Q2 2024 Universal Technical Institute Inc Earnings Call

Participants

Matt Kempton; Vice President, Corporate Finance; Universal Technical Institute Inc

Jerome Grant; Chief Executive Officer; Universal Technical Institute Inc

Troy Anderson; Chief Financial Officer, Executive Vice President; Universal Technical Institute Inc

Alex Paris; Analyst; Barrington Research Associates

Eric Martinuzzi; Analyst; Lake Street Capital Markets

Raj Sharma; Analyst; B. Riley Securities

Steve Frankel; Analyst; Colliers

Mike Grondahl; Analyst; Northland Securities

Presentation

Operator

Good day, and welcome to the Universal Technical Institute second-quarter 2024 earnings conference call. (Operator Instructions)
Please note this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance. Please go ahead.

Matt Kempton

Hello, and welcome to Universal Technical Institute's fiscal second-quarter 2024 earnings call. Joining me today are our CEO, Jerome Grant; and CFO, Troy Anderson. Following our prepared remarks, we will open the call for your questions.
A replay of this call, its transcript, and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC.
During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which, by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include but are not limited to those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments except as required by law.
Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2023. The information presented today also includes non-GAAP financial measures. This should be viewed in addition to and not as a substitute for the company's reported results prepared in accordance with US GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For more information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement, and investor presentation.
With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute, for his prepared remarks. Jerome?

