管理層發言
Good day, and welcome to Universal Technical Institute's Third Quarter 2026 Earnings Conference Call. The operator provided instructions. Please note that today's event is being recorded. I will now turn the conference over to Matt Kempton, Vice President, Corporate Finance and Investor Relations. Please go ahead.
Hello, and welcome to Universal Technical Institute's Fiscal Third Quarter 2026 Earnings Call. Joining me today are our CEO, Jerome Grant; and CFO, Bruce Schuman. Following our prepared remarks, we will open the call for your questions. A replay of this call, its transcript and our investor presentation will be archived on the Investor Relations section of our website at investor.uti.edu, along with our earnings release issued earlier today and furnished to the SEC. During this call, we may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our earnings release and SEC filings. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of fiscal 2025. The information presented today also includes non-GAAP financial measures. These should be viewed in addition to and not as a substitute for, the company's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our earnings press release to the most directly comparable GAAP measure. For information regarding definitions of our non-GAAP measures, please see our earnings release, financial supplement and investor presentation. With that, I will turn the call over to Jerome Grant, CEO of Universal Technical Institute for his prepared remarks.
Thank you, Matt. Good afternoon, everyone, and thank you for joining us. The third quarter was another strong quarter for Universal Technical Institute and reinforces our confidence in both the environment for job demand for our students as well as student interest in our program offerings. Despite some shorter-term challenges we will discuss, we remain extremely confident in the strength of our long-term North Star strategy. Driven by the strength of our new campuses and programs as well as stronger-than-expected interest in our skilled trade programs, we exceeded expectations for new student starts this quarter, generating 11% year-over-year growth, with a particularly strong contribution from the UTI division, which increased 23% year-over-year. Average full-time active students increased 6%, reflecting continued enrollment growth across both UTI and Concorde divisions. Revenue grew 7% year-over-year to $219 million. Baseline adjusted EBITDA for the third quarter was $27 million. Our SEC reported adjusted EBITDA for the quarter was $18 million due to $9 million in strategic growth investments. These results continue to validate the strategy we've been executing over the past several years and reinforce that the underlying demand environment remains exceptionally healthy. Across the industries we serve, employers continue to face significant shortages of skilled workers. Whether we're speaking with automotive dealers, manufacturers, health care systems, electrical contractors or industrial employers, the message is consistent. Demand for qualified skilled graduates continues to far exceed the available supply. That sustained supply and demand imbalance has created a durable and attractive backdrop for our business. We are seeing particularly strong momentum across skilled trades, where infrastructure investment, domestic manufacturing, energy projects and data center construction continue to drive demand for electricians, HVAC technicians, welders, industrial maintenance professionals and other skilled workers. Nearly every week, you will read articles in major print and digital publications such as the Wall Street Journal, New York Times, Forbes and Bloomberg Businessweek about both the increasing demand for and accelerating interest in the trades. These trends further reinforce that the investments we've made to expand our skilled trades offerings were the right strategic decision. The demand for skilled health care workers also remains quite strong, with providers continuing to face staffing shortages across many of the disciplines we serve. We're seeing particularly strong momentum in our radiology technician programs where enrollment and demand have ramped rapidly. Now at the same time, employer demand for transportation technicians remains exceptionally robust. For example, there are more than twice as many open positions on our campus job boards than the number of automotive or diesel graduates we produce. And the Bureau of Labor Statistics is projecting tens of thousands of job openings in this space. Several years ago, we made the decision to expand beyond transportation because we believe that the long-term workforce education opportunity was much broader. Today, we have the programs, campuses and employer relationships in place to meet the evolving student demand. As students increasingly gravitate towards our skilled trades offering, our newer campuses, capacity expansions of skilled trades offerings and recently launched programs continue to outperform both our plan and market expectations. These results further validate the diversification strategy we've been executing throughout North Star. And because we moved aggressively and invested ahead of where the student demand is moving, we are well positioned to capture those opportunities while continuing to support the needs of our employer partners in all industries we serve. While we've had strong year-to-date results and the overall demand environment remains exceptionally healthy, we have unfortunately seen some near-term softness in our UTI division's high school channel relative to our original expectations. Specifically, fourth quarter UTI high school starts, which are primarily weighted towards auto and diesel programs, are tracking below our initial outlook. This year's