Buried within Universal Technical Institute's (UTI) latest earnings call lies a fascinating story that seems to have flown under the radar of most analysts: the Concorde division is not just exceeding expectations, it's becoming a powerful growth engine with the potential to redefine the company's future. While UTI has long been synonymous with skilled trades, particularly in the automotive sector, the Concorde acquisition in December 2022 is quietly transforming them into a major player in the booming healthcare education market.

Sure, the headline numbers are impressive. Double-digit new student start growth, exceeding revenue and profitability expectations, and the full conversion of preferred stock into common stock – all fantastic news for investors. But dig a little deeper, and the Concorde division shines with a particularly potent glow.

Concorde's pro forma core student starts grew a staggering 14.4% in Q1 2024, a testament to increased marketing investments and the success of grant programs implemented last year. But the real story lies in the strategic expansion of their program offerings. The recent launch of cardiovascular sonography, diagnostic medical sonography and dental hygiene programs across various campuses points towards a deliberate focus on high-demand, high-margin fields within healthcare.

The addition of these programs is no accident. It's a calculated move to leverage Concorde's existing strengths, particularly in dental education. As Jerome Grant, UTI's CEO, astutely pointed out, Concorde’s dental hygiene programs are experiencing such high demand that they need to be selective in their admissions, even resorting to waiting lists for future cohorts. This is a clear indicator of a program hitting a sweet spot – high market demand coupled with a limited supply of qualified graduates.

The potential impact of this dental hygiene strategy cannot be overstated. Let's look at some numbers. A typical dental hygiene program at Concorde requires an investment of approximately $2 million, generates an annual revenue run rate of $4-5 million, and boasts a hefty 40% margin. With multiple programs already launched or in the pipeline, this single program category alone could contribute a significant portion of Concorde's projected mid-teens margin in the next few years.

"Beyond dental hygiene, Concorde is further bolstering its presence through shorter, cash-paid programs like phlebotomy and sterile processing technician courses. These programs, cleverly designed to bypass Department of Education growth restrictions on Title IV-funded offerings, cater to immediate market needs and provide a quick pathway for individuals to enter the healthcare workforce. The flexibility of these programs, coupled with potential employer participation in tuition coverage, adds yet another layer of attractiveness to Concorde's portfolio."

Furthermore, UTI is actively leveraging its own expertise in industry alignment and B2B relationships to supercharge Concorde’s growth. As Grant highlighted, unlocking the power of partnerships with leading healthcare providers like Heartland Dental, through scholarship programs, tuition reimbursements and deeper training collaborations, presents a significant upside for Concorde. This strategy not only ensures a steady pipeline of well-trained graduates for employers but also enhances the perceived value and accessibility of Concorde's programs.

While M&A remains a key driver for UTI's growth strategy, particularly in the healthcare sector, the company seems to have uncovered a hidden gem in Concorde. The division's strategic program expansion, coupled with focused marketing efforts and the leverage of UTI's established B2B playbook, is creating a potent force in healthcare education. It's a story that deserves a closer look, as Concorde is not merely exceeding expectations, it's quietly building a healthcare empire within Universal Technical Institute.

Student Start Growth by Division

This chart shows the projected new student start growth for UTI and Concorde divisions based on management commentary.

Hypothesis and Numbers:

Concorde's dental hygiene program expansion: Assuming an average of 50 students per program per year, with 3-4 programs in operation by FY 2025, Concorde could potentially enroll 150-200 dental hygiene students annually. Given a 40% margin and $4-5 million revenue per program, this translates to a potential direct EBITDA contribution of $6-8 million from this program category alone.Leveraging UTI's B2B network: UTI boasts over 6,000 employer partners. If Concorde can tap into even a fraction of this network, securing similar scholarship and training agreements, it could significantly enhance student recruitment, retention and employment outcomes, leading to further margin expansion.Online program growth: While numbers aren't currently available for Concorde's online programs, UTI's success with its blended learning model suggests significant potential. A robust online program offering could provide greater flexibility for students, attract a wider geographic audience, and require lower overhead costs, leading to further margin expansion.

"Fun Fact: Did you know that Universal Technical Institute once had a partnership with NASCAR? The NASCAR Technical Institute, located in Mooresville, North Carolina, provided specialized training programs for aspiring automotive technicians seeking careers in the motorsports industry. This unique partnership showcased UTI's commitment to industry alignment and its ability to cater to niche, high-demand fields."