory approvals	$	15,600	$	—	$	15,600	Indefinite
Trademarks, trade names and other	1,942		(429)		1,513		5.69
Curriculum	1,900		(118)		1,782		4.73

Total	$	19,442	$	(547)	$	18,895	5.17


	Gross Carrying Value		Accumulated Amortization		Net Book Value		Weighted Average Remaining Useful Life (Years)
Accreditations and regulatory approvals - MIAT	$	12,800	$	—	$	12,800	Indefinite
Trademarks and trade names - MIAT	3,000		—		3,000		Indefinite
Curriculum - MIAT	400		(13)		387		4.83
Non-compete agreement and trade name	442		(327)		115		3.33
Total	$	16,642	$	(340)	$	16,302	4.47

Gross Carrying Amount Accumulated Amortization Net Book Value Remaining Useful Life (Years)
Accreditations and regulatory approvals - MIAT $ 12,800 $ — $ 12,800 Indefinite
Trademarks and trade names - MIAT 3,000 — 3,000 Indefinite
Curriculum - MIAT 400 (13) 387 4.83
Non-compete agreement and trade name 442 (327) 115 3.33
Total $ 16,642 $ (340) $ 16,302 4.47
Amortization expense for the three months ended December 31, 2022 and 2021 was $120 thousand and $20 thousand, respectively. The increase in the amortization expense during the three months ended December 31, 2022, which is not considered material to the condensed consolidated financial statements, was due to the intangible assets acquired with the Concorde Acquisition.

Of the ~~$16.6~~$19.4 million recorded as intangible assets as of December 31, ~~2021, $16.2~~2022, $4.8 million relates to the Concorde Acquisition, $14.2 million relates to the MIAT acquisition completed on November 1, 2021, asand $0.4 million relates to previously ~~described in Note 4.~~recorded non-compete agreements and trade names. The remaining weighted average useful lives shown are calculated based on the net book value and remaining amortization period of each respective intangible asset. Amortization is computed using the straight-line method based on estimated useful lives of the related assets.

~~As discussed in our new significant accounting policy on intangible assets in Note 2, our~~ Our indefinite-lived intangible assets are reviewed at least annually for impairment as of August 1, or more frequently if there are indicators of impairment. There were no indicators of impairment for our indefinite-lived intangible assets as of December 31, ~~2021.~~2022.

Note 1011 - ~~Investment in Unconsolidated Affiliate~~Leases

~~In 2012,~~As of December 31, 2022, we ~~invested $4.0 million to acquire an equity interest of approximately 28% in a joint venture (“JV”) related to the lease~~leased 29 of our ~~Lisle, Illinois campus facility.~~33 campuses and two corporate office locations under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases. The facility leases have original lease terms ranging from 5 to 20 years and expire at various dates through 2036. In ~~connection with this investment, we do not possess a controlling financial interest as we do not hold a majority~~addition, the leases commonly include lease incentives in the form of the equity interest, nor do we have the power to make major decisions without approval from the other equity member. Therefore, we do not qualify as the primary beneficiary. Accordingly, this investment is accounted for under the equity method of accounting.rent abatements and tenant improvement allowances. We ~~recognize our proportionate share of the JV's net income or loss during each accounting period and any return of capital as a change in our investment.~~

~~Investment in unconsolidated affiliate consisted of the following and is included within “Other assets” on our condensed consolidated balance sheets:~~
December 31, 2021 September 30, 2021
Carrying Value Ownership Percentage Carrying Value Ownership Percentage
Investment in JV $ 4,665 28.0 % $ 4,627 28.0 %

~~Investment in unconsolidated affiliate included the following activity during the period:~~
Three Months Ended December 31,
2021 2020
Balance at beginning of period $ 4,627 $ 4,494
Equity in earnings of unconsolidated affiliate 113 107
Return of capital contribution from unconsolidated affiliate (75) (73)
Balance at end of period $ 4,665 $ 4,528
sublease

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

~~Note 11~~ - ~~Leases~~

As of December 31, 2021, we leased 11 of our 14 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases. The facility leases have original lease terms ranging from 8 to 20 years and expire at various dates through 2036. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. We sublease certain portions of unused building space to third parties, which as of December 31, ~~2021,~~2022, resulted in minimal income. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our condensed consolidated balance sheets.

Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. There are no early termination with penalties, residual value guarantees, restrictions or covenants imposed by our facility leases.

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the condensed consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”

The components of lease expense during the three months ended December 31, ~~2021~~2022 and ~~2020~~2021 were as follows:

Three Months Ended December 31,
Lease Expense 2021 2020
Operating lease expense(1)
$ 6,363 $ 6,132
Finance lease expense:
Amortization of leased assets 18 32
Interest on lease liabilities 1 2
Variable lease expense 1,091 907
Sublease income (59) (123)
Total net lease expense $ 7,414 $ 6,950


	Three Months Ended December 31,
Lease Expense	2022		2021
Operating lease expense(1)	$	5,704	$	6,363
Finance lease expense:
Amortization of leased assets	198		18
Interest on lease liabilities	87		1
Variable lease expense	1,950		1,091
Sublease income	(32)		(59)
Total net lease expense	$	7,907	$	7,414

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the three months ended December 31, ~~2021~~2022 and ~~2020.~~

2021.

Supplemental balance sheet, cash flow and other information related to our leases was as follows (in thousands, except lease term and discount rate):


Leases	Leases	Classification	December 31, 2021		September 30, 2021		Leases	Classification	December 31, 2022		September 30, 2022
Assets:	Assets:						Assets:
Operating lease assets	Operating lease assets	Right-of-use assets for operating leases	$	177,380	$	159,075	Operating lease assets	Right-of-use assets for operating leases(1)	$	199,947	$	132,038
Finance lease assets	Finance lease assets	Property and equipment, net(1)	76		94		Finance lease assets	Property and equipment, net(2)	2,719		22
Total leased assets	Total leased assets		$	177,456	$	159,169	Total leased assets		$	202,666	$	132,060

Liabilities:							Liabilities:
Current							Current
Operating lease liabilities							Operating lease liabilities	Operating lease liability, current portion(1)	$	24,206	$	12,959
Finance lease liabilities							Finance lease liabilities	Long-term debt, current portion	642		23
Noncurrent							Noncurrent
Operating lease liabilities							Operating lease liabilities	Operating lease liability(1)	195,730		129,302
Finance lease liabilities							Finance lease liabilities	Long-term debt	4,982		—
Total lease liabilities							Total lease liabilities		$	225,560	$	142,284

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Leases Classification December 31, 2021 September 30, 2021
Liabilities:
Current
   Operating lease liabilities Operating lease liability, current portion $ 16,376 $ 14,075
   Finance lease liabilities Long-term debt, current portion 74 73
Noncurrent
   Operating lease liabilities Operating lease liability 171,325 153,228
   Finance lease liabilities Long-term debt 5 23
Total lease liabilities $ 187,780 $ 167,399
(1)     As noted in Note 4, during the three months ended December 31, 2022, our right-of-use assets and operating lease liability increased due to the acquisition of Concorde.

~~(1)~~(2) Finance lease assets are recorded net of accumulated amortization of ~~$0.1~~$0.3 million and $0.2 million as of December 31, ~~2021~~2022 and September 30, ~~2021,~~2022, respectively.


Lease Term and Discount Rate	Lease Term and Discount Rate	December 31, 2021		September 30, 2021		Lease Term and Discount Rate	December 31, 2022		September 30, 2022
Weighted-average remaining lease term (in years):	Weighted-average remaining lease term (in years):					Weighted-average remaining lease term (in years):
Operating leases	Operating leases	9.49		9.37		Operating leases	8.43		8.92
Finance leases	Finance leases	1.06		1.32		Finance leases	6.08		0.33

Weighted average discount rate:	Weighted average discount rate:					Weighted average discount rate:
Operating leases	Operating leases	4.02	%	4.31	%	Operating leases	3.58	%	3.91	%
Finance leases	Finance leases	3.08	%	3.08	%	Finance leases	9.29	%	3.08	%


		Three Months Ended December 31,					Three Months Ended December 31,
Supplemental Disclosure of Cash Flow Information and Other Information	Supplemental Disclosure of Cash Flow Information and Other Information	2021		2020		Supplemental Disclosure of Cash Flow Information and Other Information	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2,567	$	5,301	Operating cash flows from operating leases	$	4,963	$	2,567
Financing cash flows from finance leases	Financing cash flows from finance leases	18		32		Financing cash flows from finance leases	115		18

Non-cash activity related to lease liabilities:	Non-cash activity related to lease liabilities:					Non-cash activity related to lease liabilities:
Lease assets obtained in exchange for new operating lease liabilities (1)	Lease assets obtained in exchange for new operating lease liabilities (1)	$	7,457	$	78	Lease assets obtained in exchange for new operating lease liabilities (1)	$	117	$	7,457
Leases assets obtained in exchange for new finance lease liabilities		—		—
Lease assets obtained in exchange for new finance lease liabilities						Lease assets obtained in exchange for new finance lease liabilities	—		—

(1) Excludes the operating leases recorded for the Concorde and MIAT ~~acquisition~~acquisitions discussed in Note 4.

Maturities of lease liabilities were as follows:


	As of December 31, 2022
Years ending September 30,	Operating Leases		Finance Leases
Remainder of 2023	$	21,804	$	854
2024	33,160		1,159
2025	31,829		1,193
2026	30,763		1,229
2027	29,301		1,266
2028 and thereafter	108,252		1,743
Total lease payments	255,109		7,444
Less: interest	(35,173)		(1,820)
Present value of lease liabilities	219,936		5,624
Less: current lease liabilities	(24,206)		(642)
Long-term lease liabilities	$	195,730	$	4,982

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

~~Maturities of lease liabilities were as follows:~~
As of December 31, 2021
Years ending September 30, Operating Leases Finance Leases
Remainder of 2022 $ 15,520 $ 56
2023 23,504 24
2024 23,350 —
2025 23,697 —
2026 23,570 —
2027 and thereafter 116,567 —
Total lease payments 226,208 80
Less: interest (38,507) (1)
Present value of lease liabilities 187,701 79
Less: current lease liabilities (16,376) (74)
Long-term lease liabilities $ 171,325 $ 5

Note 12 - Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:


		December 31, 2021		September 30, 2021			December 31, 2022		September 30, 2022
Accounts payable	Accounts payable	$	11,632	$	13,702	Accounts payable	$	13,039	$	21,746
Accrued compensation and benefits	Accrued compensation and benefits	23,294		29,506		Accrued compensation and benefits	27,453		28,430
Other accrued expenses	Other accrued expenses	12,977		11,189		Other accrued expenses	19,134		13,328
Accrued tool sets						Accrued tool sets	3,229		3,176
Total accounts payable and accrued expenses	Total accounts payable and accrued expenses	$	47,903	$	54,397	Total accounts payable and accrued expenses	$	62,855	$	66,680

Note 13 - Debt

December 31, 2021 September 30, 2021
Interest Rate Maturity Date
Carrying Value of Debt (4)
Carrying Value of Debt (4)
Term Loan(1)
2.10 % May 2028 $ 30,687 $ 30,886
Finance leases(2)
3.08 % Various 79 96
Total debt 30,766 30,982
Debt issuance costs presented with debt (3)
(246) (256)
Total debt, net 30,520 30,726
Less: current portion of long-term debt (884) (876)
Long-term debt $ 29,636 $ 29,850


	December 31, 2022					September 30, 2022
	Interest Rate		Maturity Date	Carrying Value of Debt(6)		Carrying Value of Debt(6)
Revolving Credit Facility(1)	6.54	%	Nov 2025	$	90,000	$	—
Avondale Term Loan(2)	6.12	%	May 2028	$	29,877	$	30,083
Lisle Term Loan(3)	6.12	%	Apr 2029	38,000		38,000

Finance leases(4)	9.29	%	Various	5,624		23
Total debt				163,501		68,106
Debt issuance costs presented with debt (5)				(527)		(568)
Total debt, net				162,974		67,538
Less: current portion of long-term debt				(1,945)		(1,115)
Long-term debt				$	161,029	$	66,423

(1) Interest on the Revolving Credit Facility (as defined below) accrues at annual rate equal to the SOFR plus a margin of 2.0% and a lender specific spread of 0.15%.

(2) Interest on the Avondale Term Loan (as defined below) accrues at annual rate equal to the LIBOR plus 2.0%.

~~(2)~~(3) Interest on the Lisle Term Loan (as defined below) accrues at annual rate equal to the SOFR plus 2.0%.

(4) Our finance leases include finance lease arrangements related to a facility lease and various equipment with a weighted-average annual interest rate of approximately ~~3.08%, which~~9.29%. The equipment leases mature in ~~varying installments between 2022~~2023 and ~~2023.~~the facility lease matures in 2029. See Note 11 for additional details on our finance leases.

~~(3)~~(5) The unamortized debt issuance costs as of December 31, ~~2021 and September 30, 2021~~2022 relate ~~entirely~~ to the Avondale Term Loan and the Lisle Term Loan.

