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Exhibit 99.1
2U Reports Strong Results for Fourth Quarter and Full-Year 2022
LANHAM, Md. — February 2, 2023 — 2U, Inc. (Nasdaq: TWOU), a leading online education platform company, today reported financial and operating results for the quarter and full-year ended December 31, 2022.
Results for Fourth Quarter 2022 compared to Fourth Quarter 2021
| • | Revenue decreased 3% to $236.0 million |
| • | Degree Program Segment revenue decreased 10% to $137.1 million |
| • | Alternative Credential Segment revenue increased 8% to $98.9 million |
| • | Net loss decreased 82% to $11.8 million, or $0.15 per share |
Non-GAAP Results for Fourth Quarter 2022 compared to Fourth Quarter 2021
| • | Adjusted EBITDA increased 178% to $58.4 million; a margin of 25% |
| • | Adjusted net income increased 225% to $18.5 million, or $0.23 per share |
Results for Full-Year 2022 compared to Full-Year 2021
| • | Revenue increased 2% to $963.1 million |
| • | Degree Program Segment revenue decreased 3% to $571.6 million |
| • | Alternative Credential Segment revenue increased 11% to $391.5 million |
| • | Net loss increased 65% to $322.2 million, or $4.17 per share, and includes non-cash impairment charges of $138.3 million |
Non-GAAP Results for Full-Year 2022 compared to Full-Year 2021
| • | Adjusted EBITDA increased 88% to $125.1 million; a margin of 13% |
| • | Adjusted net loss decreased 77% to $11.0 million, or $0.14 per share |
Recent Developments
In January of 2023, the company significantly strengthened its credit profile by extending near-term maturities, and reducing secured debt by $187 million. Additional information about these transactions can be found in the current report on Form 8-K filed by the company on January 9, 2023 and related filings with the Securities and Exchange Commission.
On Tuesday, March 21, 2023, the company will host an Investor Day at the Nasdaq MarketSite in New York City. The 2U leadership team will discuss the platform strategy and plans to create shareholder value. To pre-register, please click here.
Executive Commentary
“Platforms are the future of education and we are becoming increasingly confident in our platform strategy,” said 2U Co-Founder and CEO Christopher “Chip” Paucek. “We’re attracting new partners and content, driving revenue growth from enterprise clients, radically improving our marketing efficiency, and delivering significant EBITDA growth. We now expect our Alternative Credential Segment to contribute to our profitability for the first time in 2023, while continuing to deliver life-changing outcomes for students.”
Paul Lalljie, 2U’s Chief Financial Officer, added, “Our full year results demonstrate early returns from realigning our organization and cost structure to support our strategy while generating higher profit margins and cash flows. We delivered $125.1 million of adjusted EBITDA, an increase of 88% when compared with the prior year, and positive unlevered free cash flow. Looking to 2023, we expect macroeconomic challenges to continue as we execute our plans to deliver modest revenue growth, adjusted EBITDA growth of approximately 26% and positive free cash flow.”
Discussion of 2022 Results
Revenue for the fourth quarter totaled $236.0 million, a 3% decrease from $243.6 million in the fourth quarter of 2021. Revenue from the Degree Program Segment decreased $15.3 million, or 10%, due to a decrease in full course equivalent (FCE) enrollments of 9% and a 1% decrease in average revenue per FCE enrollment. Revenue from the Alternative Credential Segment increased $7.7 million, or 8%, primarily due to an increase in FCE enrollments of 15%, partially offset by an 11% decrease in average revenue per FCE enrollment.
Revenue for the year totaled $963.1 million, a 2% increase from $945.7 million in 2021. Total revenue includes $39.2 million from legacy edX offerings. Revenue from the Degree Program Segment decreased $20.7 million, or 3%, due to a 2% decrease in average revenue per FCE enrollment and a decrease in FCE enrollments of 2%. Revenue from the Alternative Credential Segment increased $38.1 million, or 11%, primarily due to legacy edX offerings and an increase in FCE enrollments of 9%, partially offset by a 5% decrease in average revenue per FCE enrollment.