UTI division lead flow is up over 15%. Candidly, we simply did not get to all the prospective students who expressed interest. But we view this as a near-term opportunity to improve execution, especially within this channel. We are proactively taking steps to strengthen our engagement with prospective students and improve conversion through the enrollment process. To address this, this summer, we are increasing our admission staffing dedicated to the high school channel by approximately 20%. We've largely completed this initiative, putting us on strong footing heading into fiscal 2027. These staffing additions will improve our conversion and better serve the needs of our employer partners. As previously noted, we also experienced stronger-than-expected student interest in our skilled trades offerings. As a result, we saw more enrollment growth than originally anticipated in these programs, which are shorter in duration, delivering marginally less revenue and profit than some of our other offerings like automotive and diesel. We are continuously refining our pricing strategies and strengthening the value proposition across our portfolio to ensure our programs remain aligned with employer needs, evolving student demand and long-term market opportunities. Collectively, these actions position us to more optimally balance enrollment opportunities across the portfolio, improve execution and enhance profitability over time. Although these efforts won't materially change the financial outcome for fiscal 2026, they reinforce our confidence in the opportunities ahead and strengthen our outlook as we enter fiscal 2027. With that backdrop, let me provide some additional context on our full year outlook. Entering 2026, and as we communicated with you throughout the year, we expected a strong fourth quarter contribution from the UTI high school channel. But as I mentioned, those new student starts are coming in softer than anticipated. As a result, and to a smaller degree due to the faster-than-expected increase in student interest in our skilled trades programs over transportation offerings, our fiscal 2026 expectations are being impacted. And let me make this clear. This is only about our near-term financial outlook. While we are updating our fiscal 2026 financial guidance, we are really adjusting expectations for Q4 2026. We now anticipate generating consolidated revenue between $893 million and $900 million, reflecting approximately 7% year-over-year growth. Baseline adjusted EBITDA is now expected to exceed $135 million and reported adjusted EBITDA to be between $100 million and $103 million due to approximately $35 million of growth investments. We're also tightening the range of our new student starts, which are now expected to be between 31,900 and 32,300. I want to emphasize that these fiscal 2026 adjustments in no way whatsoever alter our confidence in the result of the financial targets we've outlined for Phase 2 of our North Star strategy. We remain confident in both our medium- and long-term projections, which means we are still firmly on track to exceed $1.2 billion in revenue and approach $220 million in adjusted EBITDA in 2029. Bruce will walk through our updated guidance in more detail, but we remain confident in North Star financial targets and the significant long-term opportunity in front of us. The objective of the second phase of our North Star strategy was to build a larger, more diversified workforce education platform with a durable growth engine. This quarter is another proof point that that strategy is working. Our new campuses continue to outpace expectations. For example, the first start at our newly launched UTI Atlanta campus in July performed exceptionally well, tracking 30% ahead of expectations. Additionally, the strength of UTI San Antonio, which opened in the spring, has not slowed. To date, new student starts are tracking roughly 40% ahead of the launch model. The early strong performance of both UTI San Antonio and UTI Atlanta gives us confidence these locations have the potential to ramp to scale faster and perhaps above their projected mature run rates of approximately 800 and more than 1,500 students annually, respectively. Looking ahead, we continue to make excellent progress on our fiscal 2027 campus pipeline. Construction and planning activities are advancing as expected, and we recently announced the campus presidents for our new UTI campus in Salt Lake City and our new Concorde campuses in both Houston and the Phoenix metropolitan areas. These new locations represent another significant opportunity to expand reach into attractive and underserved markets. Our comprehensive UTI campus in Salt Lake City, like Atlanta, is designed to support approximately 1,500 students while each of the new Concorde campuses to open in Houston, Atlanta and Glendale, Arizona are expected to serve roughly 600 students each. With all three of our new fiscal 2026 campuses now open and four campuses getting ready to launch in fiscal 2027, we remain firmly on track with our North Star operational targets. To reiterate, we plan to open a minimum of two and up to five new campuses annually, while replicating 12 to 20 new programs annually across the legacy UTI and Concorde campuses each fiscal year. With respect to program replications, this year, we're on track to launch more than 20 new programs across UTI and Concorde, making fiscal 2026 one of the most active years for program replications in our history. At the UTI division, we've continued to build on the strong demand for our skilled trades offerings while strengthening our position in aviation with 12 new programs on existing UTI campuses across HVACR, our electrical suite and aviation maintenance in 2026. Most recently, we completed the nationwide rollout of our electric