Jerome Grant

Thank you, Matt. Good afternoon, everyone. We carried our operational momentum into the second quarter of 2024 across our key metrics we performed consistent with and in most cases better than our expectations. We had 54 hundred and 80 new student starts in the quarter, which is an 18.5% increase and our second quarter revenue grew 12.4% to $184.2 million. Both of these were above our expectations for profitability. Net income was $7.8 million. Diluted earnings per share was $0.14 and adjusted EBITDA increased 17.8% to $22.6 million. All right in line with our expectations. Our performance through the first half of fiscal 24 continues to demonstrate the strength of our execution on our growth, diversification and optimization strategy. I'd like to thank our divisional and corporate teams for their continued leadership as well as our faculty staff partners and students for their hard work and commitment. As another point of pride, we were prominently featured in a recent Wall Street Journal article how Gen Z is becoming the tool belt generation. The article highlights one of our welding graduates. As a case study for young workers increased interest in trade professions or what we refer to as skilled collar jobs. This trend has received more visibility of late, including a recent study funded by the Gates Foundation that found that students are both increasingly skeptical about the ROI of a traditional four year college education and are becoming more aware of their alternatives to college as traditional higher education enrollments decline and as our older generation of skilled trades people retire, we believe we are optimally positioned to address the rising demand for technical training among the new generation of workers our advantage also extends to the health care fields we serve, which has experienced even greater job demand momentum according to the U.S. Bureau of Labor Statistics, job growth in health care support occupations is projected to outpace all other occupational groups growing at an estimated 15.4% between 2022 and 2032. So as we welcome and train the next generation of students in both divisions, facilitating superior graduation rates and employment outcomes remains core to our growth strategy.
I'd now like to review our recent performance and highlights by division, starting with our Healthcare division, Kevin crane and his Concord division have continued to outperform our growth expectations with student start growth of approximately 17% and revenue growth of 8%. Concord newest program rollouts came in ahead of schedule as the necessary regulatory approvals for the two planned dental hygiene programs were obtained in February, and the programs officially started in April. Combined, these programs had approximately 50 students in their first cohort. Concord also continues to make progress with the expansion of its San Diego dental hygiene program, which remains on track to launch later this year. As Troy will discuss later in the call.
Start performance also benefited from our new phlebotomy and sterile processing technician programs. Market demand remains impressive for concrete growing core and clinical program offerings for the division. More broadly, Kevin and his team have continued to identify and execute on optimization and efficiency opportunities as well as evaluate other growth avenues such as expanded online offerings and additional program expansions. The team at Concord is also focused on deepening and expanding their partnership network. These relationships not only benefit graduates, employment opportunities but also enhance the accessibility and affordability of coverage programs. One great partner example is marquee companies of fifth generation family owned Senior Living healthcare company based in Portland, Oregon, for the last three years mark, he has partnered with Concord to meet the growing demand for workers, marquee subsidizes tuition for its employees who want to upskill to become vocational or practical nurses with tuition subsidies ranging from 25% to 100%. Based on the student's commitment to stay with the company. We appreciate Marty's generous support of our students and look forward to making additional partnership progress.
Our UTI. division also had a strong quarter with year-over-year student start and revenue growth of approximately 20% and 15%, respectively from a program standpoint, Tracy, Lorenz and her team are making great progress on the second phase of the division's program expansion, two of the four heating ventilation, air-conditioning and refrigeration program expansions which we announced last fall are now enrolling students at the Aventail and Long Beach campuses. These classes are expected to begin in June and July respectively. As for UTI.'s other two HVAC. program expansions. The Bloomfield campus is now enrolling students with the first cohort expected to start in September. While the Sacramento campus is on track to start its first cohort of students early next year, pending regulatory approval. The other 14 new programs, which were launched primarily in late fiscal 2023, have continued to grow nicely with over 550 combined new student starts between Q4 last year and Q2 this year. Market demand for these new programs continues to build and we remain confident in having at least 1,000 new student starts in these programs this fiscal year. As we've also discussed on previous calls, the most recent program launches are just the first step towards expanding the MIAT. source aviation, skilled trades and energy programs across the UTI. division footprint, the unification process of UTI.'s divisions to Houston operations into a single campus remains on track to complete later this calendar year with the phased transition process now underway. The Houston unification project is a prime example of our strategic focus on optimization, which is designed to drive greater operating efficiencies while enhancing the student experience and outcomes. The UTI. team has also grown the division's extensive partnership base during the second quarter UTI. announced a new partnership with Hawaiian Airlines and continued to expand its employment program partners. The division has also announced a 5-year renewal of alliance with Interstate Batteries a leading automotive replacement battery brand and the exclusive battery provider to all UTI. automotive, diesel and marine technician training programs across our footprint. We appreciate this long running alliance and look forward to building on the division's industry relationship for years to come.
Turning to our expectations for the balance of 2024 and thoughts on fiscal 2025 we are announcing positive adjustments to our starts, revenue and profitability guidance for 2024 for new student stars. Based on our results to date and expectations for the upcoming quarters we now feel confident in increasing our prior range to between 25,526 thousand 500 starts for this fiscal year. We also expect to generate between $720 million and 730 million in revenue and between 102,000,104 million in adjusted EBITDA for the fiscal year. Charlie will provide additional layers of commentary on these adjustments and expected quarterly phasing for the second half of the year with our confidence in our strategy and solid execution in 2024. We've developed our initial projections for fiscal 2025 based upon our currently announced program expansions low to mid single digit baseline student start growth and currently planned optimization initiatives. We're estimating 2025 revenue of nearly $800 million with approximately 10% year over year growth and adjusted EBITDA margin of approximately 15% which represents at least 100 basis points in margin expansion. With our robust and proven multi-divisional model, we are well positioned for continued growth, diversification and optimization.
I'd now like to turn the call over to Troy to review our financial results and our guidance in more depth. Troy?