Costs and expenses for the fourth quarter totaled $230.6 million, a 21% decrease from $293.3 million in the fourth quarter of 2021. This decrease was primarily driven by a $26.3 million decrease in paid marketing costs in connection with the platform strategy, a $24.2 million decrease in personnel and personnel-related expenses primarily relating to the strategic realignment plan and lower performance-based compensation, and a $14.1 million decrease in transaction and integration expense.
Costs and expenses for the year totaled $1.2 billion, a 10% increase from $1.1 billion in 2021. This increase includes $138.3 million of non-cash impairment charges in our Alternative Credential Segment. During the first and third quarters, the company determined that the decline in its market capitalization triggered an interim goodwill impairment review, which led to non-cash write downs of certain goodwill assets and indefinite-lived intangible assets. Of note, costs and expenses for the year include $69.7 million of operating expense related to edX, which was acquired in the fourth quarter of 2021, and a $24.7 million increase in restructuring costs. These increases were partially offset by a $46.5 million decrease in paid marketing costs in connection with the platform strategy, a $50.8 million decrease in personnel and personnel-related expenses primarily relating to the strategic realignment plan and lower performance-based compensation, and a $13.3 million decrease in transaction and integration expense.
As of December 31, 2022, the company’s cash, cash equivalents, and restricted cash totaled $182.6 million, a decrease of $67.3 million from $249.9 million as of December 31, 2021. Cash provided by operations was $10.9 million, cash used in investing activities was $69.4 million and cash used in financing activities was $6.9 million. Unlevered free cash flow was $11.5 million for the twelve months ended December 31, 2022 and compares with unlevered free cash use of $1.3 million for the twelve months ended September 30, 2022.
Business Outlook for Fiscal Year 2023
The company provided guidance for the full-year 2023 for the following metrics:
| • | Revenue to range from $985 million to $995 million, representing growth of 3% at the midpoint |
| • | Net loss to range from $95 million to $90 million |
| • | Adjusted EBITDA to range from $155 million to $160 million, representing growth of 26% at the midpoint |
New Offerings, Partnerships and Highlights
| • | Reached an agreement for edX to offer portions of the Emeritus’ catalog of higher education programs to millions of edX learners in regions outside the U.S. and Europe, beginning with India |
| • | Celebrated a milestone achievement—over 50,000 learners have graduated from our university partners’ online degree programs since the first degree program was launched together in 2009 |
| • | Announced new degree programs including |
| • | a disruptively priced Master’s of Science in Artificial Intelligence with The University of Texas at Austin, under the new, flexible model |
| • | a Doctorate of Education in Organizational Leadership, with The University of North Carolina at Chapel Hill, 2U’s sixth online degree with the University |
| • | a Master’s of Science in Occupational Therapy and a Doctorate of Physical Therapy through a new partnership with Russell Sage College |
| • | Agreed to a new Master’s of Science in Management with the University of California, Davis under the new, flexible model |
| • | Announced new MicroMasters® programs in Social Work from Baylor University, and in Business: Data, Insights, and Analytics from the University of Wisconsin–Madison |
| • | Expanded our relationship with Amazon Web Services (AWS) to offer a Professional Certificate in Cloud Solutions Architecture, a first for AWS on the edX platform |
| • | Announced a new Professional Certificate in Search Engine Optimization from the University of California, Davis |
| • | Launched over 150 new edX courses from 57 unique institutions during the fourth quarter. Welcomed new edX members, including the American Psychological Association, Baylor University, Intuit, the International Council of E-Commerce Consultants, Lehigh University, Pepperdine University, Russell Sage College, the University of California, Davis, and Wesleyan University |
