LANHAM,
Md., Nov. 9, 2023 /PRNewswire/ -- 2U, Inc.
(Nasdaq: TWOU), a leading online education platform company,
today reported financial and operating results for the quarter
ended September 30, 2023.
Results for Third Quarter 2023 compared to Third Quarter
2022
- Revenue decreased 1% to $229.7
million
- Degree Program Segment revenue was flat at $137.6 million
- Alternative Credential Segment revenue decreased 3% to
$92.1 million
- Net loss was $47.4 million, or
$0.58 per share
Non-GAAP Results for Third Quarter 2023 compared to Third
Quarter 2022
- Adjusted EBITDA decreased 12% to $28.6
million; a margin of 12%
- Adjusted net loss was $12.1
million, or $0.15 per
share
"Our edX platform uniquely positions us to capitalize on the
demand shift to more skill-based courses and the advancements in
technology, including AI, with our diverse portfolio of offerings,"
said Christopher "Chip" Paucek, Co-Founder and Chief Executive
Officer of 2U. "We believe 2U will benefit from the meaningful
long-term tailwinds from this shift in demand and our transition to
a platform company. We remain committed to our platform strategy
and its impact on students, university partners, and shareholders.
While our third quarter results did not meet our expectations,
there are bright spots in our return to profitable growth."
"Our ongoing strategic initiatives are strengthening our
business by re-aligning and refining our program offerings to
better fit within our platform strategy—positioning us for
long-term, sustainable and profitable growth," added Paul Lalljie, Chief Financial Officer of
2U. "We are confident that these initiatives, along with a
continued focus on improving operational efficiency across the
business, will generate improved adjusted EBITDA and free cash flow
going forward."
Discussion of Third Quarter 2023 Results
Revenue for the quarter totaled $229.7
million, a 1% decrease from $232.2
million in the third quarter of 2022. Revenue from the
Degree Program Segment was flat and included $25.8 million of revenue from portfolio
management activities related to the mutually negotiated exit of
certain degree programs. Portfolio management activities typically
result in current period revenue recognition of the fees paid by
university clients, which the company typically collects over 12 to
24 months. Average revenue per full course equivalent ("FCE")
enrollment increased by 26%, primarily driven by the revenue
acceleration from fees received in connection with portfolio
management activities. This increase was offset by a 21% decrease
in FCE enrollments, primarily driven by portfolio management and
the impact of our transition to a new marketing framework in
mid-2022. Revenue from the Alternative Credential Segment decreased
$2.9 million, or 3%, primarily
due to lower enrollments in coding boot camp offerings, partially
offset by 18% growth in FCE enrollments in executive education
offerings.
Costs and expenses for the quarter totaled $256.6 million, a 24% decrease from $336.5 million in the third quarter of 2022.
Costs and expenses for the third quarter of 2022 included
$79.5 million of non-cash
impairment charges in our Alternative Credential Segment, for which
the company did not have a corresponding expense this quarter. The
remaining decrease of $0.3 million was primarily driven by a
$9.0 million decrease in
personnel and personnel-related expense, partially offset by a
$3.7 million increase in paid
marketing costs and a $2.5 million increase in restructuring
charges.
As of September 30, 2023, the
company's cash, cash equivalents, and restricted cash totaled
$53.9 million, a decrease of
$128.7 million from $182.6 million as of December 31, 2022, driven by the $187.0 million term loan repayment and the
January 2023 refinancing. Cash used in operations was
$17.5 million, cash used in investing
activities was $36.6 million and cash
used in financing activities was $73.5
million. Adjusted unlevered free cash flow was $31.9 million for the twelve months ended
September 30, 2023 compared to
adjusted unlevered free cash flow of $11.7
million for the twelve months ended
June 30, 2023.
Business Outlook
The company updated its guidance provided on August 8, 2023 as follows:
- Revenue to range from $965
million to $990 million,
representing growth of 1.5% at the midpoint, including expected
revenue of $80 million in the fourth
quarter related to portfolio management activities;
- Net loss to range from $250
million to $240 million;
and
- Adjusted EBITDA to range from $165
million to $175 million,
representing growth of 36% at the midpoint.
Based on executed portfolio management activities and the
company's expectations for additional portfolio management
activities in the fourth quarter of 2023, the company expects cash
from portfolio management to be approximately $145 million
over the next 12 to 24 months. We believe this cash will provide
flexibility to launch new programs, invest in growth areas, and
strengthen the company's balance sheet. In addition, the company
reduced headcount in the third quarter by 12%, resulting in an
expected annualized cost savings of $55 million.