~~(4)~~(6) Our Credit Facility, Term ~~Loan~~Loans and finance leases bear interest at rates commensurate with market rates and therefore the respective carrying values approximate fair value (Level 2).

Revolving Credit Facility

On November 18, 2022, we entered into a $100.0 million senior secured revolving credit facility with Fifth Third Bank, a national banking association (the “Credit Facility”), which includes a $20.0 million sub facility that is available for letters of credit. The Credit Facility has a term of three years, unless earlier terminated pursuant to the terms and conditions set forth in the credit agreement.

This agreement provides that the revolver will amortize on an interest-only basis during its term with principal able to be borrowed, re-paid and re-borrowed throughout the term of the Facility and with the outstanding principal due and payable at maturity. Advances made under the Credit Facility will bear interest at a floating rate equal to, at our option, either (a) a variable rate equal to the greater of: (i) 3.5%, or (ii) the rate that the lender publicly announces, publishes or designates from time to time as its index rate or prime rate, or any successor rate thereto, in effect at its principal office, or (b) a variable rate

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

equal to the greater of (i) 0%, or (ii) Term SOFR relating to quotations for one (1) or three (3) months, as selected by us or as otherwise set pursuant to the terms of the credit agreement, as applicable, plus, in the case of any Term SOFR loan, an adjustment equal to 0.10% if the interest period is one (1) month and 0.15% if the interest period is three (3) months. Interest in the case of tranche rate loans will be increased by an applicable margin that varies from 1.75% up to 2.25% based on our then-current total leverage ratio. In executing the Credit Facility, we incurred $0.5 million in debt issuance costs which have been recorded in “Other assets” on the condensed consolidated balance sheet as of December 31, 2022. On November 28, 2022, we drew $90.0 million from the credit facility in support of the closing of the Concorde Acquisition at an interest rate of 6.54%. In December 2022, a $1.8 million letter of credit was issued on the Credit Facility, reducing our availability as of December 31, 2022 to $8.2 million.

We are also subject to certain customary affirmative and negative covenants under the credit agreement for financing generally and for the Credit Facility, including financial covenants such as total leverage ratio, a fixed charge coverage ratio, and a quick ratio. In addition, we are required to maintain a financial responsibility composite score of at least 1.4 as of the end of the fiscal year ending September 30, 2023 and of at least 1.5 as of the end of any fiscal year thereafter. Lastly, we are subject to a “clean off” provision, under which within the first 20 months after our initial draw under the Credit Facility, the amount outstanding on the Credit Facility will not exceed $20.0 million for a single 30 consecutive day period. As of December 31, 2022, we were in compliance with all covenants under our Credit Facility.

Avondale Term Loan

In connection with the Avondale, Arizona building purchase in December 2020, we entered into a Credit Agreement with Fifth Third Bank, National Association (the ~~“Lender”~~“Avondale Lender”) on May 12, 2021 in the maximum principal amount of $31.2 million with a maturity of seven years (the ~~“Term~~“Avondale Term Loan”). The Avondale Term Loan bears interest at the rate of LIBOR plus 2.0%. Principal and interest payments are due monthly. The Avondale Term Loan is secured by a first priority lien on our Avondale, Arizona property, including all land and improvements. Additionally, on May 12, 2021, we entered into an interest rate swap agreement with the Avondale Lender that effectively fixes the interest rate on 50% of the principal amount of the Avondale Term Loan, or approximately $15.6 million, at 3.5% for the entire loan term. See Note 14 below for further discussion on the interest rate swap.

Lisle Term Loan

On April 14, 2022, 2611 (the “Borrower”) entered into a new Loan Agreement (“Lisle Loan Agreement”) with Valley National Bank (the “Lisle Lender”), to fund the acquisition and retire prior loan agreement with Western Alliance bank, via a term loan in the original principal amount of $38.0 million with a maturity of seven years (the “Lisle Term Loan”). The Lisle Term Loan bears interest at a rate of one-month Secured Overnight Financing Rate (“SOFR”) plus 2.0%. The Lisle Term Loan is secured by a mortgage on the Lisle Campus and is guaranteed by the Company. In connection with the Lisle Term Loan, we entered into an interest rate swap agreement with the Lisle Lender that effectively fixes the interest rate on 50% of the principal amount of the Lisle Term Loan, or $19.0 million, at 4.69% for the entire loan term. See Note 14 below for further discussion on the interest rate swap

Debt Covenants for our Term Loans

We are subject to certain customary affirmative and negative covenants ~~under the Credit Agreement,~~in connection with our term loans, including, without limitation, certain reporting obligations, ~~and~~ certain limitations on restricted payments, ~~and~~ limitations on liens, encumbrances and ~~indebtedness. The Term Loan is also subject to certain financial maintenance covenants. The~~indebtedness and a debt service coverage ratio shall not be less than 1.25 to 1.00 and is defined as the ratio of the sum of consolidated income (loss) for the year, to the extent deducted in determining income for such period, before income taxes, interest expense, amortization, depreciation and other non-cash charges including net stock-based compensation, fees and expenses related to potential acquisitions and expansion of operations and certain non-recurring charges, including relating to restructuring, business optimization and diversification strategy, less any extraordinary non-recurring gains, interest income and non-cash gains (“Consolidated EBITDA”) (less dividends payable on our Series A Preferred Stock) and other extraordinary items to the current portion of long-term debt and interest paid during the period being measured (which commences on September 30, 2021 and is tested annually thereafter on a trailing 12-month basis). The funded debt to Consolidated EBITDA ratio is required to be no greater than 3.50 to 1.00 (which commences on June 30, 2021 and is tested quarterly thereafter on a trailing 12-month basis). Beginning on May 12, 2024, the Lender may request new appraisals of the Avondale property in order to maintain the ratio of the amortized loan balance to the value of the location at 70%, the approximate ratio that existed at May 12, 2021.covenant. Events of default under the ~~Credit Agreement~~Avondale Term Loan and the Lisle Term Loan include, among others, the failure to make payments when due, breach of covenants, ~~(including certain financial maintenance covenants)~~ and breach of representations or warranties. ~~If we fail to meet the minimum~~For further discussion of our debt ~~service coverage ratio, loan-to-value or debt yield and fail to cure such non-compliance within a time period acceptable to the Lender, we will be~~covenants, see Note 15 on “Debt” included in ~~default.~~our 2022 Annual Report on Form 10-K. As of December 31, ~~2021,~~2022, we were in compliance with all term loan debt covenants.

~~Debt Maturities~~

~~Scheduled principal payments due on our debt for the remainder of 2022 and for each year through the period ended September 30, 2026, and thereafter were as follows at December 31, 2021:~~

Maturity Term Loan Finance Leases Total
Remainder of 2022 $ 605 $ 55 $ 660
2023 832 24 856
2024 861 — 861
2025 892 — 892
2026 924 — 924
Thereafter 26,573 — 26,573
Subtotal 30,687 79 30,766
Debt issuance costs presented with debt (246) — (246)
Total $ 30,441 $ 79 $ 30,520

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Debt Maturities

Scheduled principal payments due on our debt for the remainder of 2023 and for each year through the period ended September 30, 2027, and thereafter were as follows at December 31, 2022:


Maturity	Revolving Credit Facility & Term Loans		Finance Leases		Total
Remainder of 2023	$	886	$	477	$	1,363
2024	71,672		709		72,381
2025	1,763		815		2,578
2026	21,836		931		22,767
2027	1,909		1,060		2,969
Thereafter	59,811		1,632		61,443
Subtotal	157,877		5,624		163,501
Debt issuance costs presented with debt	(527)		—		(527)
Total	$	157,350	$	5,624	$	162,974

Note ~~14-~~14 - Derivative Financial Instruments

In the normal course of business, our operations are exposed to market risks, including the effect of changes in interest rates. We may enter into derivative financial instruments to offset these underlying market risks.

On May 12, 2021, in connection with the Avondale Term Loan discussed in Note 13, we entered into an interest rate swap agreement with the Avondale Lender that effectively fixes the interest rate on 50% of the principal amount of the Avondale Term Loan, or approximately $15.6 million, at 3.5% for the entire loan term, or seven years (the ~~“Swap”~~“Avondale Swap”). On May 12, 2021, the Avondale Swap was designated as an effective cash flow hedge for accounting and tax purposes.

On April 14, 2022, in connection with the Lisle Term loan discussed in Note 13, we entered into an interest rate swap agreement with the Lisle Lender that effectively fixes the interest rate on 50% of the principal amount of the Lisle Term Loan at 4.69% for the entire loan term, or seven years (the “Lisle Swap”). On April 14, 2022, the Lisle Swap was designated as an effective cash flow hedge for accounting and tax purposes.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in “Accumulated other comprehensive ~~income (loss)”~~income” on the condensed consolidated balance sheets. For cash flow hedges, we report the effective portion of the gain or loss as a component of “Accumulated other comprehensive ~~income (loss)”~~income” and reclassify it to “Interest expense” in the condensed consolidated statements of operations over the corresponding period of the underlying hedged item. The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs. To the extent the hedged forecasted interest payments on debt related to our interest rate swap is paid off, the remaining balance in “Accumulated other comprehensive ~~income (loss)”~~income” is recognized in “Interest expense” in the condensed consolidated statements of operations. Of the net amount of the existing ~~losses~~gains that are reported in “Accumulated other comprehensive ~~income (loss)”~~income” as of December 31, ~~2021,~~2022, we estimate that ~~$0.2~~$0.9 million will be reclassified to “Interest expense” within the next twelve months. As of December 31, ~~2021,~~2022, the notional amount of ~~our~~the Avondale Swap and Lisle Swap was approximately ~~$15.3 million.~~

~~Fair Value of Derivative Instruments~~

~~The following table presents the fair value of our Swap (Level 2) which is designated as a cash flow hedge~~$14.9 million and ~~the related classification on the condensed consolidated balance sheet as of December 31, 2021:~~


	~~Interest Rate Swap~~

~~Other assets~~	43
~~Total fair value of assets designated as hedging instruments~~	$	43

~~Other current liabilities~~	$	~~149~~

~~Total fair value of liabilities designated as hedging instruments~~	$	~~149~~

~~Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)~~

~~The table below presents the effect of cash flow hedge accounting for our Swap on “Accumulated other comprehensive income (loss)” as of December 31, 2021:~~

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
Three Months Ended December 31, 2021
Interest Rate Swap $ 118 Interest expense $ (55)
$19.0 million, respectively.

1922

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Fair Value of Derivative Instruments

The following table presents the fair value of our Avondale Swap and Lisle Swap (Level 2) which are designated as cash flow hedges and the related classification on the condensed consolidated balance sheet as of December 31, 2022 and September 30, 2022:


Interest Rate Swaps	December 31, 2022		September 30, 2022
Other current assets	$	813	$	632
Other assets	1,718		2,067
Total fair value of assets designated as hedging instruments	$	2,531	$	2,699

Effect of Cash Flow Hedge Accounting on the ~~Condensed~~ Consolidated ~~Statement~~Statements of Operations and Accumulated Other Comprehensive Income

The table below presents the effect of cash flow hedge accounting for our Avondale Swap and Lisle Swap on the condensed consolidated statement of operations and “Accumulated other comprehensive income” for the three months ended December 31, 2022 and 2021:


	~~Interest Expense~~
~~Interest Rate Swap~~
~~Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income~~	$	~~(55)~~


	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative, net of taxes		Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income



	Three Months Ended December 31, 2022
Avondale Swap and Lisle Swap	$	41	Interest expense	$	(128)

	Three Months Ended December 31, 2021
Avondale Swap	$	118	Interest expense	$	(55)

Note 15 - Income Taxes

Our income tax ~~benefit~~expense for the three months ended December 31, ~~2021~~2022 was $1.5 million, or 36.5% of pre-tax income, compared to an income tax benefit of $1.3 million, or (10.0)% of pre-tax income, ~~compared to income tax expense of $26 thousand, or 2.3% of pre-tax loss,~~ for the three months ended December 31, ~~2020.~~2021. The ~~effective~~ income tax ~~rate in each period differed from~~expense for the ~~federal statutory tax rate of 21%~~three months ended December 31, 2022 is primarily ~~as a result of changes in the valuation allowance~~driven by non-deductible executive compensation, transaction costs and state and local income and franchise taxes. The income tax benefit recorded during the three months ended December 31, 2021 was primarily ~~relates to~~comprised of the valuation allowance impact ofrelated to the MIAT deferred tax liability for indefinite lived intangibles which ~~are~~were available to offset a portion of our indefinite lived deferred tax ~~assets.~~assets, offset by current state tax expense.