vehicle and hybrid curriculum and added HVACR to the UTI Lisle campus. On the Concorde side, we set out to launch 10 program replications this year. And as of today, we've actually successfully launched 12 programs across the health care campuses. These programs include dental assistant, diagnostic medical sonography, pharmacy technician, radiology technician and surgical technician. Over the last several years, we have successfully executed the first two pillars of the North Star strategy: growth and diversification. We fundamentally transformed Universal Technical Institute from a primarily transportation-focused education company into a diversified workforce education platform, serving transportation, the skilled trades, health care and the dental markets. A major catalyst in that transformation was our acquisition of Concorde Career Colleges, which unlocked an entirely new market as we made our entrance into health care and broadened our addressable market. From the beginning, we took a deliberate approach to integration, preserving the strength and brands of both organizations while creating infrastructure needed to support a larger, more diversified company. That approach has worked well and has enabled us to expand our campus footprint, launch dozens of new programs, increase student capacity and establish a stronger enterprise. As we continue to scale, we've reached an important inflection point, where we believe we can better leverage the capabilities we've built across the organization. As I mentioned last quarter, we're increasingly operating as one enterprise with two highly respected brands serving distinct markets. The North Star strategy, as we've repeatedly shared with you, has three components: growth, diversification and optimization. To date, the third leg of the North Star has been focused on optimizing how we operate behind the scenes by unifying supporting capabilities and simplifying operations. In the culmination of a year-long strategic initiative, as of the end of July, we are now operating all of our programs within both of our brands under one enterprise operating model. This is an important planned step in the evolution of our company. By unifying the capabilities we've developed across both UTI and Concorde brands, we can simplify how we operate, improve student acquisition and better align our resources behind the highest return opportunities across our businesses. Many of these opportunities ahead are enterprise-wide. Whether it's adapting to change in the digital marketing landscape, leveraging the power of artificial intelligence to enhance student acquisition, deepening employer partnerships or supporting future campus expansion, we believe a more unified approach will allow us to move faster and execute more effectively. What does not change in this unification is the strength of our customer-facing brands. UTI and Concorde have tremendous brand equity in their respective markets, and we will continue to preserve what makes each institution unique while leveraging the capabilities we have cultivated. One area where this is particularly relevant is student acquisition. Students are increasingly using AI tools earlier in their research process, which is changing where inquiries originate and how prospective students engage with our brands. Our acquisition strategy has never depended on a single source of lead. We have built a diversified model that spans paid search, social, organic discovery, admissions outreach, referrals, nurture campaigns and other digital and offline channels. That diversification has allowed us to adapt as search behaviors evolve. We're already seeing the resilience of our results. At Concorde, total marketing leads increased 22% year-over-year, while UTI total inquiries increased 18%, demonstrating continued healthy demand across the portfolio even as students increasingly discover us through different channels. We are also continuing to strengthen our position by creating more authoritative content, optimizing our media investments, expanding third-party validation through employer relationships and earned media and enhancing how we measure performance as AI-driven discovery continues to evolve. We believe these efforts, combined with our strong brand and employer partnerships, position us well to efficiently continue attracting prospective students regardless of how they choose to begin their search. Another strong area of opportunity is expanding our B2B partnerships. While each employer has unique needs, employers across the industries we serve are facing common challenges. They need more qualified talent and they need solutions that help them recruit, train and retain talent more effectively. We believe our platform positions us to play even a larger role in how we can help employers address these workforce challenges. We continue to pursue opportunities to create customized workforce solutions that expand the talent pipeline for new employer partners while deepening our relationships with our existing partners. For example, we're working with several of our current transportation and skilled trade partners that need to hire hundreds of additional workers annually. A number of these partners are facing rising costs due to limited supply of qualified talent and are evaluating having UTI expand their bespoke training curriculum across additional campuses while supporting recruitment and student services. We're currently in conversation with a major electric vehicle manufacturer regarding this topic. Another potential partner, a leading multinational company focused on electrification and industrial automation, also has limited internal training capacity due to the number of facilities available to support its month-long onboarding process. This company is exploring a