The company is in active discussions with noteholders to
refinance its convertible notes to address impending maturities and
strengthen its balance sheet, and aims to have a successful
transaction in the near term.
Business Highlights
- Increased the targeted number of launches for 2024 to
approximately 80 new degree programs, which are expected to
generate annual revenue of $120
million at steady state
- Existing program takeover of Maryville University's online
catalog of 28 undergraduate degrees and 11 graduate degrees
- New flex degree model offerings:
- The University of Cape Town -
three new one-year graduate diplomas in marketing, public sector
accounting, and sports management
- King's College London - Master of Professional Studies
- Albany College of Pharmacy and
Health Sciences - Master of Science in Biomedical Sciences and a
Master of Science in Biomanufacturing and Bioprocessing
- Emerson College - Master of
Marketing
- Hawai'i Pacific University - four
master's degrees in data science, cybersecurity, social work and
educational leadership
- Added 12 new professional certificate programs with King's
College London in the fields of law, technology, business, and
healthcare
- Entered into a new strategic partnership with Verizon to
accelerate skill-building for in-demand careers through the Verizon
Skill Forward initiative
- Expanded a strategic partnership with Degreed to broaden
enterprise access to edX offerings
- Added 159 new edX courses from 49 unique institutions
- Added new edX members, including Escola do Caos,
Integrative Mental Health University, Institute of Product
Leadership, International Compliance Association (ICA), New England
Medical Innovation Center, Qualtrics, The External Studies
Institute, and Xccelerate
Non-GAAP Measures
To provide investors and others with additional information
regarding 2U's results, the company has disclosed the following
non-GAAP financial measures: adjusted EBITDA (loss), adjusted
EBITDA margin, adjusted free cash flow, adjusted unlevered free
cash flow, adjusted net income (loss), and adjusted net income
(loss) per share. The company has provided a reconciliation of each
non-GAAP financial measure used in this earnings release to the
most directly comparable GAAP financial measure. The company
defines adjusted EBITDA (loss) as net income or net loss, as
applicable, before net interest income (expense), other income
(expense), net, taxes, depreciation and amortization expense,
transaction costs, integration costs, restructuring-related costs,
stockholder activism costs, certain litigation-related costs,
consisting of fees for certain non-ordinary course litigation and
other proceedings, impairment charges, debt modification expense
and loss on debt extinguishment, and stock-based compensation
expense. The company defines adjusted EBITDA margin as adjusted
EBITDA divided by revenue. The company defines adjusted free cash
flow as net cash provided by (used in) operating activities, less
capital expenditures, payments to university clients, and certain
non-ordinary cash payments. The company defines adjusted unlevered
free cash flow as adjusted free cash flow less cash interest
payments on debt. The company defines adjusted net income (loss) as
net income or net loss, as applicable, before other income
(expense), net, acquisition-related gains or losses, deferred
revenue fair value adjustments, transaction costs, integration
costs, restructuring-related costs, stockholder activism costs,
certain litigation-related costs, consisting of fees for certain
non-ordinary course litigation and other proceedings, impairment
charges, debt modification expense and loss on debt extinguishment,
and stock-based compensation expense. Adjusted net income (loss)
per share is calculated as adjusted net income (loss) divided by
diluted weighted-average shares of common stock outstanding for
periods that result in adjusted net income, and basic
weighted-average shares outstanding for periods that result in an
adjusted net loss. Some of the adjustments described above may not
be applicable in any given reporting period and may vary from
period to period.
The company's management uses these non-GAAP financial measures
to understand and compare operating results across accounting
periods, to understand cash that is generated by or available for
operational expenses and investment in the business after capital
expenditures, for internal budgeting and forecasting purposes, for
short- and long-term operating plans, and to evaluate the company's
financial performance. Management believes these non-GAAP financial
measures reflect the company's ongoing business in a manner that
allows for meaningful period-to-period comparisons and analysis of
trends in the company's business as they exclude expenses that are
not reflective of ongoing operating results. Management also
believes that these non-GAAP financial measures provide useful
information to investors and others in understanding and evaluating
the company's operating results and prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
The use of adjusted EBITDA (loss), adjusted free cash flow,
adjusted unlevered free cash flow, adjusted net income (loss), and
adjusted net income (loss) per share measures has certain
limitations, as they do not reflect all items of income and expense
that affect the company's operations. The company compensates for
these limitations by reconciling the non-GAAP financial measures to
the most directly comparable GAAP financial measures. These
non-GAAP financial measures should be considered in addition to,
not as a substitute for or in isolation from, measures prepared in
accordance with GAAP. Further, these non-GAAP measures may differ
from the non-GAAP information used by other companies, including
peer companies, and therefore comparability may be limited.