Troy Anderson

Thank you, Jerome. We continued to deliver positive operational and financial performance through the second quarter meeting or exceeding expectations across our key metrics. As an important reminder, this marks the first quarter with the full year-over-year comparison for Concord. Since we closed the acquisition in December 2022. For new student starts, we saw double digit year-over-year growth from both divisions. During the quarter, we delivered 5,480 total starts, representing 18.5% growth, which was above our expectations. UTI. division delivered 2,840 new student starts and grew 19.6%, same campus, same program growth was a big contributor, and we continue to see the benefits from our new program launches. Concord division delivered 26 hundred and 40 new student starts grew 17.2%. We also saw strong same campus, same program growth with Concord with a modest contribution from the recent new program launches as the start cohorts are smaller and less frequent than those of the UTI. programs, clinical starts grew 24.9%, while core starts grew 12.4%. Both reflect the benefits of increased marketing investments and grant programs.
Additionally, as Jerome mentioned, our core programs start growth includes contributions from the phlebotomy and sterile processing technician programs, which are shorter cash pay programs. We are working to expand across the Concord campus footprint.
As we look ahead to the third and fourth quarters, I'm sure many of you have heard about the Department of Education's fast simplification initiative and recent challenges with the implementation, we are keeping a watchful eye on these developments and doing everything we can to support our students as we jointly navigate through the new process. This is particularly important for our incoming high school students.
Turning to our financial results, revenue on a consolidated basis was $184.2 million, which also exceeded our expectations and reflects an increase of 12.4% year over year.
UTI. division's revenue of $123.3 million, increased 14.7% and Concord revenue of $60.9 million increased 8.2%. Consolidated net income was $7.8 million, which more than doubled versus the prior year quarter. This translated to $0.14 of diluted earnings per share, which now reflects the full benefit of the December 2023 preferred share conversion at the end of the second quarter, we had 53.8 million total shares outstanding. Adjusted EBITDA was $22.6 million, an increase of 17.8% year over year. Overall our profitability performance was in line with our expectations and continues to reflect the improved operating leverage associated with our growth in students and revenue as well as cost efficiencies. As we generate higher yield from our growth investments and optimization efforts. As of the end of the second quarter, our total available liquidity was 145.1 million, which includes $29 million of available capacity from our revolving credit facility. As I noted last quarter, we are now managing the revolver to maintain a modest level of positive working capital at the end of each quarter, which translated to a net paydown of 19 million for the quarter. We continue to pace ahead of last year in terms of operating and adjusted free cash flow generation, which reflects our improved profitability and lower level of growth investments and CapEx spend. Year to date, operating cash flow was $8.3 million and adjusted free cash flow was 3.7 million. Year to date, capital expenditures were $9.8 million. Our CapEx spend has been running lighter than planned during the first half of the year, and we expect it to be higher in the second half. Overall, we believe we have ample liquidity to fund continued organic growth initiatives such as additional program expansions and new campuses. As Jerome mentioned, we are positively adjusting our new student starts, revenue and profitability guidance for fiscal year 2024, reflecting our current visibility and continued confidence in our execution, the updated guidance ranges are as follows. Total new student starts of 25,500 to 26,500, 1,000 start increase to the midpoint, total revenue of 720 million to $730 million, which increases the midpoint by $10 million, net income of 37 to $41 million, an increase of 1 million to the midpoint. Diluted earnings per share of $0.68 to $0.73, an increase of $0.01 at the midpoint and total adjusted EBITDA of 100 to $104 million, which narrows the range and increases the midpoint by $1.5 million. This translates to adjusted EBITDA margin of 14.2% at the midpoint or roughly 350 basis points of margin expansion versus last year. We remain highly confident in our prior adjusted free cash flow guidance of 62 to 66 million, which includes total CapEx spend of approximately $30 million. We will continue to evaluate our guidance throughout the remainder of the year as we gain further insight into our actual and expected performance and make adjustments accordingly.
As far as phasing expectations over the next two quarters for new student starts, we expect low to mid-single digit growth each quarter, slowing from what we've seen the first two quarters as we begin to lap the many initiatives and the UTI. program expansions we implemented last year with a smaller relative impact from both the UTI. and Concord new program expansions launching this year for revenue, we expect low double digit growth each quarter, reflecting the ongoing ramp of our recent program expansions and the student start growth momentum we are seeing at both divisions. As a reminder, on seasonality, we typically see revenue decrease from the second to third quarter and then measurably increase in the fourth quarter as a result of higher start volumes and growth in the student population. This is more pronounced for UTI. than it is for Concord.
Turning to net income, diluted earnings per share and adjusted EBITDA, we continue to expect significant year-over-year growth each quarter with third quarter profitability down relative to the second quarter, similar to revenue in the fourth quarter being the highest profitability quarter for the year. By far since our last earnings call, we spent time evaluating the trajectory of the business as well as potential new growth investments over the next few years. While we don't have anything to announce on the latter point, just yet, we are sharing our initial projections for fiscal year 2025, which drove also touched upon in that regard. We currently estimate revenue of nearly $800 million for the year, representing approximately 10% growth, and we estimate adjusted EBITDA margin of approximately 15% or at least 100 basis points of margin expansion versus fiscal 2024. These projections reflect the momentum we expect to carry out of fiscal 2024 based upon our updated guidance, our currently completed and announced program expansions, ongoing baseline new student start growth of low to mid-single digits and increasing the yield on our growth and optimization investments as we gain further operating leverage and enhance the efficiency of our operational infrastructure. While not considered official guidance, we feel it is important to provide a longer-term view to the investment community. Along with the rationale behind it, we expect to provide formal fiscal 2025 guidance in November, along with our fiscal 2024 results, consistent with our normal cadence. As always, we encourage everyone to review our press release, financial supplement and investor presentation as well as the 10 Q once it is filed and These materials include the most current information on our consolidated and segment actual results, our strategic road map and our guidance. We are excited about our performance for the first half of the year and believe we are entering the second half of fiscal 2024 on very sound footing. I would like to thank our team students partners and investors for their continued engagement and support.
I'll now turn the call back over to Jerome for closing remarks.