As of ~~December 31, 2021, we continued to have a full valuation allowance against all~~each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. ~~We intend to continue maintaining a full valuation allowance~~During the three months ended March 31, 2022, based in part on our ~~deferred tax assets until~~sustained positive earnings in recent quarters, we determined that there iswas sufficient evidence to meet the more likely than not realizability threshold and support the reversal of ~~all or some portion~~a majority of ~~these allowances. However, given~~the previously recorded valuation allowance against our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portiondeferred tax assets. The release of the valuation allowance ~~will no longer be needed. Release of the valuation allowance would result~~resulted in the recognition of certain deferred tax assets on the condensed consolidated balance sheet and a non-cash tax benefit torecorded in the ~~income tax provision~~condensed consolidated statement of operations for the ~~period the release is recorded. In addition, if the~~period. As of December 31, 2022, we continued to maintain a valuation allowance ~~is released, the effective tax rate would increase~~related to ~~a percentage more in line with the combined statutory~~certain federal and state ~~income tax rates starting in the fiscal year following the release. However, the exact timing and amount of the valuation allowance release~~attributes which are ~~subject~~not expected to ~~change on the basis of the level of profitability that we are able~~be utilized prior to ~~actually achieve.~~expiration.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 16 - Commitments and Contingencies

Surety Bonds

Each of our campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant certificates, diplomas or degrees to its students. Our campuses are subject to extensive, ongoing regulation by each of these states. Additionally, our campuses are required to be authorized by the applicable state education agencies of certain other states in which our campuses recruit students. Our insurers issue surety bonds for us on behalf of our campuses and admissions representatives with multiple states to maintain authorization to conduct our business. We are obligated to reimburse our insurers for any surety bonds that are paid by the insurers. As of December 31, 2022 and September 30, 2022, the total face amount of these surety bonds was approximately $29.6 million and $20.5 million, respectively. The Concorde Acquisition contributed $4.6 million to the current period amount.

Legal

In the ordinary conduct of our business, we are periodically subject to lawsuits, demands in arbitration, investigations, regulatory proceedings or other claims, including, but not limited to, claims involving current or former students, routine employment matters, business disputes and regulatory demands. When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we accrue a liability for the loss. When a loss is not both probable and estimable, we do not accrue a liability.

Where a loss is not probable but is reasonably possible, including if a loss in excess of an accrued liability is reasonably possible, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the ~~claim. Because we cannot predict with certainty the ultimate resolution of the~~claims. We are not currently a party to any material legal proceedings, ~~(including lawsuits, investigations, regulatory proceedings or claims) asserted against us, it is not currently possible to provide such an estimate. The ultimate outcome of pending~~but note that legal proceedings ~~to which we are a party may~~could, generally, have a material adverse effect on our business, cash flows, ~~and~~ results of operations or financial condition.

Note 17 - Shareholders’ Equity

Common Stock

Holders of our common stock are entitled to receive dividends when and as declared by our Board of Directors and have the right to 1one vote per share on all matters requiring shareholder approval. On June 9, 2016, our Board of Directors voted to

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~~UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

eliminate the quarterly cash dividend on our common stock. Any future common stock dividends require the approval of a majority of the voting power of the Series A Preferred Stock.

Preferred Stock

Preferred Stock consists of 10,000,000 authorized preferred shares of $0.0001 par value each. As of December 31, ~~2021~~2022 and September 30, ~~2021, 700,000~~2022, 675,885 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) were issued and ~~outstanding.~~outstanding, respectively. The liquidation preference associated with the Series A Preferred Stock was $100 per share at December 31, ~~2021~~2022 and September 30, ~~2021.~~

2022.

Pursuant to the terms of the Certificate of Designations of the Series A Preferred Stock, we may pay a cash dividend on each share of the Series A Preferred Stock at a rate of 7.5% per year on the liquidation preference then in effect (“Cash Dividend”). If we do not pay a Cash Dividend, the liquidation preference shall be increased to an amount equal to the current liquidation preference in effect plus an amount reflecting that liquidation preference multiplied by the Cash Dividend rate then in effect plus 2.0% per ~~year (“Accrued Dividend”).~~year. Cash Dividends are payable semi-annually in arrears on September 30 and March 31 of each year, and begin to accrue on the first day of the applicable dividend period. We accrued Cash Dividends of approximately $1.3 million as of December 31, ~~2021.~~

~~For further discussion of our preferred stock, including the potential for conversion into common stock, see Note 16 on “Shareholders’ Equity” included in our~~ ~~2021 Annual Report on Form 10-K~~.2022.

Share Repurchase Program

On December 10, 2020, our Board of Directors authorized a new share repurchase plan that would allow for the repurchase of up to $35.0 million of our common stock in the open market or through privately negotiated transactions. This new share repurchase plan replaced the previously authorized plan from fiscal 2012. Any repurchases under this new stock repurchase

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(In thousands, except per share amounts)

(Unaudited)

program require the approval of a majority of the voting power of our Series A Preferred Stock. We have not repurchased any shares under the share repurchase program, including during the three months ended December 31, ~~2021.~~2022.

Note 18 - Earnings per Share

We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Series A Preferred Stock on June 24, 2016. Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis. The two-class method is an earnings allocation formula that determines EPS for common stock and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends. The Series A Preferred Stock is not included in the computation of basic EPS in periods in which we have a net loss, as the Series A Preferred Stock is not contractually obligated to share in our net losses.

Diluted EPS is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net income and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested restricted share units and convertible preferred stock.

The following table summarizes the computation of basic and diluted ~~weighted average~~EPS under the two-class or as-converted method, as well as the anti-dilutive shares ~~outstanding are the same for the three months ended December 31, 2020 as a result of the net loss available to common shareholders and anti-dilutive impact of the potentially dilutive securities.~~excluded:


	Three Months Ended
	December 31,
	2022		2021
Basic earnings per common share:
Net income	$	2,648	$	14,822
Less: Preferred stock dividend declared	(1,277)		(1,323)
Net income available for distribution	1,371		13,499
Income allocated to participating securities	(514)		(5,267)
Net income available to common shareholders	$	857	$	8,232

Weighted average basic shares outstanding	33,805		32,849

Basic income per common share	$	0.03	$	0.25

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~~The following table summarizes the computation of basic and diluted EPS under the two-class or as-converted method, as well as the anti-dilutive shares excluded:~~

Three Months Ended
December 31,
2021 2020
Basic earnings per common share:
Net income $ 14,822 $ 1,083
Less: Preferred stock dividend declared (1,323) (1,313)
Net income (loss) available for distribution 13,499 (230)
Income allocated to participating securities (5,267) —
Net income (loss) available to common shareholders $ 8,232 $ (230)
Weighted average basic shares outstanding 32,849 32,658
Basic income (loss) per common share $ 0.25 $ (0.01)
Diluted earnings per common share:
Method used: Two-class Two-class
Net income (loss) available to common shareholders $ 8,232 $ (230)
Weighted average basic shares outstanding 32,849 32,658
Dilutive effect related to employee stock plans 723 —
Weighted average diluted shares outstanding 33,572 32,658
Diluted income (loss) per common share $ 0.25 $ (0.01)
Anti-dilutive shares excluded:
Outstanding stock-based grants 186 436
Convertible preferred stock 21,021 21,021
Total anti-dilutive shares excluded 21,207 21,457
Dilutive shares under the as-converted method(1)
54,593 53,905


	Three Months Ended
	December 31,
	2022		2021
Diluted earnings per common share:
Method used:	Two-class		Two-class
Net income available to common shareholders	$	857	$	8,232

Weighted average basic shares outstanding	33,805		32,849
Dilutive effect related to employee stock plans	603		723
Weighted average diluted shares outstanding	34,408		33,572

Diluted income per common share	$	0.02	$	0.25

Anti-dilutive shares excluded:
Outstanding stock-based grants	506		186
Convertible preferred stock	20,297		21,021
Total anti-dilutive shares excluded	20,803		21,207

Dilutive shares under the as-converted method(1)	54,705		54,593

(1) The dilutive shares under the as-converted method assume conversion of the Series A Preferred Stock and are presented here merely for reference. In a net income position, diluted earnings per share is determined by the more dilutive of the two-class method or the as-converted method.

Note 19 - Segment Information

~~Our principal business is~~During the three months ended December 31, 2022, we revised our reportable segments to reflect the manner in which the chief operating decision-maker evaluates performance and allocates resources. As a result of the Concorde Acquisition (as discussed in Note 4), beginning with this reporting period we have two reportable segments as follows:

UTI:UTI operates 16 campuses located in 9 states and offers a wide range of degree and non-degree transportation and skilled trades technical training programs under brands such as Universal Technical Institute, Motorcycle Mechanics Institute, Marine Mechanics Institute, NASCAR Technical Institute, and MIAT College of Technology (“MIAT”). UTI also offers manufacturer specific advanced training programs, which include student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers. Lastly, UTI provides dealer technician training or instructor staffing services to manufacturers.

Concorde:Concorde operates across 17 campuses in 8 states, offering degree, non-degree and continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields. Concorde believes in preparing students for their health care careers with practical, hands-on experiences including opportunities to learn while providing ~~postsecondary education. We also provide manufacturer-specific training, and these operations~~care to real patients. Prior to graduation, students will complete a number of hours in a clinical setting or externship, depending upon their program of study.

“Corporate” includes corporate related expenses that are ~~managed separately from our campus operations. These operations do~~ not ~~currently meet~~allocated to the ~~quantitative criteria for~~UTI or Concorde reportable segments and ~~therefore are reflected in~~is included to reconcile segment results to the ~~“Other” category. Our equity method investment and other non-postsecondary education operations are also included within the “Other” category. Corporate expenses are~~condensed consolidated financial statements. These costs were previously allocated toacross our former “Postsecondary Education” reportable segment and ~~the~~ “Other” category based onupon compensation expense. Prior periods have been updated to conform to the revised presentation.

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Summary information by reportable segment ~~was~~is as follows:


		Postsecondary Education		Other		Consolidated			UTI		Concorde		Corporate		Consolidated
Three Months Ended December 31, 2021
Three Months Ended December 31, 2022								Three Months Ended December 31, 2022
Revenues	Revenues	$	101,702	$	3,373	$	105,075	Revenues	$	105,573	$	14,431	$	—	$	120,004
Income (loss) from operations	Income (loss) from operations	14,147		(569)		13,578		Income (loss) from operations	16,515		(726)		(11,341)		4,448
Depreciation and amortization (1)	Depreciation and amortization (1)	3,654		25		3,679		Depreciation and amortization(1)	4,775		457		16		5,248
Net income (loss)	Net income (loss)	15,391		(569)		14,822		Net income (loss)	15,825		(734)		(12,443)		2,648

Three Months Ended December 31, 2020
Three Months Ended December 31, 2021								Three Months Ended December 31, 2021
Revenues	Revenues	$	73,560	$	2,565	$	76,125	Revenues	$	105,075	$	—	$	—	$	105,075
Income (loss) from operations	Income (loss) from operations	1,104		(329)		775		Income (loss) from operations	23,167		—		(9,589)		13,578
Depreciation and amortization (1)	Depreciation and amortization (1)	3,258		24		3,282		Depreciation and amortization(1)	3,663		—		16		3,679
Net income (loss)	Net income (loss)	1,412		(329)		1,083		Net income (loss)	22,959		—		(8,137)		14,822

As of December 31, 2021
As of December 31, 2022								As of December 31, 2022
Total assets	Total assets	$	526,209	$	7,329	$	533,538	Total assets	$	383,349	$	149,668	$	215,056	$	748,073

As of September 30, 2021
As of September 30, 2022								As of September 30, 2022
Total assets	Total assets	$	504,934	$	7,636	$	512,570	Total assets	$	436,917	$	—	$	115,994	$	552,911

(1) Includes depreciation of training equipment obtained in exchange for services of $0.2 million ~~and $0.3 million~~ for the three months ended December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

Note 20 - Government Regulation and Financial Aid

As discussed at length in our ~~2021~~2022 Annual Report on Form 10-K, our institutions participate in a range of government-sponsored student assistance programs. The most significant of these is the federal student aid programs administered by the U.S. Department of Education (“ED”) pursuant to Title IV of the Higher Education Act (“HEA”), commonly referred to as the Title IV Programs. Generally, to participate in the Title IV Programs, an institution must be licensed or otherwise legally authorized to operate in the state where it is physically located, be accredited by an accreditor recognized by ED, be certified as an eligible institution by ED, offer at least one eligible program of education, and comply with other statutory and regulatory requirements. See “Part I, Item 1. Regulatory Environment” in our ~~2021~~2022 Annual Report on Form 10-K.

State Authorization

To operate and offer postsecondary programs, and to be certified to participate in Title IV Programs, each of our institutions must obtain and maintain authorization from the state in which it is physically located ~~(“Home~~(its “Home State”). To engage in recruiting or educational activities outside of its Home State, each institution also may be required to obtain and maintain authorization from the states in which it is recruiting ~~students. UTI is authorized to participate~~or engaging in the State Authorization Reciprocity Agreement (“SARA”). SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts. As of September 1, 2021, all states other than California are members of SARA. Each of our institutions holds the state and/or SARA authorizations required to operate and

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~~(Unaudited)~~

~~offer postsecondary education programs in its Home State, and to recruit in the states in which it engages in recruiting~~educational activities.

The level of regulatory oversight varies substantially from state to state and is extensive in some states. State laws may establish standards for instruction, qualifications of faculty, location and nature of facilities and equipment, administrative procedures, marketing, recruiting, student outcomes reporting, disclosure obligations to students, limitations on mandatory arbitration clauses in enrollment agreements, financial operations, and other operational matters. Some states prescribe standards of financial responsibility and mandate that institutions post surety bonds. Many states have requirements for institutions to disclose institutional data to current and prospective students, as well as to the ~~public, and~~public. And some states require that our schools meet prescribed performance standards as a condition of continued approval. States can and often do revisit, revise, and expand their regulations governing postsecondary education and recruiting.