Management encourages investors and others to review the company's
financial information in its entirety and not rely on a single
financial measure.
Conference Call Information
What:
|
|
2U's third quarter 2023
financial results conference call
|
When:
|
|
Thursday, November 9,
2023
|
Time:
|
|
4:30
p.m. ET
|
Live Call:
|
|
(888)
330-2446
|
Conference ID
#:
|
|
1153388
|
Webcast:
|
|
investor.2U.com
|
About 2U, Inc. (Nasdaq: TWOU)
2U is a global leader in online education. Guided by its
founding mission to eliminate the back row in higher education, 2U
has spent 15 years advancing the technology and innovation to
deliver world-class learning outcomes at scale. Through its global
online learning platform edX, 2U connects more than 81 million
people with thousands of affordable, career-relevant learning
opportunities in partnership with 250 of the world's leading
universities, institutions, and industry experts. From free courses
to full degrees, 2U is creating a better future for all through the
power of high-quality online education. Learn more at 2U.com.
Cautionary Language Concerning Forward-Looking
Statements
This press release contains forward-looking statements
regarding 2U, Inc.'s future business expectations, which are
subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. All statements other than statements
of historical facts contained in this press release, including
statements regarding future results of operations and financial
position of 2U, including financial targets, business strategy, and
plans and objectives for future operations, are forward-looking
statements. 2U has based these forward-looking statements largely
on its estimates of its financial results and its current
expectations and projections about future events and financial
trends that it believes may affect its financial condition, results
of operations, business strategy, short-term and long-term business
operations and objectives, and financial needs as of the date of
this press release. The company undertakes no obligation to update
these statements as a result of new information or future events.
These forward-looking statements are subject to a number of risks,
uncertainties and assumptions that could cause actual results to
differ materially from the results predicted, including, but not
limited to:
- trends in the higher education market and the market for
online education, and expectations for growth in those
markets;
- the company's ability to maintain minimum recurring revenues
or other financial ratios through the maturity date of its amended
term loan facilities;
- the acceptance, adoption and growth of online learning by
colleges and universities, faculty, students, employers,
accreditors and state and federal licensing bodies;
- the impact of competition on the company's industry and
innovations by competitors;
- the company's ability to comply with evolving regulations
and legal obligations related to data privacy, data protection and
information security;
- the company's expectations about the potential benefits of
its cloud-based software-as-a-service technology and
technology-enabled services to university clients and
students;
- the company's dependence on third parties to provide certain
technological services or components used in its platform;
- the company's expectations about the predictability,
visibility and recurring nature of its business model;
- the company's ability to meet the anticipated launch dates
of its offerings;
- the company's ability to acquire new clients and expand its
offerings with existing university clients;
- the company's ability to strategically exit certain programs
that no longer align with its business objectives;
- the company's ability to successfully integrate the
operations of its acquisitions, including the edX acquisition, to
achieve the expected benefits of its acquisitions and manage,
expand and grow the combined company;
- the company's ability to refinance its indebtedness on
attractive terms, if at all, to better align with its focus on
profitability and address impending maturities;
- the company's ability to service its substantial
indebtedness and comply with the covenants and conversion
obligations contained in the indentures governing its 2.25%
convertible senior notes due 2025 and 4.50% convertible senior
notes due 2030 and the credit agreement governing its revolving
credit facility;
- the company's ability to implement its platform strategy and
achieve the expected benefits;
- the company's ability to generate sufficient future
operating cash flows from recent acquisitions to ensure related
goodwill is not impaired;
- the company's ability to execute its growth strategy,
including internationally and growing its enterprise
business;
- the company's ability to continue to recruit prospective
students for its offerings;
- the company's ability to maintain or increase student
retention rates in its degree programs;
- the company's ability to attract, hire and retain qualified
employees;
- the company's expectations about the scalability of its
cloud-based platform;
- potential changes in laws, regulations or guidance
applicable to the company or its university clients;
- the company's expectations regarding the amount of time its
cash balances and other available financial resources will be
sufficient to fund its operations;
- the impact and cost of stockholder activism;
- the potential negative impact of the significant decline in
the market price of the company's common stock, including the
impairment of goodwill and indefinite-lived intangible
assets;
- the impact of any natural disasters or public health
emergencies, such as the COVID-19 pandemic;
- the company's expectations regarding the effect of the
capped call transactions and regarding actions of the option
counterparties and/or their respective affiliates; and
- other factors beyond the company's control.