new broader partnership with UTI to support recruitment, training and onboarding, while leveraging our campuses to create additional capacity. We're also evaluating similar opportunities with major airlines and defense contractors that are facing increasing pressure to attract and retain the talent necessary to fulfill contract obligations. And finally, we continue to work with Heartland to address the significant demand for dental hygienists. We're currently discussing three additional co-branded Concorde campuses that would build on the success of the Fort Myers location with Concorde recruiting, training and placing students into Heartland locations nationwide. While each of these opportunities is unique, they all reinforce the same point. Employers increasingly view Universal Technical Institute as a trusted workforce partner capable of helping them solve critical talent challenges. We look forward to sharing more specific details on these opportunities as they continue to develop. As we look ahead, our confidence in the business continues to strengthen as our North Star strategy moves forward. As demonstrated by the performance of our new campuses and programs, we have built a durable and repeatable growth platform, supported by strong demand, disciplined execution, a healthy balance sheet and meaningful long-term tailwinds across workforce education. Moving forward, we will continue to optimize our existing campuses and program portfolio to further improve campus-level performance, enhance conversion and retention and drive same-store growth, leverage our proven campus launch model to expand into attractive new markets while adding high-demand programs and increasing capacity in areas where demand is strongest, and deepen and diversify our strategic partnerships with employers and industry leaders. Now before I wrap up, I'd like to highlight the recognition our organization continues to receive. Earlier this year, we were added to the S&P SmallCap 600 Index, an important milestone that reflects the significant progress we've made scaling and diversifying the company. Additionally, this fall, three of our UTI campuses will once again be recognized as ACCSC Schools of Excellence, underscoring our continued commitment to educational quality, student outcomes and operational excellence. These accomplishments reinforce the strength of our platform, the dedication of our people, the significant progress we've made and most notably, the immense opportunity that remains ahead. I want to thank our students, instructors, campus teams and employees for their hard work and commitment. Their passion for steering students and supporting our employer partners is what makes these results possible. We're proud of our performance this quarter and remain focused on executing on our strategy and creating long-term value for our students, employer partners and shareholders. With that, I'll turn the call over to Bruce, our CFO, to review our third quarter financials and provide you with additional details on our guidance.
Thank you, Jerome. As Jerome discussed, our third quarter results reflect a business that continues to execute well operationally, while we also invest to support the long-term opportunity outlined in our North Star Phase 2 strategy. In the third quarter, total average full-time active students grew 5.8% year-over-year to 25,131 while total new student starts increased 10.9% to 6,342. This growth was driven by continued strength across our newly launched programs and campuses with the UTI division contributing significantly to the increase. Concorde starts were softer driven by fewer clinical starts in the quarter relative to the comparable year. As we've mentioned in the past, start instances can vary based on academic calendars and the timing of program cohorts, and this impact was known and included in our Q3 outlook. The Concorde division grew average full-time active students 8.5% year-over-year for the third quarter, reflecting continued strength in our dental programs. The UTI division increased average full-time active students 4% year-over-year, driven by continued momentum across new campuses and program expansions as well as strong demand for skilled trades offerings. Third quarter revenue on a consolidated basis increased 7.2% to $218.9 million. Concorde contributed $80.9 million, an increase of 11.1% over the prior year quarter, while the UTI division contributed $138 million, an increase of 5% over the prior year quarter. Turning to profitability. Consolidated net income for the third quarter was $2.3 million or $0.04 per diluted share, which was consistent with our expectations outlined last quarter. Baseline adjusted EBITDA for the third quarter was $27.2 million, including $9 million in growth investments; our SEC reported adjusted EBITDA for the quarter was $18.2 million. At the end of the quarter, we had 55 million shares outstanding. Total available liquidity at the end of the quarter was $181 million, including short-term investments and remaining capacity on our revolving credit facility. Year-to-date capital expenditures were $85.4 million or approximately 85% of our originally targeted spend for the year. In an effort to capitalize on the momentum we're seeing in the business and to ensure on-time launches of our fiscal year 2027 initiatives, we've accelerated some of our CapEx spend and now expect to execute on approximately $110 million of capital expenditures this year. Now turning to our full year outlook. As Jerome discussed, the underlying fundamentals of the business remain healthy. Employer demand continues to exceed available graduate supply, student interest remains strong and our newer campuses and recently launched programs continue to perform at or above our expectations. We also believe it's