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(In thousands, except per share amounts)

(Unaudited)

All UTI institutions and the Concorde Career Colleges, Kansas City institution are authorized to participate in the State Authorization Reciprocity Agreement (“SARA”). SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. SARA is overseen by a national council and administered by four regional education compacts. As of July 1, 2022, 49 states (all but California), the District of Columbia, Puerto Rico and the U.S. Virgin Islands have joined SARA. Each of our institutions holds either the state or SARA authorizations required to operate and offer postsecondary education programs, and to recruit in the states in which it engages in recruiting activities.

State Licensing Boards

Many educational programs leading to professional licensure in a regulated profession require approval from, and are subject to, ongoing oversight by state agencies or boards. Certain Concorde healthcare programs, such as the Vocational Nursing, Practical Nursing, Dental Assistant, Massage Therapy, Nursing Practice (RN) programs, require and have obtained state licensure. Such programs are required to meet the standards of the state licensure agency or board and must periodically renew their licenses by completing a comprehensive license renewal process.

Institutional Accreditation

Accreditation is a non-governmental process through which an institution voluntarily submits to ongoing qualitative reviews by an organization of peer institutions. Institutional accreditation by an ED-recognized accreditor is required for an institution to be certified to participate in Title IV Programs. All of ~~our~~the UTI institutions and 14 of the Concorde institutions are accredited by the Accrediting Commission of Career Schools and Colleges (“ACCSC”)~~, which is an~~. The remaining two Concorde institutions are accredited by the Council on Occupational Education (“COE”). Both ACCSC and COE are accrediting ~~agency~~agencies recognized by ED. ACCSC ~~reviews~~and COE review the academic quality of each institution’s instructional programs, as well as the administrative and financial operations of the institution to ensure that it has the resources necessary to perform its educational mission, implement continuous improvement processes, and support student success. Our institutions must submit annual reports, and at times, supplemental reports, to demonstrate ongoing compliance and improvement. ACCSC ~~requires~~and COE require institutions to disclose certain institutional information to current and prospective students, as well as to the public, and ~~requires~~require that our schools and programs meet various performance standards as a condition of continued accreditation. Institutions must periodically renew their accreditation by completing a comprehensive renewal of accreditation process. See “Part I, Item 1. Regulatory Environment - Accreditation” in our ~~2021~~2022 Annual Report on Form 10-K for further details and the current status of ~~our campus~~UTI campus’ accreditation.

Programmatic Accreditation

In addition to institutional accreditation, programmatic accreditation may be required for particular educational programs. Programmatic accreditors review specialized and professional programs in a range of fields and disciplines within an institution to ensure the public that an academic program has undergone a rigorous review process and found to meet high standards for educational quality. Certain Concorde healthcare programs, including the Physical Therapist Assistant, Dental Hygiene, Neurodiagnostic Technology, Polysomnographic Technology, Respiratory Therapy, Surgical Technology, Radiologic Technology, Diagnostic Medical Sonography, Cardiovascular Sonography, Occupational Therapy Assistant, Pharmacy Technician, and Occupational Therapy Assistant programs, have obtained programmatic accreditation. Such programs are required to meet the standards of their programmatic accreditor and must periodically renew their accreditation by completing a comprehensive accreditation renewal process.

Title IV Programs

The federal government provides a substantial part of its support for postsecondary education through Title IV Programs in the form of grants and loans to students who can use those funds at any institution that has been certified as eligible to participate by ED. All of our institutions are certified to participate in Title IV Programs. Significant factors relating to Title IV Programs that could adversely affect us include:

•The 90/10 Rule. As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to comply with the ~~90/~~“90/10 rule.” Under the current 90/10 rule, to remain eligible to participate in the federal

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student aid programs, a proprietary institution must derive at least 10% of ~~their~~its revenues for each fiscal year ~~from sources other than Title IV Program funds. Under the American Rescue Plan Act of 2021 (“ARPA”), a proprietary institution must derive at least 10 percent of its revenue~~ from sources other than “Federal education assistance funds.” Federal education assistance funds are defined as “federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution.” ~~Pursuant to ARPA, the earliest this revision to the~~ED published a proposed 90/10 rule ~~may~~on July 28, 2022 and a final rule on October 28, 2022. The new rule will take effect isJuly 1, 2023 and will apply to any annual audit submission for a proprietary institutional fiscal ~~years~~year beginning on or after January 1, 2023.

A proprietary institution is subject to sanctions if it exceeds the 90% level for a single year, and loses its eligibility to participate in Title IV Programs if it derives more than 90% of its revenue from Title IV Programs/Federal education assistance funds, as applicable, for two consecutive fiscal years.

~~We are currently reviewing the potential impact of the change in the 90/10 rule created under ARPA and will be monitoring any proposed or final regulations promulgated by ED to carry out this change.~~

•Administrative Capability. To continue its participation in Title IV Programs, an institution must demonstrate that it remains administratively capable of providing the education it promises and of properly managing the Title IV Programs. ED assesses the administrative capability of each institution that participates in Title IV Programs under a series of

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standards listed in the regulations, which cover a wide range of operational and administrative topics, including the designation of capable and qualified individuals, the quality and scope of written procedures, the adequacy of institutional communication and processes, the timely resolution of issues, the sufficiency of recordkeeping, and the frequency of findings of noncompliance, to name a few. ED’s administrative capability standards also include thresholds and expectations for federal student loan cohort default rates (discussed below), satisfactory academic progress, and loan counseling. Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV Programs, require the institution to repay Title IV Program funds, change the method of payment of Title IV Program funds, place the institution on provisional certification as a condition of its continued participation or take other actions against the institution.

•Three-Year Student Loan Default Rates. To remain eligible to participate in Title IV Programs, institutions also must maintain federal student loan cohort default rates below specified levels. An institution whose three-year cohort default rate is 15% or greater for any one of the three preceding years is subject to a 30-day delay in receiving the first disbursement on federal student loans for first-time borrowers. As of September 30, 2021, only Universal Technical Institute of Texas was subject to a 30-day delay in receiving the first disbursement on federal student loans for first-time borrowers due to a three-yearAn institution whose cohort default rate ~~that was 15% or greater~~exceeds 30% in consecutive fiscal years may be subject to conditions and restrictions, and will lose eligibility if the rate remains above 30% three years in a row. An institution also will lose eligibility if its rate exceeds 40% for ~~one of the three most recent years.~~any fiscal year.

•Financial Responsibility. All institutions participating in Title IV Programs also must satisfy specific ED standards of financial responsibility. Among other things, an institution must meet all of its financial obligations, including required refunds to students and any Title IV Program liabilities and debts, be current in its debt payments, comply with certain past performance requirements, and not receive any adverse, qualified, or disclaimed opinion by its accountants in its audited financial statements. Each year, ED also evaluates institutions’ financial responsibility by calculating a “composite score,” which utilizes information provided in the institutions’ annual audited financial statements. The composite score is based on three ratios: (1) the equity ratio which measures the institution’s capital resources, ability to borrow and financial viability; (2) the primary reserve ratio which measures the institution’s ability to support current operations from expendable resources; and (3) the net income ratio which measures the institution’s ability to operate at a profit. Between composite score calculations, ED also will reevaluate the financial responsibility of an institution following the occurrence of certain “triggering events,” which must be timely reported to the agency.

•Title IV Program Rulemaking. ED is almost continuously engaged in one or more negotiated rulemakings, which is the process pursuant to which it revisits, revises, and expands the complex and voluminous Title IV Program regulations. ~~Recent~~ED is currently managing two significant rulemaking efforts. First, between October and ~~significant negotiated rulemakings include~~December 2021, ED held three rounds of negotiations as part of the ~~Gainful Employment Rulemaking, the Borrower Defense to Repayment Rulemaking,~~Affordability and the Accreditation and Innovation Rulemaking. New regulations associated with these rulemakings took effect on July 1, 2020, and additional, new rules took effect on July 1, 2021. Additionally, ED has established multiple rulemaking committees to prepare proposed regulations across 14 different topicsStudent Loans rulemaking. The negotiators considered nine issue areas, including the ~~rules governing changes in ownership, standards of administrative capability,~~ borrower defense to repayment rule, closed school loan discharges ~~mandatory~~and loan repayment plans. Second, between January and March of 2022, ED held three rounds of negotiations as part of the Institutional and Programmatic Eligibility rulemaking. The negotiators considered seven issue areas, including administrative capability, financial responsibility, gainful employment, change of ownership and control, ability to benefit and the 90/10 rule. On October 28, 2022, ED published a final rule amending regulations governing Pell Grants for prison education programs, the 90/10 rule, and changes in ownership and control, effective July 1, 2023. On November 1, 2022, ED published a final rule governing borrower defense to repayment rule, closed school loan discharges, pre-dispute arbitration and class action waiver clauses, interest capitalization on Federal student loans, Public Student Loan Forgiveness, total and ~~gainful employment. It~~permanent disability discharges, and false certification discharges, also effective July 1, 2023. The regulated community is ~~expected that these~~awaiting proposed rules on the remaining topics covered by ED’s current negotiated rulemakings. ED also has announced a slate of new negotiated rulemakings to begin in Spring 2023, which will ~~continue throughout 2022,~~address state authorization, accreditation, distance education, and ~~that any resulting rules would become effective during that time or thereafter. ED has also invited public commentary on~~ other ~~matters around potential gaps in post-secondary outcomes including retention, completion, loan repayment and student loan default. The potential outcome, if any, from these announced actions isunknown at this time.~~topics. We devote significant effort to understanding the effects of ED ~~regulations and rulemakings on our business and to developing compliant solutions that also are congruent with our business, culture, and mission to serve our students and industry relationships.~~

~~Other Federal and State Student Aid Programs~~

Some of our students also receive financial aid from federal sources other than Title IV Programs, such as the programs administered by the U.S. Department of Veterans Affairs (“VA”) , the Department of Defense (“DOD”) and under the Workforce Investment Act. Additionally, some states provide financial aid to our students in the form of grants, loans or scholarships. Our Long Beach, Rancho Cucamonga and Sacramento, California campuses, for example, are currently eligible to participate in the Cal Grant program. All of our institutions must comply with the eligibility and participation requirements applicable to each of these funding programs, which vary by funding agency and program.

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regulations and rulemakings on our business and to developing compliant solutions that also are congruent with our business, culture, and mission to serve our students and industry relationships.

•Non-Discrimination Rulemakings. On July 12, 2022, ED published a proposed rule to amend the regulations implementing Title IX of the Education Amendments of 1972 (“Title IX”). The regulated community is awaiting a final Title IX rule. ED also has indicated that it will be proposing a rule to amend regulations related to nondiscrimination on the basis of disability in the Spring of 2023.

Department of Veterans Affairs Benefit Programs

Some of our students also receive financial aid from federal sources other than Title IV Programs, such as the programs administered by the Department of Veterans Affairs (“VA”), the Department of Defense (“DOD”) and under the Workforce Innovation and Opportunity Act.

In 2022, the UTI programs derived approximately 13% of their revenues, on a cash basis, from veterans’ benefits programs, which include the Post-9/11 GI Bill, the Montgomery GI Bill, the Reserve Education Assistance Program (“REAP”) and VA Vocational Rehabilitation. To continue participation in veterans’ benefits programs, an institution must comply with certain requirements established by the VA.

Other Federal and State Student Aid Programs

The Department of Veterans Affairs, the Department of Defense, the Department of Labor, the Department of Education (through non-Title IV programs), and certain states provide support to postsecondary students through grants, benefits, loans, or scholarships. All of our institutions that engage in such programs must comply with the eligibility and participation requirements applicable to each of these funding programs, which vary by funding agency and program.

Each year we derive a portion of our revenues, on a cash basis, from veterans’ benefits programs, which include the Post-9/11 GI Bill, the Montgomery GI Bill, the Reserve Education Assistance Program (“REAP”) and VA Vocational Rehabilitation. To continue participation in veterans’ benefits programs, an institution must comply with certain requirements established by the VA.

~~COVID-19,~~Additionally, some states provide financial aid to our students in the form of grants, loans, or scholarships. The UTI campuses in Long Beach, Rancho Cucamonga and Sacramento, California, as well as the Concorde campuses in Garden Grove, North Hollywood and San Diego, California for example, are currently eligible to participate in the Cal Grant program. All of our institutions must comply with the eligibility and participation requirements applicable to each of these funding programs, which vary by funding agency and program.

Consumer Protections Laws and Regulations

As a postsecondary educational institution, we are subject to a broad range of consumer protection and other laws, such as recruiting, marketing, the protection of personal information, student financing and payment servicing, enforced by federal agencies such as the FTC and CFPB and various state agencies and state attorneys general. We devote significant effort to complying with state and federal consumer protection laws.