These and other potential risks and uncertainties that could
cause actual results to differ from the results predicted are more
fully detailed under the heading "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended December 31, 2022, and other SEC filings.
Moreover, 2U operates in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible
for 2U management to predict all risks, nor can 2U assess the
impact of all factors on its business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements 2U may make. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed
in this press release may not occur and actual results could differ
materially and adversely from those anticipated.
Investor Relations Contact: investorinfo@2U.com
Media Contact: media@2U.com
2U,
Inc. Condensed Consolidated Balance Sheets (in
thousands, except share and per share amounts)
|
|
|
September
30,
2023
|
|
December 31,
2022
|
|
|
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
41,141
|
|
$
167,518
|
Restricted
cash
|
12,710
|
|
15,060
|
Accounts receivable,
net
|
113,202
|
|
62,826
|
Other receivables,
net
|
29,196
|
|
33,813
|
Prepaid expenses and
other assets
|
37,722
|
|
43,090
|
Total current
assets
|
233,971
|
|
322,307
|
Other receivables,
net, non-current
|
18,388
|
|
14,788
|
Property and
equipment, net
|
42,387
|
|
45,855
|
Right-of-use
assets
|
65,292
|
|
72,361
|
Goodwill
|
712,644
|
|
734,620
|
Intangible assets,
net
|
386,272
|
|
549,755
|
Other assets,
non-current
|
78,981
|
|
71,173
|
Total
assets
|
$ 1,537,935
|
|
$ 1,810,859
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued expenses
|
$
128,316
|
|
$
110,020
|
Deferred
revenue
|
116,276
|
|
90,161
|
Lease
liability
|
15,106
|
|
13,909
|
Accrued restructuring
liability
|
11,451
|
|
6,692
|
Other current
liabilities
|
43,485
|
|
58,210
|
Total current
liabilities
|
314,634
|
|
278,992
|
Long-term
debt
|
878,124
|
|
928,564
|
Deferred tax
liabilities, net
|
310
|
|
282
|
Lease liability,
non-current
|
86,381
|
|
99,709
|
Other liabilities,
non-current
|
2,007
|
|
1,796
|
Total
liabilities
|
1,281,456
|
|
1,309,343
|
Stockholders'
equity
|
|
|
|
Preferred stock,
$0.001 par value, 5,000,000 shares authorized, none
issued
|
—
|
|
—
|
Common stock, $0.001
par value, 200,000,000 shares authorized, 81,630,808 shares
issued
and outstanding as of September 30, 2023;
78,334,666 shares issued and outstanding as
of December 31, 2022
|
82
|
|
78
|
Additional paid-in
capital
|
1,738,092
|
|
1,700,855
|
Accumulated
deficit
|
(1,455,131)
|
|
(1,179,972)
|
Accumulated other
comprehensive loss
|
(26,564)
|
|
(19,445)
|
Total stockholders'
equity
|
256,479
|
|
501,516
|
Total liabilities
and stockholders' equity
|
$ 1,537,935
|
|
$ 1,810,859
|
2U,
Inc. Condensed Consolidated Statements of Operations and
Comprehensive Loss (in thousands, except share and per
share amounts)
|
|
|
Three Months
Ended September
30,
|
|
Nine Months
Ended September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(unaudited)
|
Revenue
|
$
229,699
|
|
$
232,238
|
|
$
690,292
|
|
$
727,031
|
Costs and
expenses
|
|
|
|
|
|
|
|
Curriculum and
teaching
|
32,143
|
|
31,558
|
|
99,085
|
|
96,933
|
Servicing and
support
|
31,484
|
|
36,110
|
|
101,178
|
|
112,795
|
Technology and content
development
|
45,877
|
|
43,976
|
|
135,611
|
|
140,649
|
Marketing and
sales
|
96,256
|
|
94,311
|
|
292,313
|
|
341,643
|
General and
administrative
|
36,801
|
|
39,388
|
|
108,708
|
|
131,146
|
Restructuring
charges
|
14,085
|
|
11,632
|
|
22,582
|
|
29,172
|
Impairment
charges
|
—
|
|
79,509
|
|
134,117
|
|
138,291
|
Total costs and
expenses
|
256,646
|
|
336,484
|
|
893,594
|
|
990,629
|
