The perception of skilled trades — mechanics, heating, ventilation, industrial maintenance and welding — has changed dramatically in recent years. As the traditional college experience faces perception and cost issues, learning a high-demand skill that can provide sustainable career opportunities has become increasingly attractive to young professionals.
Much like accounting’s labor issues, the demand for labor in many of the skilled trades and healthcare sectors continues to increase alongside this diminishing value of the traditional higher education model. For Troy Anderson, CFO of the Universal Technical Institute, this crossroads of increasing demand for trades has resulted in “a bit of a moment” for his industry, as he and his leadership call it.
Troy Anderson
CFO, Universal Technical Institute, Inc.
First CFO Position: 2012
Notable Previous Employers:
- Xerox
- Nextel/Sprint Nextel
- MCI Communications
- Bell Atlantic (now Verizon)
- Coopers & Lybrand (now PricewaterhouseCoopers)
This interview has been edited for brevity and clarity.
ADAM ZAKI: It’s clear the accounting industry talent pipeline needs some change. Based on your experience as a trained accountant and CFO, what can be learned from the skilled trades’ approach to work that can help remedy some of accounting’s issues?
TROY ANDERSON: It’s an interesting question. First, I think it’s important to highlight there are also significant shortages in the trades that we focus on, particularly skilled labor in transportation, energy and healthcare. Across both of our divisions that encompass these fields, we’re seeing incredibly large gaps between demand and the supply of technicians working in those fields and students coming in to work within them.
Frankly, our issues are just like the ones in accounting. I’m not sure if we’ve found the solution to talent problems, or if there is one out there yet. I know there is some talk about the 150-hour requirements, and I’ve read things in articles that you’ve previously written, and what I can gather is we must continue to demonstrate the benefits of these careers. Whether it’s a skilled trade or finance, by continuing to focus on offering employee flexibility when possible.
I strongly believe it’s incumbent upon employers and leadership to continue looking at ways to motivate people to enter their respective fields and create an environment where people want to be there and be successful.
You mentioned the 150-hour rule. What are your thoughts on scaling this back while maintaining the same standards? Have any of the trades you offer programs around gone through a similar process?
ANDERSON: Yes. In our nursing program and some areas of our healthcare programs, we have seen similar discussions take place regarding addressing talent shortages by lowering standards. However, the accrediting bodies — the nursing boards for example — resist this, and they still restrict the amount of programs available and the number of seats in the program because they are concerned about the quality of care and the quality of education the workers are receiving while they’re heading for those careers.
As for myself, I am a product of the pre-150-hour era. I spent six years in public accounting, and both of my sons have accounting degrees. One pursued his CPA and the other did not, although the one who didn’t still met his 150-hour requirement. Both are doing quite well, and after watching them go through the process I can imagine there will be people who are trailing into the end of their 150-hour requirements right now that might not feel so good about change to the requirement, so I think there needs to be a structured transition period if any changes are made.
There’s a perception that traditional higher education is losing its value. Are you talking about this when discussing plans for the future with your fellow executives, and how do you plan on increasing the value students get from your programs, long term?
ANDERSON: Yes, we are talking about this a lot right now. We like to say we are having a bit of a moment in our industry right now when it comes to our viewpoint. For several years, it was frowned upon for a high school student to consider anything other than a four-year degree. Many young people were told to go get a four-year degree and it will all work out.
And for a while, that created a lot of headwinds for what we do.
“I can imagine there will be people who are trailing into the end of their 150-hour requirements right now that might not feel so good about change to the requirement, so I think there needs to be a structured transition period if any changes are made.”
Troy Anderson
CFO, Universal Technical Institute
But now, I think the tide has turned a bit with student loan forgiveness by providing a lot of visibility to the level of debt traditional degrees can cost people. This, combined with the demand for skilled trades and healthcare being as strong as it is, has created a strong opportunity lately for us and our programs to get a lot of visibility and recognition.
We believe some of our strongest value comes from our employment community relationships that allow our students to qualify for jobs. We have thousands of employer relationships. Our enhanced manufacturer programs are a great example of this. Companies like BMW, Porsche, Harley Davidson, Mercedes, and more have a strong understanding of what we do and they know that we will provide highly qualified people to their premium brands who need those skills.
A large part of your bottom line relies on the funding of student loans. Given the politics and costs around debt forgiveness nowadays, how would you respond if the process of obtaining a student loan became much more rigorous?
ANDERSON: Certainly, if you look at our business model, 65 to 75% of our revenue is through the Department of Education. Things such as Pell Grants, subsidized loans, direct loans and parental loans are all a part of this. It’s also worth noting that 15% of our business is also through veteran affairs programs. We have a fairly large ex-military population among our student body.
The remainder of our funding is from private loans of cash-paid programs, or credits we extend to students. If there were changes to how these things all worked, it would be a significant change for us given its significance to our revenue stream.
When we talk to students about financing, we take the same approach as a community college or traditional four-year school would. We also heavily emphasize that many of these employers that we have partnerships with have pretty great tuition reimbursement programs. It’s very much in our student’s power to decide whether or not they want to go to school for free. They must bear the risk upfront and obtain the initial financing for tuition, but they can go into it knowing that there’s a possibility their future employer can reimburse them for the cost of their education.
"When I joined in 2019 the company had begun a transformation, looking at the front of the business by rationalizing cost structure after many years of revenue decline, decline in profitability, and ultimately losing money."
Troy Anderson
CFO, Universal Technical Institute
These programs that we offer that bring together our partners and students have requirements for membership that have tuition reimbursement in their guidelines. This, combined with the amount of debt our students are taking on being substantially lower than traditional student debt, allows us to maintain a positive outlook on our revenue stream moving forward while also creating opportunities for our students to build financially sound futures.
Your share price is up around 150% in one year. What do you credit the most to this?
ANDERSON: It’s a lot of things coming together that we’ve been working on. When I joined in 2019 the company had begun a transformation, looking at the front of the business by rationalizing cost structure after many years of revenue decline, decline in profitability, and ultimately losing money. I came into this job on the front end of that transformation.
We received capital from a large strategic investor, and have been deploying that capital by building new campuses. We also raised capital through an equity raise too, subsequently some debt as well. We deployed that capital on our new campuses too. We also acquired two new schools, which gave us a broader portfolio of programs, including an aviation program and further expansions into healthcare programs, which is now about a third of our business.
A lot of that stock price increase has been between the last six and nine months. We just completed our fiscal second quarter and we’ve had over 12% YoY growth as another positive indicator of our recent success. We’re yielding the results of all our culminated efforts lately, and it’s been great to see.