We received a January 18, 2022 letter from the Consumer Financial Protection Bureau (“CFPB”) explaining that it was assessing whether UTI “is subject to the CFPB’s supervisory authority based on its activities related to student lending.” The CFPB’s letter then requested certain information about extensions of credit to UTI students; generally explained the source and scope of the CFPB’s regulatory authority; and advised that, after it reviewed the requested materials, the CFPB “anticipates providing guidance regarding whether UTI is subject to CFPB’s supervisory authority.” We have provided the requested information and are awaiting further guidance, if any, from the CFPB.

Both UTI and Concorde, along with 68 other proprietary institutions, received an October 6, 2021 letter from the FTC providing notice that engaging in deceptive or unfair conduct in the education marketplace violates consumer protection laws

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and could lead to significant civil penalties. The notice stated that an institutions receipt of the letter “does not reflect any assessment as to whether they have engaged in deceptive or unfair conduct,” and the FTC did not request any information.

The CARES Act, the CRRSAA, and ARPA

During fiscal 2020 and 2021 various pieces of legislation were issued related to the COVID-19 pandemic including the ~~CARES~~Coronavirus Aid, Relief, and Economic Security Act, the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 ~~(“CRRSAA”)~~ and the American Rescue Plan ~~Act (“ARPA”).~~Act. This legislation, along with guidance from the ED, are discussed at length in “Note 2124 - Governmental Regulation and Financial Aid” in our ~~2021~~2022 Annual Report on Form 10-K. ~~The funding received from these Acts is also discussed in Note 21 on Higher Education Emergency Relief Fund Grants below.~~ For additional information and risks associated with this legislation, see Item 1A. “Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K.

Distance Education

Institutions that offer instruction outside of their Home State must comply with federal regulations governing state authorization for distance education in order to participate in the Title IV student financial aid programs. We continue to work to ensure that our programming complies with applicable distance education rules and standards, including ED’s new distance education rules, which became effective July 1, 2021. We also will closely monitor any new rulemaking initiated in Spring 2023 that concerns state authorization or distance education.

In response to the COVID-19 pandemic, ED provided broad approval for institutions to use distance education without going through the standard ED approval process. ED also permitted accreditors to waive their distance education review requirements. ~~Taking advantage of these flexibilities, we transitioned our students into blended program formats, which permitted their non-clinical training to be offered online.~~

ED’s temporary flexibilities currently remain in place, and will continue through the end of the payment period that begins after the date on which the federally-declared national emergency related to COVID-19 is rescinded. However, having observed that our blended learning programs offer a range of academic, operational, and financial efficiencies, we have determined to seek the permanent approvals that will permit us to continue offering blended learning programming after the noted temporary flexibilities have expired. We also continue to work to ensure that our blended learning programming complies with applicable distance education rules and standards, including ED’s new distance education rules, which became effective July 1, 2021. We intend to offer our Automotive, Diesel, Automotive/Diesel, Motorcycle and Marine programs in a blended learning format on a permanent basis. Additionally, we intend to continue to invest in our blended learning platform and curriculum to further enhance the student experience and student outcomes.

To date, we have received approval from ACCSC and COE to permanently offer blended format programs that utilize both distance and on-ground education. Additionally, we have received permanent approvals ~~from~~by all state education authorizing agencies to offer blended format programs. Last, we note that as part of the Responsible Education Mitigating Options and Technical Extensions (REMOTE) Act, remote learning waivers for GI Bill students were extended until June 1, 2022. GI Bill students attending a course that was converted to remote learning because of COVID-19 may also continue to receive housing benefits until June 1, 2022.

~~Note 21 - Higher Education Emergency Relief Fund Grants~~

~~HEERF II Grants for Students under the CRRSAA and HEERF III Grant for Students under the ARPA~~

~~As discussed in “Note 21 - Governmental Regulation and Financial Aid” in our~~ ~~2021 Annual Report on Form 10-K~~, the CRRSAA includes Higher Education Emergency Relief Fund II (“HEERF II”), which makes an additional $22.7 billion available to higher education institutions. Of this amount, private, proprietary institutions are allocated approximately $681 million. The statute permits proprietary institutions to use HEERF II funds to provide financial aid grants to students, and requires that institutions prioritize the grants to students with exceptional need, such as students who receive Pell Grants. On January 14, 2021, ED issued guidance regarding the administration of the HEERF II program. In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $16.8 million for purposes of funding HEERF II student grants.

~~Additionally, as discussed in “Note 21 - Governmental Regulation and Financial Aid” in our~~ ~~2021 Annual Report on Form 10-~~K~~, the ARPA provides almost $40 billion in funding available to higher education institutions under the Higher Education~~

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~~(Unaudited)~~

Emergency Relief III (“HEERF III”). Of this amount, private, proprietary institutions are allocated approximately $396 million and may only use HEERF III funding to provide emergency financial aid grants to students. In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $9.9 million for purposes of funding HEERF III student grants.

During the three months ended December 31, 2021, we awarded approximately $2.9 million in HEERF II and HEERF III grants to over 2,900 students. The HEERF II and HEERF III funds were drawn down as student grants were distributed with approximately $0.2 million included in “Restricted cash” on our consolidated balance sheet as of December 31, 2021 which relates to pending student grants and outstanding checks. As of December 31, 2021, we have approximately $4.0 million of funds still available for HEERF II and HEERF III grants to students.

~~HEERF I Grants for Significant Changes to the Delivery of Instruction Due to the Coronavirus under the CARES Act~~

~~As discussed in “Note 22 - Higher Education Emergency Relief Fund under the CARES Act” in our~~ ~~2021 Annual Report on Form 10-K~~, during the three months ended December 31, 2020, we incurred $0.9 million in allowable costs related to the changes in the delivery of instruction due to the coronavirus, thereby utilizing the remaining available HEERF institutional funds. Of the $0.9 million incurred, $0.3 million was recorded in “Educational services and facilities” and $0.6 million was recorded in “Selling, general and administrative” on the condensed consolidated statements of operation for the three months ended December 31, 2020. The $0.9 million was drawn down prior to December 31, 2020 and was included in our “Cash and cash equivalents” on our condensed consolidated balance sheet as of December 31, 2020.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and those in our ~~2021~~202 2 Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to those described under “Risk Factors” in our ~~2021~~202 2 Annual Report on Form 10-K and included in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also “Cautionary Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Company Overview

~~Founded in 1965, with approximately 250,000 graduates in its history,~~ Universal Technical Institute, Inc. ~~(“we,~~, which together with its subsidiaries is referred to as the “Company”, “we,” “us” or ~~“our”)~~“our,” was founded in 1965 and is a leading workforce solutions provider of transportation, skilled trades and ~~technical training programs.~~healthcare education programs, whose mission is to serve students, partners, and communities by providing quality education and support services for in-demand careers across a number of highly-skilled fields. We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. As a result of the Concorde Career Colleges acquisition on December ~~31, 2021,~~1, 2022, beginning with this reporting period we ~~offered certificate, diploma or degree programs at 14 campuses across the United States under the banner of several well-known brands, including~~ have two reportable segments as follows:

Universal Technical Institute (“UTI”),:UTI operates 16 campuses located in nine states and offers a wide range of degree and non-degree transportation and skilled trades technical training programs under brands such as Universal Technical Institute, Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively “MMI”), NASCAR Technical Institute, ~~(“NASCAR Tech”),~~ and MIAT College of Technology (“MIAT”). ~~Additionally, we offer~~UTI also offers manufacturer specific advanced training ~~(“MSAT”)~~ programs, ~~including~~which include student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers. Lastly, UTI provides dealer technician training or instructor staffing services to manufacturers. UTI works closely with over 35 original equipment manufacturers and industry brand partners to understand their needs for qualified service professionals.

Concorde Career Colleges (“Concorde”): Concorde operates across 17 campuses in eight states, offering degree, non-degree, and continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields. Concorde believes in preparing students for their health care careers with practical, hands-on experiences including opportunities to learn while providing care to real patients. Prior to graduation, students will complete a number of hours in a clinical setting or externship, depending upon their program of study. We acquired Concorde on December 1, 2022. See Note 4 on “Acquisitions” for additional information.

“Corporate” includes corporate related expenses that are not allocated to the UTI or Concorde reportable segments. These costs were previously allocated across our former “Postsecondary Education” reportable segment and “Other” category based upon compensation expense. Additional information about our reportable segments is presented in Note 19.

All of our campuses are ~~nationally~~ accredited and are eligible for federal student financial assistance funds under the Higher Education Act of 1965, as amended (“HEA”), commonly referred to as Title IV Programs, which are administered by the U.S. Department of Education (“ED”). Our programs are also eligible for financial aid from federal sources other than Title IV Programs, such as the programs administered by the U.S. Department of Veterans Affairs (“VA”) and under the Workforce ~~Investment~~Innovation and Opportunity Act.

To ensure our programs provide students with the necessary hard and soft skills needed upon graduation, we have relationships with over 35 original equipment manufacturers (“OEMs”) and industry brand partners across the country to understand their needs for qualified service professionals. Through our industry relationships, we are able to continuously refine and expand our programs and curricula. We believe that our industry-focused educational model and national presence ~~have~~has enabled us to develop valuable industry relationships, which provide us with significant competitive advantages and supports our market leadership, along with enabling us to provide highly specialized education to our students, resulting in enhanced employment opportunities and the potential for higher wages for our graduates.

Our industry relationships also extend to thousands of local employers, after-market retailers, fleet service providers and enthusiast organizations. Other target groups for relationship-building, such as parts and tools suppliers, provide us with a variety of strategic and financial benefits that include equipment sponsorship, new product support, licensing and branding opportunities and financial sponsorship for our campuses and students.

On December 1, 2022, we completed the acquisition contemplated by the previously announced Stock Purchase Agreement (the “Purchase Agreement”), dated May 3, 2022, by and among the Company, Concorde Career Colleges, Inc., a Delaware corporation (“Concorde”); Liberty Partners Holdings 28, L.L.C., a Delaware limited liability company, and Liberty

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Investment IIC, LLC, a Delaware limited liability company (each a “Seller,” and collectively, the “Sellers”); and Liberty Partners L.P., a Delaware limited partnership, in its capacity as a representative of the Sellers. Under the terms of the Purchase Agreement, we acquired of all of the issued and outstanding shares of capital stock of Concorde for a base purchase price of $50.0 million, less $1.3 million in net adjustments, for total cash consideration paid of $48.7 million. The final cash consideration paid is subject to closing working capital and other customary adjustments. See the “Liquidity and Capital Resources” section of this MD&A for a discussion on the financing used to fund the acquisition. The risks and uncertainties related to the acquisition are described in Item 1A. “Risk Factors” of our 2022 Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Overview of the Three Months Ended December 31, ~~2021~~2022

Student Metrics


	Three Months Ended December 31, 2022
	UTI	Concorde	Consolidated
Total new student starts	1,974	336	2,310
Average undergraduate full-time active students	13,511	7,737	21,248
End of period undergraduate full-time active students	12,657	7,630	20,287


							Three Months Ended December 31, 2021
		December 31, 2021	December 31, 2020	% Change			UTI	Concorde	Consolidated
Total new student starts	Total new student starts	1,972	1,927	2.3	%	Total new student starts	1,972	—	1,972
Average undergraduate full-time active students	Average undergraduate full-time active students	13,729	11,813	16.2	%	Average undergraduate full-time active students	13,729	—	13,729
End of period undergraduate full-time active students	End of period undergraduate full-time active students	13,129	10,763	22.0	%	End of period undergraduate full-time active students	13,129	—	13,129


	% Change
	UTI		Concorde		Consolidated
Total new student starts	0.1	%	100.0	%	17.1	%
Average undergraduate full-time active students	(1.6)	%	100.0	%	54.8	%
End of period undergraduate full-time active students	(3.6)	%	100.0	%	54.5	%

The ~~increase~~decrease in the UTI average undergraduate full-time active students and end of period undergraduate full-time active students was due to ~~strong~~lower growth in student ~~demand and increased effectiveness of our marketing and admissions efforts throughout fiscal 2021 and the ongoing but diminishing impacts of the COVID-19 pandemic on~~starts in the prior fiscal year. ~~The~~On a consolidated basis, the acquisition of ~~MIAT in November 2021 contributed to the increase in~~Concorde increases our new student starts, average and end of period undergraduate full-time active students.

Our ability to start new students can be influenced by various factors including: ongoing impacts of the COVID-19 pandemic and related variants, unemployment rates; competition; adverse media coverage, legislative hearings, regulatory actions and investigations by attorneys general and various agencies related to allegations of wrongdoing on the part of other companies within the education and training services industry, which ~~have~~can cast the aggregate “for-profit” education industry in a negative light; and the state of the general macro-economic environment and its impact on price sensitivity and the ability and willingness of students and their families to incur ~~debt.~~debt to fund their education.

Operations

Revenues for the three months ended December 31, ~~2021~~2022 were ~~$105.1~~$120.0 million, an increase of ~~$29.0~~$14.9 million, or ~~38.0%~~14.2%, from the comparable period in the prior year. The ~~increase in revenue was due to growth in students, increased revenue per student due to the impact~~acquisition of ~~the COVID-19 pandemic in the prior year, and~~Concorde contributed $14.4 million of revenue. Excluding the acquisition, ~~of MIAT. Additionally, as a result of catch-up labs not yet completed, as of December 31, 2020, we had deferred revenue of $2.0 million.~~our revenues increased slightly.