important to balance that confidence with appropriate expectations for the remainder of the current year based on what we're now seeing. Due to the challenge in our high school starts in Q4 and the more muted impact of our program mix, we now expect consolidated revenue to range from $893 million to $900 million for fiscal 2026 or approximately 7% year-over-year growth at the midpoint. Net income is now anticipated to be between $32 million and $36 million, with diluted earnings per share of $0.57 to $0.64. Baseline adjusted EBITDA is now expected to exceed $135 million and reported adjusted EBITDA to be between $100 million and $103 million due to approximately $35 million of growth investments. We are also tightening the range for total new student starts, which are now expected to be between 31,900 and 32,300. Let me provide some additional context around what's driving the revised outlook. First, and most importantly, as Jerome emphasized, this is not an underlying demand issue. In fact, inquiries are up solidly in both divisions. We exceeded our expectations for new student starts during the quarter, and we continue to expect to finish the year squarely in the range of our original start expectations. The primary driver, as Jerome outlined, is lower-than-anticipated fourth quarter new student starts specific to our UTI division's high school channel, primarily in the auto diesel program. To a lesser extent, we're seeing some impact of UTI's portfolio mix due to the incredibly strong starts performance in the skilled trades, which are shorter and drive less revenue compared to other offerings. As we've shared with you since first releasing our fiscal 2026 guidance last November, based on our normal seasonality as well as the timing of our growth investments this year, we expected Q4 to have an outsized impact on the year. Because our new student starts in the fourth quarter are not coming in as strong as we'd initially expected, revenue and profitability are impacted and we've, therefore, aligned our outlook to reflect a still strong and very profitable but more measured Q4. Further, we continue to maintain confidence in the long-term earnings power of the business and in our trajectory toward our fiscal 2029 targets. Second, fiscal 2026 represents the largest investment year-to-date in our North Star Phase 2. We've intentionally accelerated investments in campus expansions and new programs. The early results we're seeing across these initiatives only reinforce our conviction that expanding access to the programs we offer is the best use of capital for our students, employer partners and investors. Nothing in our updated fiscal 2026 outlook changes our confidence in the long-term financial framework we've established for North Star Phase 2 nor in the underlying building blocks to get there. We continue to maintain confidence in delivering more than $1.2 billion in revenue by fiscal 2029 and adjusted EBITDA approaching $220 million that year. As we move into fiscal 2027, we continue to expect revenue growth higher than fiscal 2026 and are targeting modest EBITDA growth with more meaningful EBITDA expansion in fiscal 2028 and 2029. Supporting new campus and program launches, we continue to plan for $100 million or more of annual capital expenditures. Importantly, looking ahead, we remain confident in our long-term outlook outlined in Phase 2 of our North Star strategy. With the results we're seeing, we are emboldened that the investments we are making today are strengthening the foundation for sustained growth and long-term value creation. We also remain focused on executing with discipline, managing our investments thoughtfully and positioning the company to continue to deliver revenue growth, margin expansion and shareholder value. In addition to this earnings call transcript, we encourage everyone to review our press release, financial supplement, investor presentation and upcoming 10-Q filing. These materials include the latest updates on our consolidated and segment results, strategic initiatives and guidance. As always, thank you to our students, team, partners and investors for your ongoing support. I'd now like to turn the call over to the operator for Q&A.
分析師問答
The operator provided instructions. And today's first question comes from Jasper Bibb with Truist.
You mentioned that in the fourth quarter, the high school leads were up 15% year-over-year on UTI, but it sounds like the starts are going to be flat, maybe down in the fiscal fourth quarter for the high school channel. Do you think this was a capacity problem on your end where some leads may have been dropped, or a conversion problem? And how does that inform some of the changes it sounds like you're making?
It's a great question. It's not a capacity issue overall. We do have some capacity constraints associated with the skilled trades programs which are growing at a significantly faster pace than we originally planned, but we're working quickly to increase capacity for those courses. Frankly, it was an execution issue in terms of the number of representatives we had in the field on a persistent basis. We were not able to get to all of the students that were inquiring. That's what's making it fall short. As we said on the call, we've already taken steps in the last month or two to remediate that. We're now loaded with our reps, and we've actually added 20% to the field this year so that it is not replicated again in 2027.
As you look back to last year, I think the high school channel was a little weaker than expected in auto diesel in fiscal '25, too. Are you seeing anything different in student behavior that's made the productivity of the high school channel or the enrollment cycle weaker or less predictable than it has been historically over the past two years?