Jerome Grant

Thank you, Troy. In the coming quarters, we intend to make additional progress on our three strategic tenets, growth, diversification and optimization. We're actively pursuing organic initiatives in three primary ways.
First, we are continuing to consider expansion of our campus locations into new geographies. We are also continuing to expand the geographic reach of our existing programs as well as exploring adding new in-demand program offerings to our portfolio. And finally, we'll continue to add new partner relationships across our program. From an inorganic perspective, we remain active opportunistically in pursuing additional strategic M&A targets. As we discussed previously, we intend to bolster our health care presence as well as program offerings to complement our current Concord business. Although we have nothing to announce today, we believe our current and future diversification pathways will strengthen our industry leadership especially as market demand continues to grow across our fields. And of course, in the second half of 2024, we'll continue driving the key operational focus areas that you've come to expect. These include ramping the most recent campus and program launches in both divisions to drive enrollment revenue and profitability growth, enhancing the yield of our marketing and admission investments to optimize lead generation and inquiry conversion and optimizing our workforce and facilities utilization to drive greater PROGRAM availability, margin expansion and improved operating leverage. To date, our company's strategic progress has enhanced our capabilities as a leading workforce solutions provider, all while maintaining our focus on facilitating superior outcomes for an expanding range of in-demand fields. We look forward to providing further updates on our exciting trajectory over the coming quarters.
And I'd now like to turn the call over to the operator for Q&A. Operator?

Question and Answer Session

Operator

(Operator Instructions) Alex Paris, Barrington Research.

Alex Paris

Hey, guys. Thanks for taking my questions and nice job on the quarter and on the guidance.

Jerome Grant

Great. Thanks, Alex.

Troy Anderson

Thanks, Alex.

Alex Paris

And so my first question is just so big picture within your operations what's driving demand? We had headwinds, headwinds of COVID headwinds of inflation. Those headwinds have apparently eased off. Would you call it a tailwind at this point?

Jerome Grant

Well, I'd say we're seeing momentum build. I think there's been a great deal of positive press about the ROI. of skilled trades, especially as we enter the summer months. And people are making decisions about it directions post high school. And so we're seeing an environment that feels more favorable to considering alternatives like ours. And that's what we're hearing in the conversations. And clearly that's what we're seeing in the numbers.

Alex Paris

That's great. I'm hearing the same thing now. As I recall on the fourth quarter call, we discussed that you significantly increased your presence in the high school market by adding field reps and you did something similar, although it's a smaller sales force and military, how has that been ramping?

Jerome Grant

It's ramping well. As we said, this is the second year. So we added the resources and in high school last fall of 2020 to my and on. And they really catch their stride as they move into their 2nd year that got their relationships with counselors with the teachers with the students and begin to finish their stride. So we're seeing them do exactly what we needed them to do military is having a very good year and we added six new military recruiters on the bases at that same time in 2022, and they're coming through quite nicely for us.

Troy Anderson

Yes, Alex, this is Troy. You can see in our financial supplement where we have the breakout on the new student start details, both military and high school actually all three of the channels were double digits, some really last two quarters in a row. So I'm just strong performance across the board.