We had income from operations of $4.4 million during the three months ended December 31, 2022, compared to income from operations of $13.6 million during the three months ended December 31, ~~2021, compared to $0.8 million during the three months ended December 31, 2020.~~2021. The ~~increase~~decrease in our income from operations ~~during the three months ended December 31, 2021~~ was primarily driven by increased costs associated with our ~~increase~~new campus and program rollouts in ~~revenue.~~the prior fiscal year, and both ongoing and one-time costs associated with our growth and diversification strategy. Additionally, productivity improvements and proactive cost actions have been a key part of our operating model for the past several years, and we continue to identify and execute on efficiency opportunities throughout our cost structure, while improving and investing in the overall student experience.

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Business Strategy

Our core business strategies are aligned with our mission to serve students, partners and communities by providing quality education and training for in-demand careers. Additionally, as we evolve our business model, we are focused on growth and diversification which is achieved through acquisitions, opening new campus locations, the expansion of new program offerings, and new funding and business operating models.

During the three months ended December 31, ~~2021,~~2022, we executed the following as part of our growth and diversification strategy:

•As previously noted, we closed on the acquisition of Concorde on December 1, 2022. Concorde is a leading provider of industry-aligned healthcare education programs in fields such as nursing, dental hygiene and medical diagnostics. Concorde currently operates 17 campuses across eight states with approximately 7,600 students, and offers its programs in ground, hybrid and online formats. The acquisition aligns with our growth and diversification strategy, which is focused on offering a broader array of high-quality, in-demand workforce education solutions which both prepare students for a variety of careers in fast-growing fields and help close the country's skills gap by leveraging key industry partnerships.

•~~Completed~~UTI expanded the ~~acquisition of MIAT College of Technology (“MIAT”) from HCP & Company on November 1, 2021. MIAT served approximately 1,000 students as of December 31, 2021 through its campuses~~Volvo TEKNIKER Apprentice Program, a 12-week, manufacturer-paid apprentice program to Volvo's training facility in Canton, Michigan and Houston, Texas. The company offers vocational and technical certificates as well as associates degrees in fields with robust and growing demand for skilled technical workers, including aviation maintenance, energy technology, wind power, robotics and automation, non-destructive testing, HVACR, and welding. The acquisition will enable us to further expand ourRidgeville, South Carolina. Previously this program ~~offerings into growing industry sectors and rapidly expanding fields likely to be bolstered by technological innovation and~~was only offered at UTI's Avondale, Arizona campus. These are the ~~country’s focus on sustainable energy.~~

•Launched electric vehicle (“EV”) technician training coursework to meet increasing demand for clean cars and trucks. This enhanced training is the initial step in our overall EV strategy to prepare future technicians for surging electric vehicle salesonly two locations in the ~~coming decades.~~

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•Formed a new strategic alliance with Napa Auto Parts (“NAPA”). NAPA will supply essential parts for hands-on labs, including brake kits, rotors, bulbs, bearing kits, wheel weights and more. The initial stage ofcountry offering the ~~partnership will impact UTI, MMI and NTI-branded campuses and may be expanded to MIAT-branded campuses in the future.~~

program.

In addition, we continue to pursue other opportunities that align with our growth and diversification strategy.

Regulatory Environment

See Note 20 of the notes to our condensed consolidated financial statements herein for a discussion of our regulatory environment.

Results of Operations: Three Months Ended December 31, ~~2021~~2022 Compared to Three Months Ended December 31, ~~2020~~2021

The following table sets forth selected statements of operations data as a percentage of revenues for each of the periods indicated.


		Three Months Ended December 31,					Three Months Ended December 31,
		2021		2020			2022		2021
Revenues	Revenues	100.0	%	100.0	%	Revenues	100.0	%	100.0	%
Operating expenses:	Operating expenses:					Operating expenses:
Educational services and facilities	Educational services and facilities	45.6	%	51.7	%	Educational services and facilities	51.2	%	45.6	%
Selling, general and administrative	Selling, general and administrative	41.5	%	47.3	%	Selling, general and administrative	45.1	%	41.5	%
Total operating expenses	Total operating expenses	87.1	%	99.0	%	Total operating expenses	96.3	%	87.1	%
Income (loss) from operations		12.9	%	1.0	%
Income from operations						Income from operations	3.7	%	12.9	%
Interest income	Interest income	—	%	0.1	%	Interest income	0.7	%	—	%
Interest expense	Interest expense	(0.2)	%	—	%	Interest expense	(1.2)	%	(0.2)	%
Other income, net	Other income, net	0.1	%	0.4	%	Other income, net	0.3	%	0.1	%
Total other (expense) income, net		(0.1)	%	0.5	%
Income (loss) before income taxes		12.8	%	1.5	%
Total other expense, net						Total other expense, net	(0.2)	%	(0.1)	%
Income before income taxes						Income before income taxes	3.5	%	12.8	%
Income tax (expense) benefit	Income tax (expense) benefit	1.3	%	—	%	Income tax (expense) benefit	(1.3)	%	1.3	%
Net income (loss)		14.1	%	1.4	%
Net income						Net income	2.2	%	14.1	%
Preferred stock dividends	Preferred stock dividends	1.3	%	1.7	%	Preferred stock dividends	(1.1)	%	(1.3)	%
Income (loss) available for distribution		12.8	%	(0.3)	%
Income available for distribution						Income available for distribution	1.1	%	12.8	%
Income allocated to participating securities						Income allocated to participating securities	(0.4)	%	(5.0)	%
Net income available to common shareholders						Net income available to common shareholders	0.7	%	7.8	%

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Revenues

~~Revenues~~The following table presents revenue by segment (in thousands):


	Three Months Ended December 31, 2022
	UTI			Concorde			Consolidated
Revenue	$	105,573		$	14,431		$	120,004

	Three Months Ended December 31, 2021
	UTI			Concorde			Consolidated
Revenue	$	105,075		$	—		$	105,075

% Change	0.5		%	100.0		%	14.2		%

Revenues for the three months ended December 31, ~~2021~~2022 were ~~$105.1~~$120.0 million, an increase of ~~$29.0~~$14.9 million, or ~~38.0%~~14.2%, as compared to revenues of ~~$76.1~~$105.1 million for the three months ended December 31, ~~2020. During~~2021.

UTI

Revenues for UTI for the three months ended December 31, ~~2021, we~~2022 were $105.6 million. UTI had a ~~2.3% increase~~1.6% decrease in ~~our new student starts and a 16.2% increase in our~~ average undergraduate full-time active students as we saw strong front-end demand across all channels during fiscal 2021, and the prior year period was impacted by the ongoing but diminishing effects of the global pandemic. The increase in revenue is primarily due to lower student starts in fiscal 2022. Revenue increased slightly despite the slight decline in the average undergraduate full-time students as it was offset by an increase in the average revenue per student as compared to the prior year which was impacted by the timing of completion of student make-up lab work and slower student progression due to the ongoing but diminishing impacts of COVID-19. The acquisition of MIAT also contributed to our student and revenue growth. As a result of the catch-up labs not yet completed, as of December 31, 2020, we had deferred revenue ofyear. UTI recognized $2.0 ~~million. We recognized $2.5~~ million and ~~$1.8~~$2.5 million on an accrual basis related to revenues and interest under our proprietary loan program for the three months ended December 31, 2022, and 2021, respectively.

Concorde

Revenues for Concorde, which represent one month as Concorde was acquired on December 1, 2022, were $14.4 million. Note that due to phasing and ~~2020, respectively.~~seasonality of clinical programs, December is one of Concorde’s lowest revenue months during the fiscal year.

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Educational services and facilities expenses

Educational services and facilities expenses were $61.4 million for the three months ended December 31, 2022, which represents an increase of $13.5 million as compared to $47.9 million for the three months ended December 31, 2021, which ~~represents an increase~~is primarily due to the acquisition of ~~$8.6 million as compared to $39.3 million for the three months ended~~Concorde on December ~~31, 2020.~~

1, 2022.

The following table sets forth the significant components of our educational services and facilities expenses by segment (in thousands):


	Three Months Ended December 31, 2022
	UTI		Concorde		Consolidated
Salaries, employee benefits and tax expense	$	26,852	$	6,559	$	33,411
Bonus expense	656		—		656
Stock-based compensation	81		—		81
Compensation and related costs	27,589		6,559		34,148
Occupancy costs	7,682		1,764		9,446
Depreciation and amortization expense	4,417		420		4,837
Supplies, maintenance and student expense	4,585		911		5,496
Contract services expense	1,065		56		1,121
Other educational services and facilities expense	5,539		821		6,360
Total educational services and facilities expense	$	50,877	$	10,531	$	61,408

Three Months Ended December 31,
2021 2020
Salaries expense $ 20,058 $ 17,836
Employee benefits and tax 4,224 2,972
Bonus expense 539 454
Stock-based compensation 46 26
Compensation and related costs 24,867 21,288
Occupancy costs 8,996 8,268
Depreciation and amortization expense 3,407 3,057
Supplies and maintenance expense 3,441 2,258
Taxes and licensing expense 754 389
Student expense 1,087 1,384
Contract services expense 1,248 696
Other educational services and facilities expense 4,101 1,991
Total educational services and facilities expense $ 47,901 $ 39,331

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	Three Months Ended December 31, 2021
	UTI		Concorde		Consolidated
Salaries, employee benefits and tax expense	$	24,282	$	—	$	24,282
Bonus expense	539		—		539
Stock-based compensation	46		—		46
Compensation and related costs	24,867		—		24,867
Occupancy costs	8,996		—		8,996
Depreciation and amortization expense	3,407		—		3,407
Supplies, maintenance and student expense	4,528		—		4,528
Contract services expense	1,248		—		1,248
Other educational services and facilities expense	4,855		—		4,855
Total educational services and facilities expense	$	47,901	$	—	$	47,901

UTI

Compensation and related costs increased by ~~$3.6~~$2.7 million for the three months ended December 31, ~~2021~~2022 primarily due to ~~lower headcount in~~increased instructor salaries related to the opening of two new campuses and program expansions since the prior year period due to attrition and productivity improvements enacted to offset revenue decreases from COVID-19. The acquisition of MIAT accounted for $1.4 million of the increased compensation and related costs.year.

Occupancy costs decreased by $1.3 million for the three months ended December 31, 2022. The decrease was primarily due to the purchasing of our Lisle, Illinois campus and the consolidation of the MMI and UTI campuses in both Arizona and Florida into single sites. The decrease was partially offset by the opening of the Miramar, Florida campus.

Depreciation expense increased by $1.0 million for the three months ended December 31, 2022 primarily due to purchasing the Lisle Campus and the capital expenditures related to construction and new equipment costs for the new campuses in Austin, Texas and Miramar, Florida and the new welding programs in Mooresville, North Carolina and Exton, Pennsylvania, all of which opened last year.

Other educational services and facilities expense increased by $0.7 million for the three months ended December 31, ~~2021.~~2022. The increase was primarily due to ~~costs associated with~~ the ~~planned new campuses in Austin, Texas and Miramar, Florida, both~~cost of ~~which are expected to open in the second half~~welding gear of ~~2022, as well as~~ $0.3 ~~million related to MIAT’s two campuses for November and December, partially offset by the benefit associated with the purchase of our Avondale, Arizona campus in December 2020.~~

Supplies and maintenance expense increased by $1.2 million primarily due to a $0.4 million increase for the purchase of laptops for our students to aid their education under our blended-learning model. During the prior year, we primarily utilized funds from the CARES Act to purchase the laptops for our students. We also incurred additional expenses for technical supplies of $0.4 million and student textbooks of $0.2 million due to ~~a higher average student population and~~ the ~~acquisition~~expansion of ~~MIAT during the quarter.~~

~~Contract services increased by $0.6 million primarily due to costs incurred related~~our welding programs to our ~~growth~~Mooresville, North Carolina and ~~diversification initiatives.~~

~~Other educational services and facilities expense increased by $2.1 million for the three months ended December 31, 2021, primarily due to~~Exton, Pennsylvania campuses, a ~~$0.6~~$0.3 million increase in expense related to ~~our accrued tool kits,~~training aids, and an increase in the cost of ~~books of $0.2 million and an increase of $0.1 million in the cost of tools. Additionally, the three months ended December 31, 2020 included a credit~~tools of $0.3 ~~million~~million.

Concorde

Educational services and facilities expenses for the reimbursement of allowable costs related to the changes in the delivery of instruction due to the coronavirus. The allowable costs are included in the relevant line items above for the prior year period. See Note 21 of the notes to the condensed consolidated financial statements herein for additional details.Concorde, which represent one month as Concorde was acquired on December 1, 2022, were $10.5 million.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended December 31, ~~2021~~2022 were ~~$43.6~~$54.1 million. This represents an increase of ~~$7.6~~$10.6 million, as compared to ~~$36.0~~$43.6 million for the three months ended December 31, ~~2020.~~2021, which is primarily due to the acquisition of Concorde on December 1, 2022 and both ongoing and one-time costs associated with our growth and diversification strategy.