The weakness we outlined was more about the volume of representatives we had in the field to be able to process the leads that we had. The change we are seeing in behavior is that traditionally the high school students have been primarily focused on auto diesel. Many are 16 or 17 and want to work on cars. We believe that because of increased publicity about opportunities in welding, electronics, HVAC and other trades, younger people are seeing those as opportunities. They're attracted to careers in data centers or industrial automation and similar fields. They also see that these programs can be completed faster. That mix shift toward skilled trades over auto diesel is something we did not forecast at the pace it occurred. Demand for auto diesel remains high and is projected to grow, but more students are choosing the skilled trades now than before.
Last one for me. You said fiscal '29 targets won't be impacted by this, but you build there off '27 and '28. To confirm expectations for '27, would it be fair to say total enrollment or revenue might need to recalibrate for a lower starting point on enrollment going into the year? And on the comment about modest EBITDA dollar growth for '27, is that off the new $100 million to $103 million baseline?
Jasper, we feel very confident about 2027. Yes, there will be a little carry-in impact from the high school miss directly. But there are many offsets with the strong demand we're seeing on the skilled trade side. We've been building capacity in the skilled trades for several quarters now. You'll see better capacity utilization flow through in 2027. We're going to lean further into capacity in 2027 generally in the skilled trades. So no, we don't expect to come off our guidance, especially on EBITDA for 2027. We feel very good about how our forward-looking year in 2027 is shaping up.
The next question is from Lucas John Horton with Northland Securities.
I wanted to touch back on the softer high school enrollment starts. Were you implying this related to increasing usage of AI search causing top-of-the-funnel disruptions, or are those separate issues?
No, not at all. Most of how the high school channel works is not dependent on AI search. Our high school representatives do presentations in front of students and follow up on inquiries from QR codes or inquiry cards manually. Throughout the year we were running at a deficit in the number of reps necessary to get to the number of starts we were expecting. It was an execution issue, not an AI issue. Also, about 70% of the deficit is the rep issue; roughly 30% is the mix shift toward skilled trades we did not anticipate moving this quickly. Regarding AI more broadly, students are using AI tools earlier in their research process, but our acquisition strategy is diversified across channels. Our Concorde leads increased 22% year-over-year and UTI inquiries increased 18%, showing resilience. We've not seen material negative effects from AI so far because our marketing team has pivoted into other channels.
Understood. On the unified UTI and Concorde enterprise operating model, are there expected cost synergies or efficiency gains you want to call out and a timeframe for when they might materialize?
Yes. We began unification in July after deliberate planning. When we acquired Concorde, we intentionally did not integrate certain operating and customer acquisition functions initially, because we believed we could improve Concorde's performance independently. Now that we've reached more standardized operating models for program expansions and campus launches, the two units have more similarities. Over time there will be synergies as we remove duplications. More importantly, the unification will allow us to move faster and more efficiently in customer acquisition, invest in shared AI technologies, CRMs, student information systems and communications systems. We will see simplification effects and cost efficiencies over time, and we'll provide more detail on synergies as they are realized.
The next question is from Steven Frankel with Rosenblatt.
To revisit the high school issue, can you parse how much of the shortfall is the staffing issue versus the mix shift to skilled trades? Also, are any of these nonconverted students gettable over time via email campaigns or other outbound efforts?
Steven, the adjusted EBITDA numbers give some perspective. Our original guide had baseline adjusted EBITDA north of $155 million; we're now seeing baseline EBITDA around $135 million. Roughly 70% of that $20 million delta is directly related to the auto diesel high school starts miss for the reasons Jerome outlined. About 30% is the mix piece from skilled trades. The mix shift is intentional as part of our strategy over the next three years; it happened faster than anticipated, and we're addressing it.
On the second part, yes, in the staffing increases we've implemented over the last month to six weeks, part of our remediation plan is to go back to those leads that did not convert and see if we can enroll them in the first quarter of next fiscal year. The basket of nonconverting leads is larger this year, and we have turned those leads over to the increased staff. We expect them to begin to convert in the first quarter.
Understood. One more funnel-related question: with AI search, many talk about rising costs. What is happening with your cost per lead?
In general, cost per lead has been relatively stable overall. Marketing and advertising spend as a percent of revenue is down slightly sequentially versus last quarter and up modestly versus prior year as we focus on new campus and program launches. We have not seen a very material impact to cost per lead at this point.