Alex Paris

Yes, it's still strongly double digit high to high-teens, low 20s. I see that.
And then that just orders of magnitude, what is the size of the high school rep group and what is the size of the military rep group.

Jerome Grant

We've got 24 recruiters in the military group that cover both transitioning service people as well as veterans. And then we've got in the low one 51, 52 one 53 on high school representatives.

Alex Paris

Great. And then can I just wanted to follow up a little bit on the corporate partnerships on the UTI. side? You've always had a lot of really high quality corporate partnerships. Sounds like you're adding and renewing those as well. And what are the initiatives over on the Concord side?
As I recall, I don't believe they had developed corporate partnerships than UTI did.

Jerome Grant

UTI is an impressive group volume relationships over 6,000 employer partners. And on the Concord side there, they're B2B partnerships were really around clinical placements in relationships with hospitals and dental centers and things along those lines for clinical placements but they weren't really as far along in terms of B2B relationships for training relationships, up-skilling relationships, scholarship relationships was one of them. We mentioned in the in there. And so we've been adding resources on the concrete side to focus on on some of those things that have made UTI. great for all these years.

Alex Paris

Great. I appreciate the additional color. I'll get back into the queue.

Jerome Grant

Thanks.

Troy Anderson

Great pace pick up.

Operator

Eric Martinuzzi, Lake Street.

Eric Martinuzzi

Yes, the of the thousand students or new students start bump up here will be talked about a little bit better on the new program timing. Just trying to bridge that upward revision to the new student starts is it more around just healthy macro demand? Is it more around new program, accelerated launches? Let's just pick that apart for me.

Jerome Grant

Sure. Yes, of air. Thanks. Destroys the on. Really it's more the the we've said all along and John touched on demand in the first question, but we've said all along that our inquiry flow has been strong and really our focus has been on conversion rates against that inquiry flow. We continue to see very strong lead generation. We focus very heavily on the marketing efforts in the different tools available to us to maximize of inquiry generation and high-quality inquiry generation. We've with Concord, we've invested more in marketing and have seen great response there. So I'd say a good portion of that uplift has been a better performance on the Concord side in response to some of the additional marketing investments there.
And then just overall just better conversion as we've been progressing through the year. And we commented last quarter that we had with the strong Q1 that we were flowing through the revenue lift there and didn't have quite enough data at that point despite the strong stock performance to raise guidance. And now we're halfway through the year and another very strong start quarter.

Troy Anderson

And so now we're at a point where we're comfortable doing that Okay.

Eric Martinuzzi

And then given the inflationary pressures in originally a fleet inflation was a headwind for kind of the new student start. But I'd like to flip it around and just talk about the inflationary pressures in the business you guys are talking about essentially at the midpoint here we'd be looking at. So I guess the.
Yes, it's roughly a 20% to 25% incremental margin from the additional the 75 million of revenue between your current FY24. And you have Slide 25, it doesn't look like you're factoring. I mean it looks like you're factoring in some good margin expansion. And I'm just curious, do you feel like those inflationary pressures in your cost structure are not going to be a headwind?

Troy Anderson

Yes. I mean, we've we've touched on this in some in some prior calls, too, that we and we haven't seen that significant of an impact from inflationary pressures on the instructor workforce side, it tends to be more on the health care. And given the larger adjunct population there and the pressure on wages in the health care space overall, rippling into our workforce. Some we've seen some moderation, frankly, in some of the support organizations. But relative to what we were seeing last year or the year before on finance IT organizations like that as we've been growing some of those organizations along with the company. And so we really and really our commodities and the like of we haven't really seen a ton of pressure there a little bit here and there again, when inflation was really spiking with things like welding supplies. But so generally speaking, I'd say, and given our cost structure so much with the labor and then marketing expense and then facilities. We haven't seen that much pressure on it. We do have investments that we're continuing to make, and we and we've tried to factor that in a bit in the forward guide projection for next year, but really haven't factored in any excess inflationary pressure per se on that.