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The following table sets forth the significant components of our selling, general and administrative expenses by segment (in thousands):


	Three Months Ended December 31, 2022
	UTI		Concorde		Corporate		Consolidated
Salaries, employee benefits and tax expense	$	15,404	$	1,917	$	5,101	$	22,422
Bonus expense	2,887		188		1,134		4,209
Stock-based compensation	171		—		917		1,088
Compensation and related costs	18,462		2,105		7,152		27,719
Advertising and marketing expense	13,349		1,280		—		14,629
Professional and contract services expense	2,000		41		2,175		4,216
Other selling, general and administrative expenses	4,370		1,200		2,014		7,584
Total selling, general and administrative expenses	$	38,181	$	4,626	$	11,341	$	54,148

Three Months Ended December 31,
2021 2020
Salaries expense $ 15,624 $ 13,954
Employee benefits and tax 2,903 2,851
Bonus expense 3,954 3,449
Stock-based compensation 659 522
Compensation and related costs 23,140 20,776
Advertising expense 11,338 9,030
Contract services expense 1,181 1,223
Professional services expense 1,637 946
Depreciation and amortization expense 272 217
Other selling, general and administrative expenses 6,028 3,827
Total selling, general and administrative expenses $ 43,596 $ 36,019


	Three Months Ended December 31, 2021
	UTI		Concorde		Corporate		Consolidated
Salaries, employee benefits and tax expense	$	13,637	$	—	$	4,889	$	18,526
Bonus expense	2,968		—		986		3,954
Stock-based compensation	123		—		537		660
Compensation and related costs	16,728		—		6,412		23,140
Advertising and marketing expense	11,959		—		—		11,959
Professional and contract services expense	736		—		2,082		2,818
Other selling, general and administrative expenses	4,584		—		1,095		5,679
Total selling, general and administrative expenses	$	34,007	$	—	$	9,589	$	43,596

UTI

Compensation and related costs increased by ~~$2.4~~$1.7 million for the three months ended December 31, ~~2021~~2022 primarily due to an increase in ~~salaries~~headcount to support ~~our~~ growth ~~strategy~~and diversification initiatives as compared to the prior year. ~~The acquisition of MIAT represented $0.8 million of the increase.~~

Advertising and marketing expense increased by ~~$2.3~~$1.4 million for the three months ended December 31, ~~2021,~~2022, primarily due to timing of spend along with incremental investment to support ~~our~~ growth objectives. We continue to target cost-efficient marketing with an increased focus on digital media. Advertising and marketing expense as a percentage of revenues ~~decreased~~increased to ~~10.8%~~12.2% for the three months ended December 31, ~~2021~~2022 as compared to ~~11.9%~~11.4% in the prior year. ~~Advertising expense for MIAT accounted for $0.7 million of the increase.~~

Professional and contract services expense increased by ~~$0.7~~$1.3 million primarily due to one-time costs incurred related to ~~our~~ growth and diversification initiatives, ~~including the acquisition of MIAT which closed on November 1, 2021.~~primarily integration costs.

~~Other selling, general~~

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Concorde

Selling, General and ~~administrative~~Administrative expenses for Concorde, which represented one month as Concorde was acquired on December 1, 2022, were $4.6 million.

Corporate

Selling, General and Administrative expenses for Corporate increased by ~~$2.2~~$1.8 million for the three months ended December 31, 2022. This was primarily due to compensation and related costs which increased by $0.7 million due to an increase in headcount to support growth and diversification initiatives as compared to the prior year.

Income taxes

Income tax expense for the three months ended December 31, 2022 was $1.5 million, or 36.5% of pre-tax income, compared to an income tax benefit of $1.3 million, or (10.0)% of pre-tax income, for the three months ended December 31, 2021. The primary factors include increases of $0.3 million for software, $0.3 million for recruiting, $0.2 million for bad debt expense, and $0.2 million for travel. The three months ended December 31, 2020 included a $0.6 million credit for the reimbursement of allowable costs related to the changes in the delivery of instruction due to the coronavirus from the institutional HEERF funds received. The allowable costs are included in the relevant line items above for the prior year period. See Note 21 of the notes to the condensed consolidated financial statements herein for additional details.

~~Income taxes~~

~~Our~~ income tax ~~benefit~~expense for the three months ended December 31, 2021 was $1.3 million, or (10.0)% of pre-tax income, compared to an income tax expense of $26 thousand, or 2.3% of pre-tax loss, for the three months ended December 31, 2020. The effective income tax rate in each period differed from the federal statutory tax rate of 21%2022 is primarily ~~as a result of changes in the valuation allowance~~driven by non-deductible executive compensation, transaction costs and state and local income and franchise taxes. The income tax benefit recorded during the three months ended December 31, 2021 is primarily ~~relates to~~comprised of the valuation allowance impact ofrelated to the MIAT deferred tax liability for indefinite lived intangibles which are available to offset a portion of our indefinite lived deferred tax ~~assets. We recorded a full valuation allowance against the deferred~~assets, offset by current state tax ~~assets as of December 31, 2021 and 2020.~~expense. See Note 15 of the notes to the condensed consolidated financial statements herein for additional ~~details on our valuation allowance.~~details.

Preferred stock dividends

~~On June 24, 2016, we sold~~As of December 31, 2022 and 2021, 675,885 and 700,000 shares of Series A Convertible Preferred Stock ~~for $70.0 million in cash, less $1.2 million in issuance costs.~~were issued and outstanding, respectively. Pursuant to the Certificate of Designations of the Series A Preferred Stock, we recorded a preferred stock cash dividend of $1.3 million for the three months ended December 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

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~~Net income (loss)~~Income available for distribution

~~Net income (loss)~~Income available for distribution refers to ~~the~~ net income ~~or net loss~~ reduced by dividends on our Series A Preferred Stock. As a result of the foregoing, we reported ~~a net~~ income available for distribution ~~for the three months ended December 31, 2021~~ of ~~$13.5~~$1.4 million and ~~net loss available for distribution of $0.2~~$13.5 million for the three months ended December 31, ~~2020.~~2022 and 2021, respectively.

Income allocated to participating securities

Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis. The two-class method is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends. The amount of income allocated to the participating securities for the three months ended December 31, 2022 and 2021 was $0.5 million and $5.3 million, respectively.

Net income available to common shareholders

After allocating the income to the participating securities, we had $0.9 million and $8.2 million of net income available to

common shareholders for the three months ended December 31, 2022 and 2021, respectively.

Non-GAAP Financial Measures

Our earnings before interest income, income taxes, depreciation and amortization (“EBITDA”) for the three months ended December 31, 2022 and 2021 ~~and 2020~~ were ~~$17.4~~$10.0 million and ~~$4.3~~$17.4 million, respectively. We define EBITDA as net income, ~~(loss),~~ before interest (income) expense, income tax expense (benefit) ~~expense,~~, and depreciation and amortization.

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EBITDA is a non-GAAP financial measure which is provided to supplement, but not substitute for, the most directly comparable GAAP measure. We choose to disclose this non-GAAP financial measure because it provides an additional analytical tool to clarify our results from operations and helps to identify underlying trends. Additionally, this measure helps compare our performance on a consistent basis across time periods. Management also utilizes EBITDA as a performance measure internally. To obtain a complete understanding of our performance, this measure should be examined in connection with net income determined in accordance with GAAP. Since the items excluded from this measure should be examined in connection with net income in determining financial performance under GAAP, this measure should not be considered an alternative to net income as a measure of our operating performance or profitability. Exclusion of items in our non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure across companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.

EBITDA reconciles to net income, as follows (in thousands):

Three Months Ended December 31,
2021 2020
Net income $ 14,822 $ 1,083
Interest income (12) (54)
Interest expense 233 2
Income tax (benefit) expense (1,347) 26
Depreciation and amortization(1)
3,679 3,282
EBITDA $ 17,375 $ 4,339


	Three Months Ended December 31,
	2022		2021
Net income	$	2,648	$	14,822
Interest income	(823)		(12)
Interest expense	1,423		233
Income tax expense (benefit)	1,525		(1,347)
Depreciation and amortization(1)	5,248		3,679
EBITDA	$	10,021	$	17,375

Liquidity and Capital Resources

Overview of Liquidity

Based on past performance and current expectations, we believe that our cash flows from operations, cash on hand and investments will satisfy our working capital needs, capital expenditures, commitments and other liquidity requirements associated with our existing operations, as well as announced growth and diversification initiatives ~~through~~over the next 12 ~~months.~~months and beyond. Our cash position is available to fund strategic long-term growth initiatives, including opening additional campuses in new markets and the creation of new programs, such as welding, in existing markets where we continue to optimize utilization of our campus facilities.

Our aggregate cash and cash equivalents were ~~$99.5~~$162.2 million as of December 31, ~~2021, a decrease~~2022, an increase of ~~$34.2~~$95.8 million from September 30, ~~2021.~~ 2022.

Strategic Uses of Cash

On ~~November~~December 1, ~~2021,~~2022, using ~~operating cash on hand,~~funds from our new revolving credit facility, we acquired of all of the issued and outstanding shares of capital stock of ~~MIAT~~Concorde for ~~$26.0 million~~a base purchase price ~~plus $2.4~~of $50.0 million, ~~working capital surplus~~less $1.3 million in net adjustments, for total cash consideration paid of ~~$28.4~~$48.7 million. The final cash consideration paid is subject to closing working capital and other customary adjustments. See Note 4 of the notes to the condensed consolidated financial statements herein for additional details on the acquisition.

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We had $30.8 million of long-term debt outstanding as of December 31, 2021 which consists primarily of a $31.2 million term loan that bears interest at the rate of LIBOR plus 2.0% over the seven year term secured in connection the Avondale, Arizona campus property that was purchased in December 2020. See Note 13 of the notes to the condensed consolidated financial statements herein for additional details on the term loan.

We believe that additional strategic uses of our cash resources may include consideration of additional strategic acquisitions and organic growth initiatives, purchase of real estate assets, subsidizing funding alternatives for our students, and the repurchase of common stock, among others. To the extent that potential acquisitions are large enough to require financing beyond cash from operations, cash and cash equivalents, and short-term investments, or we need capital to fund operations, new campus openings or expansion of programs at existing campuses, we may enter into additional credit facilities, issue debt or issue additional equity.

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Long-term Debt

As of December 31, 2022, we had $163.5 million of long-term debt outstanding, which is comprised of two term loans and a revolving credit facility. Of the $163.5 million outstanding, $29.9 million relates to a term loan that bears interest at the rate of LIBOR plus 2.0% over the seven year term secured in connection with the Avondale, Arizona campus property purchased in December 2020. Approximately $38.0 million relates to a term loan that bears interest at the rate of SOFR plus 2.0% over the seven year term, secured in connection with the Lisle Campus property. The remaining $90.0 million relates to a revolving credit facility secured in connection with the Concorde acquisition. See Note 13 of the notes to the condensed consolidated financial statements herein for additional details on the term loans and the revolving credit facility.

Dividends

We currently do not pay a cash dividend on our common stock. WeFor our outstanding Series A preferred shares, we currently pay preferred stock cash dividends of ~~$2.6~~approximately $2.5 million during March and September of each fiscal ~~year. We accrued~~year, which is subject to adjustment for any preferred stock ~~cash dividends~~conversions that occur during the year.

Principal Sources of ~~$1.3 million as of December 31, 2021.~~Liquidity

Our principal source of liquidity is operating cash flows and existing cash and cash equivalents. A majority of our revenues are derived from Title IV Programs and various veterans’ benefits programs. Federal regulations dictate the timing of disbursements of funds under Title IV Programs. Students must apply for new funding for each academic year consisting of 30-week periods. Loan funds are generally provided in two disbursements for each academic year. The first disbursement for first-time borrowers is usually received 30 days after the start of a student’s academic year, and the second disbursement is typically received at the beginning of the 16th week from the start of the student’s academic year. Under our UTI proprietary loan program, we bear all credit and collection risk and students are not required to begin repayment until six months after the student completes or withdraws from his or her program. Similarly, we bear all credit and collection risk for students paying through UTI cash payment plans and those under a retail installment contract at Concorde. These factors, together with the timing of when our students begin their programs, affect the timing and seasonality of our operating cash flow.

Operating Activities

Our net cash provided by operating activities was $2.8 million for the three months ended December 31, 2022, compared to $2.5 million for the three months ended December 31, ~~2021, compared to $7.8 million for the three months ended December 31, 2020.~~2021.

Net income, after adjustments for non-cash items, provided cash of $14.4 million. The non-cash items included $4.1 million for amortization of right-of-use assets for operating leases, $5.2 million for depreciation and amortization expense and $1.2 million for stock-based compensation expense and a change in deferred tax assets of $1.1 million.

Changes in operating assets and liabilities used cash of $11.6 million primarily due to the following:

•The decrease in accounts payable and accrued expenses used cash of $15.9 million primarily related to the timing of payments to vendors and for payroll and bonus accruals.

•Changes in our operating lease liability, primarily as a result of rent payments, used cash of $5.0 million.