The next question is from Eric Martinuzzi with Lake Street.
Jerome, you said reps in the field number were at 160. Is that an increase from earlier in the year? Can you clarify current rep headcount?
Throughout the year we were around 140-ish and were running at a deficit. We believed the team could catch up but they did not. We've added to that since then. Today we're a little over 170 in the field.
As you ramp field reps, is there a training timeline? Are new reps productive quickly or does it take time?
A brand-new rep is not as productive as a two- to three-year rep. Seasoned reps have more relationships with counselors and schools and hit their stride after time. We build that ramp into our plan, and you'll see more of the benefit next year as rep experience and headcount increase. We'll share more detail when we set guidance for next year.
Regarding Atlanta, you opened it in July and said it tracked 30% ahead. Did you see the same mix shift toward skilled trades there?
Not really. For a new campus, the timeline to recruit high school students after approvals isn't long enough to count on many high school starts in July. We did increase skilled trades capacity from the original model because we anticipated strong interest in skilled trades initially, especially from adult populations in early cohorts. The 30% upside did include strong skilled trades performance, and that additional capacity helped capture the demand.
Bruce, can you recap FY 2027 outlook color? You said revenue growth should be higher in '27 than '26 and modest EBITDA growth. Is that modest growth versus the new $100 million to $103 million reported adjusted EBITDA baseline?
Eric, we have not provided formal guidance for 2027 yet, but generally, revenue growth should be higher in 2027 versus 2026. We expect modest EBITDA growth in 2027 and more meaningful EBITDA expansion in 2028 and 2029. We feel comfortable with the plan as it stands and will provide formal guidance when appropriate.
The next question is from Eric Wold with Texas Capital.
On the high school headwind and the mix shift to skilled trades versus auto diesel, what is a typical average revenue delta between those two program types? Also, can you adjust pricing if demand shifts toward one over the other?
Eric, the average revenue per student for UTI is similar across our skilled trades programs. The primary difference is program length. Some skilled trades programs are around nine months versus 51 weeks to a full year for auto diesel. From a margin perspective, there is a small differential between skilled trades and auto diesel. We do not disclose detailed margins by program, but we feel comfortable with the profitability profile overall. The capacity expansions we've made this year will drive better utilization and margin improvement in 2027, and we are evaluating pricing optimization for skilled trades as well.
To add, two actionable items to improve margins in skilled trades are: increasing capacity, which improves margin at the campus level, and exercising pricing power where appropriate. When demand is strong and cohorts are filling, we have the ability to reevaluate price points. These actions will help drive margin expansion.
The next question is from Griffin Boss with B. Riley Securities.
On the high school side, you said demand for skilled trades is trending much higher than anticipated, but demand for auto diesel is also robust. So this is not simply students moving away from auto diesel; demand for both is strong?
Yes. Demand for both remains robust. The change is in the mix. Previously, the vast majority of high school students chose auto diesel, but now a significantly larger portion are choosing welding, electrical, HVAC and other skilled trades. We did not anticipate how quickly that shift would occur. In addition, we had fewer representatives consistently in the field than needed to engage all the prospective students, which added to the shortfall. That was an execution issue rather than a strategy error.
On the execution point, were prospects per rep higher than historical levels, or was it simply that you had fewer reps than intended?
It was fewer reps than intended. Lead counts are robust across digital and non-digital channels, but we needed more bodies in the field more persistently to have the conversations required to convert those leads, and we did not have enough for part of the year.
One more: what percentage of your student body is military-affiliated, veterans or active duty?
About 15% of UTI students are military-affiliated. Concorde has a much smaller military population. As we unify operations, we see an opportunity to expand military-related channels for health care programs, which was not a focus historically at Concorde before acquisition. That represents incremental opportunity going forward.
This concludes our question-and-answer session. I will now turn the conference back over to Jerome Grant for closing remarks.
Thank you. I'd like to also thank everyone who attended today. As always, Bruce, Matt and I are available for follow-up questions. We encourage everyone, if you have an opportunity, to visit one of our campuses. If you're interested in doing that, please let us know, and we'd be happy to host you. We look forward to speaking with our investors and analysts when we report our fiscal fourth quarter and full year results for 2026 in November. Thanks again, and have a great evening.
Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines. Thank you for your participation.