Eric Martinuzzi

Okay. And then last question is on the Concord expansion of the existing footprint. I think there were some department of ID hurdles, not hurdles, but anniversaries, you needed to celebrate with the sort of post acquisition that you needed to own it for 12 months or so prove that you're a responsible owner and then you could invest in growing the number of students at a given campuses are we at that point yet?

Jerome Grant

All right. Well, let me let me sharpen that a bit is that we are absolutely growing the number of students at add at the Concord campuses. One of the reasons for the momentum we're seeing is that we're seeing some extremely positive response to increase investment in marketing and admissions and the and so conference doing quite well in terms of some of their growth on their campuses, what we aren't able to do due to the growth restrictions in place imposed by the Department of Education post merger which is a standard operating practice in a merger is we're not allowed to open a new campus, and we're not allowed to start new programs that weren't previously approved before the merger.
And so what that really means is you won't see a new Concord campus until late 26 or 27.
And when does growth restrictions on are scheduled to be are scheduled to be lifted. But in the meantime, we're working very diligently on on on filling those Concord classes beyond where they had been filled.
Before you talk about margin expansion and we've said this in the past, you know, the the the fastest way to margin expansion is to fill more seats in a classroom, right? That are that may be empty and so we're working very hard to continue to expand those margins by expanding the representation in each place.

Eric Martinuzzi

Yes. Congrats on the quarter and the bright outlook for this year. And 25. Great years.

Jerome Grant

Thank you.

Operator

Raj Sharma, B. Riley.

Raj Sharma

Hi. Thank you for taking my questions. Again, solid solid results beating raise.
And the second start, could you explain that the cadence of the new starts growth is growing from the high 10s in the first half? Two, I think you indicated mid-single digits in the second half, is that it was that drop happening again, is that some new program ramps that are happening in the first half and not happening in second half.

Troy Anderson

Yes, correct, Raj, it's Troy. The on a few factors. One is we do start to lap the UTI. program expansions that started launching in July of last year. We'll still have some growth there on a year-over-year basis as they launched throughout the quarter. And of course, the first Satya starts aren't usually as robust. We're trying to temper those a little bit just to get work out some of the kinks on. We also have just some seasonality effect of the Concord clinical programs as far as the number of starts available given the programmatic accreditors and the frequency of starts that we can have within a given clinical program. And so we have some fluctuation with that on a year-over-year basis and across the quarters. And then we implemented a number of initiatives. Drum talked earlier about the the reps in both military and high school are hitting their stride. Again, we're now coming to the end of the year, too. So we're getting to a point where they're on. They're still driving increased productivity, but it's less on a relative basis than it was earlier in the year, we had implemented some pretty major changes in our adult and transformation or a transformation in our adult lead flow and enrollment process that really was throughout 2023 So again, as we get into the back half of the year, that's a much more mature process. And so it's just a number of different factors, frankly, that on kind of all rolled together that we are getting a lift in the front half of the year because of those things. And that's still generating significantly more year over year. And that becomes more normalized in the back half of the year.

Raj Sharma

Thank you. That's helpful. And then for the fiscal 25 guidance, I think you're assuming mid single digit start

Troy Anderson

And yes, our core to projection of just clarification on that via some of our baseline start growth, we've always said we believe we can generate low to mid single digit growth rate in starts in any given environment. And so that's always our baseline starting point. We do have a little bit of flow through on the new programs that would be a bit incremental to that we're launching for UTIHVACR. programs here in the latter part of the year and into next year. The dental hygiene programs that we touched upon in our prepared remarks launching and those are, by the way, only one started a year and as we mentioned, about 50 starts per year. So not huge drivers but so we have some of that flow through from the new programs in addition to the baseline growth, but not significant.

Jerome Grant

And then the last last point, the last point is we've, as we've said in the past, is that it really takes about 36 months for new campuses to ramp in Myanmar and often hit that point on throughout 2025. So that's up. Thus the building blocks to what we said would likely be a double digit increase in revenue and 100 basis points at least 200 basis points in margin expansion.

Raj Sharma

Great. That's really helpful. And then just the what is causing the EBITDA margin to expand next year? Is that purely operating leverage?