Loss from
operations
|
(26,947)
|
|
(104,246)
|
|
(203,302)
|
|
(263,598)
|
Interest
income
|
363
|
|
269
|
|
1,099
|
|
767
|
Interest
expense
|
(19,167)
|
|
(15,913)
|
|
(55,040)
|
|
(43,709)
|
Debt modification
expense and loss on debt
extinguishment
|
—
|
|
—
|
|
(16,735)
|
|
—
|
Other income
(expense), net
|
(1,585)
|
|
(1,845)
|
|
(751)
|
|
(4,242)
|
Loss before income
taxes
|
(47,336)
|
|
(121,735)
|
|
(274,729)
|
|
(310,782)
|
Income tax (expense)
benefit
|
(107)
|
|
59
|
|
(430)
|
|
474
|
Net
loss
|
$
(47,443)
|
|
$
(121,676)
|
|
$
(275,159)
|
|
$
(310,308)
|
Net loss per share,
basic and diluted
|
$
(0.58)
|
|
$
(1.57)
|
|
$
(3.42)
|
|
$
(4.03)
|
Weighted-average
shares of common stock
outstanding, basic
and diluted
|
81,515,246
|
|
77,692,911
|
|
80,470,221
|
|
77,013,180
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments, net of tax of
$0 for all periods presented
|
185
|
|
(5,637)
|
|
(7,119)
|
|
(5,982)
|
Comprehensive
loss
|
$
(47,258)
|
|
$
(127,313)
|
|
$
(282,278)
|
|
$
(316,290)
|
2U,
Inc. Condensed Consolidated Statements of Cash
Flows (in thousands)
|
|
|
Nine Months
Ended September
30,
|
|
2023
|
|
2022
|
|
(unaudited)
|
Cash flows from
operating activities
|
|
|
|
Net
loss
|
$
(275,159)
|
|
$
(310,308)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Non-cash interest
expense
|
10,488
|
|
9,929
|
Depreciation and
amortization expense
|
86,846
|
|
95,070
|
Stock-based
compensation expense
|
35,986
|
|
62,740
|
Non-cash lease
expense
|
13,164
|
|
16,507
|
Restructuring
|
838
|
|
9,523
|
Impairment
charges
|
134,117
|
|
138,291
|
Provision for credit
losses
|
6,558
|
|
6,129
|
Loss on debt
extinguishment
|
12,123
|
|
—
|
Other
|
794
|
|
4,660
|
Changes in operating
assets and liabilities, net of assets and liabilities
acquired:
|
|
|
|
Accounts receivable,
net
|
(54,612)
|
|
(36,253)
|
Other receivables,
net
|
(2,207)
|
|
(2,867)
|
Prepaid expenses and
other assets
|
(1,095)
|
|
1,973
|
Accounts payable and
accrued expenses
|
19,888
|
|
(12,964)
|
Deferred
revenue
|
26,348
|
|
43,252
|
Other liabilities,
net
|
(31,597)
|
|
(27,124)
|
Net cash used in
operating activities
|
(17,520)
|
|
(1,442)
|
Cash flows from
investing activities
|
|
|
|
Purchase of a
business, net of cash acquired
|
—
|
|
5,010
|
Additions of
amortizable intangible assets
|
(32,442)
|
|
(50,155)
|
Purchases of property
and equipment
|
(4,335)
|
|
(8,777)
|
Advances made to
university clients
|
—
|
|
(310)
|
Advances repaid by
university clients
|
200
|
|
200
|
Other
|
1
|
|
(17)
|
Net cash used in
investing activities
|
(36,576)
|
|
(54,049)
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
debt
|
309,223
|
|
530
|
Payments on
debt
|
(373,914)
|
|
(5,313)
|
Prepayment premium on
extinguishment of senior secured term loan facility
|
(5,666)
|
|
—
|
Payment of debt
issuance costs
|
(4,411)
|
|
—
|
Tax withholding
payments associated with settlement of restricted stock
units
|
(957)
|
|
(2,320)
|
Proceeds from exercise
of stock options
|
110
|
|
1,083
|
Proceeds from employee
stock purchase plan share purchases
|
2,102
|
|
1,282
|
Net cash used in
financing activities
|
(73,513)
|
|
(4,738)
|
Effect of exchange
rate changes on cash
|
(1,118)
|
|
(4,530)
|
Net decrease in
cash, cash equivalents and restricted cash
|
(128,727)
|
|
(64,759)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
182,578
|
|
249,909
|
Cash, cash
equivalents and restricted cash, end of period
|
$
53,851
|
|
$
185,150
|
2U,
Inc. Reconciliation of Non-GAAP Measures - Adjusted
EBITDA (unaudited)
|
|
The following table
presents a reconciliation of adjusted EBITDA to net loss for each
of the periods indicated.