•The increase in deferred revenue provided cash of $4.6 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at December 31, 2022 as compared to September 30, 2022.

•The decrease in receivables provided cash of $4.7 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

Net income, after adjustments for non-cash items, for the three months ended December 31, 2021 provided cash of $22.2 million. The non-cash items included $4.5 million for amortization of right-of-use assets for operating leases, $3.7 million for depreciation and amortization expense and $0.7 million for stock-based compensation expense.

Changes in operating assets and liabilities used cash of $19.8 million primarily due to the following:

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•The decrease in accounts payable and accrued expenses used cash of $8.9 million primarily related to the timing of payments to vendors and for payroll and bonus accruals.

•The decrease in deferred revenue used cash of $8.7 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at December 31, 2021 as compared to September 30, 2021.

•The change in other liabilities used cash of $3.0 million primarily due to the reclassification of the CARES payroll tax deferral to current liabilities.

•Changes in our operating lease liability as a result of rent payments used cash of $2.6 million.

•The decrease in receivables provided cash of $4.9 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.

Investing Activities

~~Net income, after adjustments for non-cash items, for~~During the three months ended December 31, ~~2020~~2022, cash provided ~~cash of $9.6~~by investing activities was $5.2 million. The non-cash items included $4.4 million for amortization of right-of-use assets for operating leases, $3.3 million for depreciation and amortization expense and $0.5 million for stock-based compensation expense.

~~Changes in operating assets and liabilities used~~ cash ~~of $1.8 million primarily~~inflow was due to proceeds from maturities of held-to-maturity securities of $29.0 million, offset by cash outflow related to the ~~following:~~

•~~The decrease in accounts payable~~purchase of Concorde for $17.0 million, net of cash consideration received. Additionally, we purchased property and ~~accrued expenses used cash~~equipment of ~~$8.4~~$6.8 million which primarily related to capital expenditures for our new campuses in Austin, Texas and Miramar, Florida, and the ~~timing~~rollout of ~~payments to vendors and for payroll, bonus, and incentive compensation accruals.~~

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•~~Changes in~~new programs at our ~~operating lease liability as a result of rent payments used cash of $5.3 million.~~

•~~The decrease in receivables provided cash of $8.1 million and was primarily due to the timing of Title IV disbursements and~~ other ~~cash receipts on behalf of our students.~~

•~~The decrease in the income tax receivable provided cash of $2.8 million and was primarily attributable to the CARES Act, which allowed us to carryback net operating losses from 2019 and 2018.~~

•The increase in deferred revenue provided cash of $1.9 million and was primarily attributable to the timing of student starts, the number of students in school and where they were at period end in relation to completion of their program at December 31, 2020 as compared to September 30, 2020.

~~Investing Activities~~campuses.

During the three months ended December 31, 2021, cash used in investing activities was $36.9 million. The cash outflow was primarily related to the purchase of MIAT for $26.1 million, net of cash consideration received. Additionally, we purchased property and equipment of $10.8 million which primarily related to capital expenditures for the Orlando, Florida and MMI, Phoenix consolidations, new campuses in Austin, Texas and Miramar, Florida, and other campus investments.

Financing Activities

During the three months ended December 31, ~~2020,~~2022, cash ~~used in investing~~provided by financing activities was ~~$37.2 million. The cash outflow~~$88.7 million which was primarily related to ~~the purchase~~proceeds from our new revolving credit facility of ~~property and equipment~~$90.0 million, offset by $0.5 million in payments of ~~$47.3 million, of which $45.2 million~~payroll taxes on stock-based compensation through shares withheld, debt issuance costs related to the ~~purchase~~credit facility of $0.5 million and the ~~building at our Avondale, Arizona campus location, partially offset by proceeds from maturities~~repayment of ~~held-to maturity securities~~long-term debt of ~~$10.0~~$0.3 million.

~~Financing Activities~~

During the three months ended December 31, 2021, cash ~~used in~~provided by financing activities was $0.5 million which was primarily the payment of payroll taxes on stock-based compensation through shares withheld and payments on our term loan.

During the three months ended December 31, 2020, cash used in financing activities was $0.2 million and related primarily to the payment of payroll taxes on stock-based compensation through shares withheld.

Seasonality and Trends

Our operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in total student population and costs associated with opening or expanding our campuses. Our student population varies as a result of new student enrollments, graduations and student attrition. Historically, ~~we have~~UTI has had lower student populations in ~~our~~the third quarter than in the remainder of ~~our~~the year because fewer students are enrolled during the summer months. Additionally, ~~we have~~UTI has had higher student populations in ~~our~~the fourth quarter than in the remainder of the year because more students enroll during this period. ~~Our~~Concorde typically has higher student populations in January and August through October for its core programs and in February for its clinical programs. UTI and Concorde core program expenses ~~however,~~ do not vary significantly with changes in student population and ~~revenues,~~revenues. Concorde clinical program expenses fluctuate based on the academic calendar and ~~as a result, such expenses do not fluctuate significantly on a quarterly basis.~~season due to the timing of clinical starts. We expect quarterly fluctuations in operating results to continue as a result of seasonal enrollment patterns. However, such patterns may change as a result of new school openings, new program introductions, increased enrollments of adult students or acquisitions.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP and management’s discussion and analysis of our financial condition and operating results require management to make judgments, assumptions and estimates that affect the amounts reported. There were no significant changes in our critical accounting policies and estimates in the three months ended December 31, ~~2021~~2022 from those previously disclosed in Part II, Item 7 of our 202 12 Annual Report on Form 10-K ~~other than noted below.~~.

~~Goodwill and Intangible Assets~~

~~We test goodwill and indefinite-lived intangible assets for impairment annually as of August 1, or more frequently if events and circumstances warrant. Under ASC 350,~~ ~~Intangibles - Goodwill and Other~~, to evaluate the impairment of goodwill, we first assess qualitative factors, such as deterioration in the operating performance of the acquired business, adverse market conditions, adverse changes in the applicable laws or regulations and a variety of other circumstances, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. To evaluate the impairment of the indefinite-lived intangible assets, we assess the fair value of the assets to determine whether they were greater or less than the carrying values. If we conclude that it is more likely than not that the fair value is less than the carrying amount based on our qualitative assessment, or that a qualitative assessment should not be performed, we proceed with the quantitative

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impairment tests to compare the estimated fair value of the reporting unit to the carrying value of its net assets. Determining the fair value of indefinite-lived intangible assets is judgmental in nature and involves the use of significant estimates and assumptions. We believe the most critical assumptions and estimates in determining the estimated fair value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate. The assumptions used in determining our expected future cash flows consider various factors such as historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives. There were no indicators of impairment for our goodwill or indefinite-lived intangible assets as of December 31, 2021.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 3 of the notes to the condensed consolidated financial statements herein.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal exposure to market risk relates to changes in interest rates.

We invest our cash and cash equivalents in money market funds. As of December 31, ~~2021,~~2022, we held ~~$99.5~~$162.2 million in cash and cash equivalents. During the three months ended December 31, ~~2021,~~2022, we earned interest income of ~~$12~~$823 thousand. As we have a ~~restrictive~~conservative investment policy, our financial exposure to fluctuations in interest rates related to our interest income is expected to remain low. We do not believe that the value or liquidity of our cash and cash equivalents and investments have been significantly impacted by current market events.

On May 12, 2021, we entered into a credit agreement to finance the Avondale property through a $31.2 million term loan that bears interest at the rate of LIBOR plus 2.0% with a maturity of seven years. As of December 31, ~~2021,~~2022, the fair value of our long-term debt was ~~$30.7~~$29.9 million and bears interest on the outstanding principal amount at a rate equal to the LIBOR plus 2.0%, which was ~~2.10%~~6.12% as of December 31, ~~2021.~~ 2022.

On April 14, 2022, we entered into a credit agreement to finance the Lisle property through a $38.0 million term loan that bears interest at the rate of SOFR plus 2.0% with a maturity of seven years. As of December 31, 2022, the fair value of our long-term debt was $38.0 million and bears interest on the outstanding principal amount at a rate equal to the SOFR plus 2.0%, which was 6.12% as of December 31, 2022.

We believe the carrying value of the debt approximates fair value as the interest rate is a floating rate equal to the LIBOR or SOFR plus 2.0%, which is representative of market rates for similar instruments. It is anticipated that the fair market value of our debt will continue to be immaterially affected by fluctuations in interest rates and we do not believe that the value of our debt has been significantly impacted by current market events. The variable rate of interest on our long-term debt can expose us to interest rate volatility due to changes in ~~LIBOR.~~LIBOR and SOFR. To mitigate this exposure, ~~on May 12, 2021,~~ we entered into an interest rate swap ~~agreement~~agreements that effectively ~~fixes~~fix the interest ~~rate~~rates on 50% of the principal ~~amount~~amounts of the term ~~loan~~loans at 3.5% and 4.69% for the entire loan ~~term.~~term on our Avondale debt and Lisle debt, respectively.

On November 18, 2022, we entered into a $100.0 million senior secured revolving credit facility that bears variable interest in a maturity of three years. On November 28, 2022, we drew $90.0 million from the credit facility in support of the closing of the Concorde acquisition at an interest rate of 6.54%.

During the three months ended December 31, ~~2021,~~2022, we recorded interest expense of ~~$0.2~~$1.4 million on our outstanding debt. Assuming all terms of our outstanding long-term debt remained the same, a hypothetical ~~1.0%~~10.0% change (up or down) in the ~~one-month~~ LIBOR or SOFR rates would result in a ~~$0.1~~$12.4 million change to our annual interest expense for the portion of the long-term debt not hedged by the interest rate swap agreement.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), pursuant to Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, ~~2021~~2022 were effective in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

~~There~~On December 1, 2022, we completed the acquisition of Concorde Career Colleges, Inc. We intend to exclude the acquired business from our assessment and report on internal control over financial reporting for the year ended September 30, 2023, as permitted under SEC rules. Other than the foregoing, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) or 15d-15(d) that occurred during the three months ended December 31, ~~2021.~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks that internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the ordinary conduct of our business, we are periodically subject to lawsuits, demands in arbitrations, investigations, regulatory proceedings or other claims, including, but not limited to, claims involving current and former students, routine employment matters, business disputes and regulatory demands. When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we would accrue a liability for the loss. When a loss is not both probable and estimable, we do not accrue a liability. Where a loss is not probable but is reasonably possible, including if a loss in excess of an accrued liability is reasonably possible, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim. Because we cannot predict with certainty the ultimate resolution of the legal proceedings (including lawsuits, investigations, regulatory proceedings or claims) asserted against us, it is not currently possible to provide such an estimate. The ultimate outcome of pending legal proceedings to which we are a party may have a material adverse effect on our business, cash flows, results of operations or financial condition.

Item 1A. RISK FACTORS

~~None.~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, including the information contained in Part I, Item 3, you should carefully consider the factors discussed in Part I, Item IA of our 202 2 Annual Report on Form 10-K, which could materially affect our business, financial condition or operating results. The risks described in this Quarterly Report on Form 10-Q and in our 202 2 Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

~~None.~~Not applicable.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

The following exhibits required by Item 601 of Regulation S-K are filed or furnished with this report, as applicable:


Exhibit Number						Description
2.1						Stock Purchase Agreement, dated May 3, 2022, by and among Universal Technical Institute, Inc., Concorde Career Colleges, Inc., Liberty Partners Holdings 28, L.L.C., Liberty Investment IIC, LLC, and Liberty Partners L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 3, 2022).
10.1						Credit Agreement, dated as of November 18, 2022, by and among Universal Technical Institute, Inc., Fifth Third Bank, National Association, and the other loan parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 21, 2022).
10.2						Guaranty and Security Agreement, dated as of November 18, 2022, by and among Universal Technical Institute, Inc., Fifth Third Bank, National Association, and the other loan parties thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 21, 2022).
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+						Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+						Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document.
101.SCH*						XBRL Taxonomy Extension Schema Document.
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________________

* Filed herewith.

+ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNIVERSAL TECHNICAL INSTITUTE, INC.

Date:

February ~~4, 2022~~9, 2023

By:

/s/ Jerome A. Grant

Name:

Jerome A. Grant

Title:

Chief Executive Officer (Principal Executive Officer)

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	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Remaining Useful Life (Years)
Accreditations and regulatory approvals - MIAT	$	12,800	$	—	$	12,800	Indefinite
Trademarks and trade names - MIAT	3,000		—		3,000		Indefinite
Curriculum - MIAT	400		(13)		387		4.83
Non-compete agreement and trade name	442		(327)		115		3.33
Total	$	16,642	$	(340)	$	16,302	4.47


	December 31, 2021				September 30, 2021
	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
Investment in JV	$	4,665	28.0	%	$	4,627	28.0	%


Maturity	Term Loan		Finance Leases		Total
Remainder of 2022	$	605	$	55	$	660
2023	832		24		856
2024	861		—		861
2025	892		—		892
2026	924		—		924
Thereafter	26,573		—		26,573
Subtotal	30,687		79		30,766
Debt issuance costs presented with debt	(246)		—		(246)
Total	$	30,441	$	79	$	30,520