Troy Anderson

Well, it's operating leverage. We've given we added, we had the growth and diversification strategy. And now you hear us, say, growth, diversification and optimization. We've always had programs to optimize our operating model, but now where we're driving a new level of that with our workforce optimization, more efficiency productivity from a workforce perspective, more space intensive space utilization so that we can expand and programs in the future which also drive some educational delivery optimization. So it's a combination of operating leverage as well as just getting more efficient as we continue to grow and scale and drive more optimization across the footprint, both in the UTI. side as well as on the concrete side. And again, we've always said to with the Concord acquisition, which at the time of acquisition was an 8% margin this year to be about 10%. And we said we would drive that toward mid 10s through growth and through of driving some of the consistent practices that we've previously implemented AUTI. with with centralization and more efficiency in various ways. And so that's also contributing. And towards that, thank you again, our great color and solid results and great execution.

Raj Sharma

Thank you. Again, I'll take my questions offline. Thank you.

Jerome Grant

Thank you, Raj.

Operator

Steve Frankel, Colliers.

Steve Frankel

And good afternoon. You mentioned a couple of cash pay programs at Concord. Could you give us a little more details on that and what kind of opportunities might you have on the UTI. side to create some cash pay programs there as well?

Jerome Grant

Yes, I'll add some this of choice. Steve, thanks for the question. And the ad, the cash pay programs on the Concord side, phlebotomy, sterile processing. They're really a subset of the of the MA program, the medical assistant program, and there's demand for that in the market there. There are two to four month programs, $2,000. Usually employers may participate in that or it's a quick start for somebody to get into the the medical workforce. And so we've seen some demand for that in a number of different markets and continuing to look for more demand. So that's something the Concord team.
And again, back to your question about the growth restrictions, something the Concorde team came up with as a way to generate some growth in lieu of a title for Department of Ed of certified program. It's an accredited program So through our creditors, but it doesn't require Department of Ed because it's not for not requiring Title four funding for it on the ad. And so we'll continue looking at opportunities to expand is within the corporate footprint. On the UGI side, we're looking at different ways to tie something similar. Nothing, nothing imminent by any means, but we've considered some other type of programs, whether they're short welding program, an evening or weekend, a few weekends a for a few months in and they'll get somebody into the workforce again on a quicker basis but we're working through some things like that on that side as well.

Steve Frankel

Okay. And then you've done a great job building this start pipeline. What are you doing to make sure these students get to graduation?

Jerome Grant

Well, our persistence of attrition, persistence. There's a number of different metrics that are used even within our own institutions. But across the the of the industry has been trending very positively. So we're seeing upticks in and retaining students and graduate students, and we're not talking five and 10 percentage points, but 50 basis points makes a difference. That's a few hundred more students a year that are finishing the program and of course, support us from a financial performance perspective. So a lot of focus on outcomes. That's what we've always said, we start and end with outcomes first and foremost and on the between the getting them started, getting them through as quickly as possible. So pass rates were not having that a lot of retailers, things along those lines, keeping them in schools are not allowed on LOAs and the like. So they can get out of the workforce faster. And then and then the employment side and continue our focus all the way through that lifecycle.

Troy Anderson

Yeah, the other point I'll make is our blended learning model, which is at full ramp across the UTI. curriculum has already been in place or was in place at Concord also mandates that the students are actually only in our building for about three hours a day doing their lab work because the data active learning is all is all online. That flexibility is allowing students to be able to keep their jobs while they're in school, do their work a circuit, a synchronously it at other times. And I think one of the things we're hearing is that this sort of a welcome approach that gives flexibility is allowing more students who may have needed to back out because of financial pressures or life happens, types of things staying in the game because they now have on more hours of the day they can use for other things like work. So I think that's helping with our retention rates as well.

Steve Frankel

Okay. And one of the trends you talked a lot about last year was the employers kind of battling each other to get on-campus to recruit and really fighting to get in front of those students by offering better terms, better tuition reimbursement, things like that. Where are we in that cycle today?
Or is that less of a factor? Or are you still able to command these kind of terms from potential employers?