|
|
|
Three Months
Ended September
30,
|
|
Nine Months
Ended September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
(in thousands, except share and per
share amounts)
|
Revenue
|
$ 229,699
|
|
$ 232,238
|
|
$ 690,292
|
|
$ 727,031
|
|
|
|
|
|
|
|
|
Net loss
|
$ (47,443)
|
|
$
(121,676)
|
|
$
(275,159)
|
|
$
(310,308)
|
Stock-based
compensation expense
|
10,440
|
|
15,967
|
|
35,986
|
|
62,740
|
Other (income)
expense, net
|
1,585
|
|
1,845
|
|
751
|
|
4,242
|
Amortization of
acquired intangible assets
|
7,691
|
|
9,187
|
|
26,537
|
|
42,516
|
Income tax benefit on
amortization of acquired intangible
assets
|
(19)
|
|
(326)
|
|
(57)
|
|
(1,201)
|
Impairment
charges
|
—
|
|
79,509
|
|
134,117
|
|
138,291
|
Debt modification
expense and loss on debt
extinguishment
|
—
|
|
—
|
|
16,735
|
|
—
|
Restructuring
charges
|
14,085
|
|
11,632
|
|
22,582
|
|
29,172
|
Other*
|
1,553
|
|
343
|
|
4,383
|
|
5,025
|
Adjusted net
loss
|
(12,108)
|
|
(3,519)
|
|
(34,125)
|
|
(29,523)
|
Net interest
expense
|
18,804
|
|
15,644
|
|
53,941
|
|
42,942
|
Income tax
expense
|
126
|
|
267
|
|
487
|
|
727
|
Depreciation and
amortization expense
|
21,807
|
|
20,126
|
|
60,309
|
|
52,554
|
Adjusted
EBITDA
|
$
28,629
|
|
$
32,518
|
|
$
80,612
|
|
$
66,700
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
12 %
|
|
14 %
|
|
12 %
|
|
9 %
|
Net loss per share,
basic and diluted
|
$
(0.58)
|
|
$
(1.57)
|
|
$
(3.42)
|
|
$
(4.03)
|
Adjusted net loss per
share, basic and diluted
|
$
(0.15)
|
|
$
(0.05)
|
|
$
(0.42)
|
|
$
(0.38)
|
Weighted-average
shares of common stock outstanding,
basic and diluted
|
81,515,246
|
|
77,692,911
|
|
80,470,221
|
|
77,013,180
|
|
|
|
|
*
|
|
Includes (i)
transaction and integration expense of $0.1 million and
$0.0 million for the three months ended September 30, 2023 and
2022, respectively, and $0.3 million and $3.4 million for
the nine months ended September 30, 2023 and 2022, and (ii)
litigation-related expense of $1.5 million and $0.3 million for the
three months ended September 30, 2023 and 2022, respectively, and
$4.1 million and $1.6 million for the nine months ended September
30, 2023 and 2022.
|
2U,
Inc. Reconciliation of Non-GAAP Measures - Adjusted
EBITDA by Segment (unaudited)
|
|
The following table
presents a reconciliation of adjusted EBITDA (loss) to net loss by
segment for each of the periods
indicated.