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, 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, losses on debt extinguishment, and stock-based compensation expense. The company defines adjusted EBITDA margin as adjusted EBITDA divided by revenue. The company defines unlevered free cash flow as net cash provided by (used in) operating activities, less capital expenditures, payments to university clients, certain non-ordinary cash payments, and 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, losses 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 in the definitions of adjusted EBITDA (loss), unlevered free cash flow, and adjusted net income (loss) may not be applicable in any given reporting period and they 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), 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 fourth quarter and full-year 2022 financial results conference call | |
| When: | Thursday, February 2, 2023 | |
| Time: | 4:30 p.m. ET | |
| Live Call: | (888) 330-2446 | |
| Conference ID #: | 1153388 | |
| Webcast: | investor.2U.com |
About 2U, Inc. (Nasdaq: TWOU)
As the parent company of edX, a leading global online learning platform, 2U provides 48 million learners with access to world-class education in partnership with more than 230 colleges, universities, and corporations. Our people and technology are powering more than 4,000 digital education offerings — from free courses to full degrees — and helping unlock human potential. To learn more: visit 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 at required periods during the fiscal quarters through the maturity date of the term loan; |
| • | 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 degree programs, executive education offerings and boot camps; |
| • | the company’s ability to acquire new university clients and expand its degree programs, executive education offerings and boot camps with existing university clients; |
| • | 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; |
| • | the company’s ability to service our substantial indebtedness and comply with the covenants and conversion obligations contained in the indentures governing our 2.25% convertible senior notes due 2025 and 4.50% convertible senior notes due 2030 and the credit agreement governing our revolving credit facility; |
| • | 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 in the international, undergraduate and non-degree alternative markets; |
| • | 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 regulations 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 impact of the significant decline in the market price of our common stock, including the impairment of goodwill and indefinite-lived assets; |
| • | the timing, structure and expected impact of our strategic realignment plan and the estimated savings and amounts expected to be incurred in connection therewith; |
| • | the impact of any natural disasters or public health emergencies, such as the coronavirus disease 2019 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 our Annual Report on Form 10-K for the year ended December 31, 2021, 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.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| December 31, 2022 |
December 31, 2021 |
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| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 167,518 | $ | 232,932 | ||||
| Restricted cash |
15,060 | 16,977 | ||||||
| Accounts receivable, net |
62,826 | 67,287 | ||||||
| Other receivables, net |
33,813 | 29,439 | ||||||
| Prepaid expenses and other assets |
43,090 | 47,217 | ||||||
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|
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| Total current assets |
322,307 | 393,852 | ||||||
| Other receivables, net, non-current |
14,788 | 21,568 | ||||||
| Property and equipment, net |
45,855 | 48,650 | ||||||
| Right-of-use assets |
72,361 | 76,841 | ||||||
| Goodwill |
734,620 | 834,539 | ||||||
| Intangible assets, net |
549,755 | 665,523 | ||||||
| Other assets, non-current |
71,173 | 68,033 | ||||||
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| Total assets |
$ | 1,810,859 | $ | 2,109,006 | ||||
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| Liabilities and stockholders’ equity |
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| Current liabilities |
||||||||
| Accounts payable and accrued expenses |
$ | 110,020 | $ | 164,723 | ||||
| Deferred revenue |
90,161 | 91,926 | ||||||
| Lease liability |
13,909 | 13,985 | ||||||
| Accrued restructuring liability |
6,692 | 1,735 | ||||||
| Other current liabilities |
58,210 | 61,138 | ||||||
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|
|
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| Total current liabilities |
278,992 | 333,507 | ||||||
| Long-term debt |
928,564 | 845,316 | ||||||
| Deferred tax liabilities, net |
282 | 1,726 | ||||||
| Lease liability, non-current |
99,709 | 98,666 | ||||||