Jerome Grant

Yes, I think demand for our graduates has never been higher. And so, you know, there's there continues to be a significant deficit between the number of open jobs out there and the number of graduates across the industry. And so that demand on really drives the behavior of the employment community. And so we're seeing the packages that are being put in front of our graduates continue to look better and better every year. We've started these same programs on the Concord side, and that's helping get it more organized for access to the graduates. And I think that will help on those packages tick-up as well.

Steve Frankel

Perfect. Thank you so much. I'll jump back in the queue.

Jerome Grant

Thanks.

Troy Anderson

Thanks, Steve.

Operator

Mike Grondahl, Northland Securities.

Mike Grondahl

Hey, guys. Thanks, Tom. First question is just about the 2025 kind of outlook. Is there anything embedded in that for new geographies or new campuses if so just curious roughly how much? And then if you could just remind us kind of the economics, the investment of a new campus kind of how that grows?

Jerome Grant

Yes. Thanks for the question, Mike, destroy the and we tried to be fairly clear and I'm glad you asked the question so we can make sure we get it here in the Q&A as well. It is all existing programs in already in operation as well as programs that we have announced that we're planning to launch. So primarily the four remaining HVAC/R programs now that we have the the dental hygiene programs with Concord already started. There'll be a small amount on the San Diego expansion that we've talked about. But but so really it's the old beyond what we already have. It's the four HVCR. programs and then just the lift we carry out of this year into next year with the start growth that we've seen and in the ramp of those those programs.
As far as I would like to be clear, we've yet to announce a new program launch portfolio for 2025 yet. And so that would be additive.
Yes, and potentially geographies. In addition to that, which segues to the second part of your question on the economics, we did add a slide in our investor presentation. It's in the appendix that shows a campus economics and program economics for both UTI and Concord. We've talked a lot about dental hygiene with Concord and that's been the program are they primarily been expanding. And so we showed an illustrative example there along with the welding or HVAC, our programs. And that's what we've been launching mainly with the UTI. here more recently. So but the campuses of current format and historically the UTI. format was auto diesel welding and maybe a manufacturer program about a 25 million per year run rate revenue generating between 10 and of the 10 to $12 million and direct EBITDA contribution of about a $15 million.
Capital investment and about four, three to four years to ramp from commented on that earlier on in a four year payback or so on the cash investment, the programs, those are dental hygiene is a fairly expensive program to implement relatively speaking because we the model that that we use at Concord is that we actually build the clinical lab in our campus versus some of the other programs where they do the clinicals on the provider's site. So we have dentists on staff. We actually build out the dental office stories, the chairs and everything. So it is a few million dollars of investment requires about 75 hundred square feet. And you could see it's about a four to $4.5 million run rate revenue HVAC/R about a 2.5 million run rate revenue. Dental hygiene is about a 40% margins. A $2 million in HVAC/R is also about a 40% margin or so on and but about $600,000 investment so much, much lower investment, much smaller footprint, 4,000 square feet. And the I feel like you've got a great, but I see it, Troy, thanks for pointing that out.

Mike Grondahl

And then just one follow-up question maybe for Jerry. You've talked about Concorde some online programs online effort. I think you hired someone to head that up. How is that progressing? And how should we think about the growth coming out of that?

Jerome Grant

You're progressing quite well and again, it's not something you just hire someone and flip the switch and suddenly you have 100 online courses, is it that you didn't have before or another direction. And so we're setting the initial stages of looking at what we consider to be the low hanging fruit in terms of marketing, the courses that are already there courses that are that may be underrepresented in the market and we're starting to see some uptick there. And then we're doing a fair amount of the internal work right now, which will bear fruit over the next 36 months. And that redesigning courses. We fashioning them to better work in the online environment. And then also thinking about both our admissions, marketing and support models to better support a scaled on online campus. If you would a.

Mike Grondahl

Thank you, Jerry.

Operator

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

Jerome Grant

Thank you very much, and thank you very much for joining us today. I know it takes a lot of your schedule to spend this time with us, and we are looking forward to reporting to you again in three months. A reminder, Troy and I are available for questions and answers over the next few days. And throughout the quarter, we would like to an era of transparency. We want to make sure that you get everything answered that you can. So have a great afternoon. Thanks.

Operator

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