|
|
|
Degree Program
Segment
|
|
Alternative
Credential Segment
|
|
Consolidated
|
|
Three Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Revenue
|
$
137,604
|
|
$
137,242
|
|
$ 92,095
|
|
$ 94,996
|
|
$
229,699
|
|
$
232,238
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(12,458)
|
|
$ (4,620)
|
|
$
(34,985)
|
|
$ (117,056)
|
|
$
(47,443)
|
|
$ (121,676)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
expense
|
6,748
|
|
8,989
|
|
3,692
|
|
6,978
|
|
10,440
|
|
15,967
|
Other (income)
expense, net
|
407
|
|
441
|
|
1,178
|
|
1,404
|
|
1,585
|
|
1,845
|
Net interest expense
(income)
|
18,939
|
|
15,710
|
|
(135)
|
|
(66)
|
|
18,804
|
|
15,644
|
Income tax expense
(benefit)
|
69
|
|
(38)
|
|
38
|
|
(21)
|
|
107
|
|
(59)
|
Depreciation and
amortization
expense
|
14,989
|
|
13,770
|
|
14,509
|
|
15,543
|
|
29,498
|
|
29,313
|
Impairment
charges
|
—
|
|
—
|
|
—
|
|
79,509
|
|
—
|
|
79,509
|
Restructuring
charges
|
13,400
|
|
10,295
|
|
685
|
|
1,337
|
|
14,085
|
|
11,632
|
Other
|
1,553
|
|
360
|
|
—
|
|
(17)
|
|
1,553
|
|
343
|
Total
adjustments
|
56,105
|
|
49,527
|
|
19,967
|
|
104,667
|
|
76,072
|
|
154,194
|
Total adjusted EBITDA
(loss)
|
$ 43,647
|
|
$ 44,907
|
|
$
(15,018)
|
|
$
(12,389)
|
|
$ 28,629
|
|
$ 32,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
32 %
|
|
33 %
|
|
(16) %
|
|
(13) %
|
|
12 %
|
|
14 %
|
2U,
Inc. Reconciliation of Non-GAAP Measures - Adjusted
EBITDA by Segment (unaudited)
|
|
The following table
presents a reconciliation of adjusted EBITDA (loss) to net loss by
segment for each of the periods
indicated.
|
|
|
Degree Program
Segment
|
|
Alternative
Credential Segment
|
|
Consolidated
|
|
Nine Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Revenue
|
$
397,578
|
|
$
434,499
|
|
$
292,714
|
|
$
292,532
|
|
$
690,292
|
|
$
727,031
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(34,186)
|
|
$
(25,890)
|
|
$ (240,973)
|
|
$ (284,418)
|
|
$ (275,159)
|
|
$ (310,308)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
expense
|
21,202
|
|
34,624
|
|
14,784
|
|
28,116
|
|
35,986
|
|
62,740
|
Other (income)
expense, net
|
(1,400)
|
|
1,688
|
|
2,151
|
|
2,554
|
|
751
|
|
4,242
|
Net interest expense
(income)
|
54,263
|
|
43,144
|
|
(322)
|
|
(202)
|
|
53,941
|
|
42,942
|
Income tax expense
(benefit)
|
315
|
|
(127)
|
|
115
|
|
(347)
|
|
430
|
|
(474)
|
Depreciation and
amortization
expense
|
42,252
|
|
41,273
|
|
44,594
|
|
53,797
|
|
86,846
|
|
95,070
|
Impairment
charges
|
—
|
|
—
|
|
134,117
|
|
138,291
|
|
134,117
|
|
138,291
|
Debt modification
expense
and loss on debt
extinguishment
|
16,735
|
|
—
|
|
—
|
|
—
|
|
16,735
|
|
—
|
Restructuring
charges
|
20,426
|
|
21,236
|
|
2,156
|
|
7,936
|
|
22,582
|
|
29,172
|
Other
|
4,355
|
|
4,316
|
|
28
|
|
709
|
|
4,383
|
|
5,025
|
Total
adjustments
|
158,148
|
|
146,154
|
|
197,623
|
|
230,854
|
|
355,771
|
|
377,008
|
Total adjusted EBITDA
(loss)
|
$
123,962
|
|
$
120,264
|
|
$
(43,350)
|
|
$
(53,564)
|
|
$ 80,612
|
|
$ 66,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
31 %
|
|
28 %
|
|
(15) %
|
|
(18) %
|
|
12 %
|
|
9 %
|
2U,
Inc. Reconciliation of Non-GAAP Measures - Adjusted Free
Cash Flow and Adjusted Unlevered Free Cash
Flow (unaudited)
|
|
The following table
presents a reconciliation of adjusted unlevered free cash flow to
net cash provided by (used in)
operating activities for each of the twelve-month periods
indicated.
|
|
|
Trailing Twelve
Months Ended
|
|
September 30,
2023
|
|
June
30,
2023
|
|
March
31,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Net cash (used in)
provided by operating activities
|
$
(5,149)
|
|
$
(16,536)
|
|
$
38,472
|
|
$
10,927
|
Additions of
amortizable intangible assets
|
(44,733)
|
|
(50,619)
|
|
(55,544)
|
|
(62,445)
|
Purchases of property
and equipment
|
(7,313)
|
|
(8,640)
|
|
(11,210)
|
|
(11,755)
|
Payments to university
clients
|
1,050
|
|
3,550
|
|
6,425
|
|
6,775
|
Non-ordinary cash
payments*
|
34,618
|
|
36,101
|
|
32,282
|
|
24,157
|
Adjusted free cash
flow
|
(21,527)
|
|
(36,144)
|
|
10,425
|
|
(32,341)
|
Cash interest payments
on debt
|
53,473
|
|
47,802
|
|
48,118
|
|
43,826
|
Adjusted unlevered free
cash flow
|
$
31,946
|
|
$
11,658
|
|
$
58,543
|
|
$
11,485
|
|
|
|
|
*
|
|
Includes transaction,
integration, restructuring-related, stockholder activism, and
litigation-related expense.
|
2U,
Inc. Reconciliation of Non-GAAP
Measures (unaudited)
|
|
The following table
presents a reconciliation of adjusted EBITDA guidance to net loss
guidance, at the midpoint of the
ranges provided by the company, for the period
indicated.
|
|
|
Year
Ending December 31,
2023
|
|
(in
millions)
|
Net loss
|
$
(245.0)
|
Stock-based
compensation expense
|
50.0
|
Amortization of
acquired intangible assets
|
36.0
|
Impairment
charges
|
134.1
|
Debt modification
expense and loss on debt extinguishment
|
16.7
|
Restructuring
charges
|
22.6
|
Other
|
5.1
|
Adjusted net
income
|
19.5
|
Net interest
expense
|
72.0
|
Income tax
expense
|
0.5
|
Depreciation and
amortization expense
|
78.0
|
Adjusted
EBITDA
|
$
170.0
|
2U,
Inc. Key Financial Performance
Metrics (unaudited)
|
Full Course
Equivalent Enrollments
|
|
Degree Program
Segment
|
|
The following table
presents FCE enrollments and average revenue per FCE enrollment in
the company's Degree
Program Segment for the last eight quarters.
|
|
|
Q3
'23
|
|
Q2
'23
|
|
Q1
'23
|
|
Q4
'22
|
|
Q3
'22
|
|
Q2
'22
|
|
Q1
'22
|
|
Q4
'21
|
Degree Program Segment
FCE
enrollments
|
45,284
|
|
50,490
|
|
55,491
|
|
53,631
|
|
57,092
|
|
60,303
|
|
62,609
|
|
58,967
|
Degree Program Segment
average
revenue per FCE enrollment*
|
$
3,039
|
|
$
2,367
|
|
$
2,532
|
|
$
2,557
|
|
$
2,404
|
|
$
2,373
|
|
$
2,462
|
|
$
2,585
|
|
|
|
|
*
|
|
Average revenue per FCE
enrollment includes revenue from portfolio management
activities.
|
Alternative
Credential Segment*
|
|
The following table
presents FCE enrollments and average revenue per FCE enrollment in
the company's Alternative
Credential Segment for the last eight quarters.
|
|
|
Q3
'23
|
|
Q2
'23
|
|
Q1
'23
|
|
Q4
'22
|
|
Q3
'22
|
|
Q2
'22
|
|
Q1
'22
|
|
Q4
'21
|
Alternative Credential
Segment FCE
enrollments
|
25,318
|
|
25,840
|
|
21,990
|
|
24,236
|
|
23,128
|
|
23,443
|
|
22,664
|
|
21,153
|
Alternative Credential
Segment
average revenue per FCE enrollment
|
$
3,428
|
|
$
3,591
|
|
$
4,193
|
|
$
3,840
|
|
$
3,850
|
|
$
3,891
|
|
$
4,012
|
|
$
4,312
|
|
|
|
|
*
|
|
FCE enrollments and
average revenue per FCE enrollment exclude the impact of
enrollments in edX offerings and the related revenue of
$5.3 million and $5.9 million for the three months ended
September 30, 2023 and 2022, respectively, and
$20.9 million and $21.3 million for the nine months ended
September 30, 2023 and 2022, respectively.
|
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SOURCE 2U, Inc.