| Other liabilities, non-current |
1,796 | 636 | ||||||
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| Total liabilities |
1,309,343 | 1,279,851 | ||||||
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| 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, 78,334,666 shares issued and outstanding as of December 31, 2022; 75,754,663 shares issued and outstanding as of December 31, 2021 |
78 | 76 | ||||||
| Additional paid-in capital |
1,700,855 | 1,735,628 | ||||||
| Accumulated deficit |
(1,179,972 | ) | (890,638 | ) | ||||
| Accumulated other comprehensive loss |
(19,445 | ) | (15,911 | ) | ||||
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| Total stockholders’ equity |
501,516 | 829,155 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 1,810,859 | $ | 2,109,006 | ||||
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2U, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Revenue |
$ | 236,049 | $ | 243,624 | $ | 963,080 | $ | 945,682 | ||||||||
| Costs and expenses |
||||||||||||||||
| Curriculum and teaching |
32,953 | 32,012 | 129,886 | 130,817 | ||||||||||||
| Servicing and support |
35,002 | 36,601 | 147,797 | 138,548 | ||||||||||||
| Technology and content development |
49,823 | 50,522 | 190,472 | 179,061 | ||||||||||||
| Marketing and sales |
80,504 | 109,915 | 422,147 | 456,096 | ||||||||||||
| General and administrative |
28,272 | 62,926 | 159,418 | 200,054 | ||||||||||||
| Restructuring charges |
4,067 | 1,330 | 33,239 | 8,544 | ||||||||||||
| Impairment charges |
— | — | 138,291 | — | ||||||||||||
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| Total costs and expenses |
230,621 | 293,306 | 1,221,250 | 1,113,120 | ||||||||||||
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|||||||||
| Income (loss) from operations |
5,428 | (49,682 | ) | (258,170 | ) | (167,438 | ) | |||||||||
| Interest income |
398 | 287 | 1,165 | 1,475 | ||||||||||||
| Interest expense |
(18,525 | ) | (18,208 | ) | (62,234 | ) | (51,222 | ) | ||||||||
| Loss on debt extinguishment |
— | — | — | (1,101 | ) | |||||||||||
| Other income (expense), net |
427 | (406 | ) | (3,815 | ) | 22,324 | ||||||||||
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| Loss before income taxes |
(12,272 | ) | (68,009 | ) | (323,054 | ) | (195,962 | ) | ||||||||
| Income tax benefit |
429 | 748 | 903 | 1,196 | ||||||||||||
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| Net loss |
$ | (11,843 | ) | $ | (67,261 | ) | $ | (322,151 | ) | $ | (194,766 | ) | ||||
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| Net loss per share, basic and diluted |
$ | (0.15 | ) | $ | (0.89 | ) | $ | (4.17 | ) | $ | (2.61 | ) | ||||
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| Weighted-average shares of common stock outstanding, basic and diluted |
78,261,601 | 75,509,253 | 77,327,850 | 74,580,115 | ||||||||||||
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| Other comprehensive income (loss) |
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| Foreign currency translation adjustments, net of tax of $0 for all periods presented |
2,448 | (4,031 | ) | (3,534 | ) | (6,127 | ) | |||||||||
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| Comprehensive loss |
$ | (9,395 | ) | $ | (71,292 | ) | $ | (325,685 | ) | $ | (200,893 | ) | ||||
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2U, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| Year Ended December 31, |
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| 2022 | 2021 | 2020 | ||||||||||
| (unaudited) | ||||||||||||
| Cash flows from operating activities |
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| Net loss |
$ | (322,151 | ) | $ | (194,766 | ) | (216,484 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||
| Non-cash interest expense |
19,835 | 25,403 | 16,267 | |||||||||
| Depreciation and amortization expense |
128,153 | 108,448 | 96,469 | |||||||||
| Stock-based compensation expense |
80,220 | 97,766 | 82,042 | |||||||||
| Non-cash lease expense |
21,020 | 18,933 | 15,153 | |||||||||
| Restructuring |
9,555 | 5,014 | 283 | |||||||||
| Provision for credit losses |
8,610 | 8,036 | 4,642 | |||||||||
| Loss on debt extinguishment |
— | 1,101 | 11,671 | |||||||||
| Gain on sale of investment |
— | (27,762 | ) | — | ||||||||
| Impairment charges |
138,291 | — | — | |||||||||
| Other |
5,443 | 2,515 | 1,443 | |||||||||
| Changes in operating assets and liabilities, net of assets and liabilities acquired: |
||||||||||||
| Accounts receivable, net |
(3,041 | ) | (31,756 | ) | (17,877 | ) | ||||||
| Other receivables, net |
(517 | ) | (27,001 | ) | (21,148 | ) | ||||||
| Prepaid expenses and other assets |
4,833 | (7,636 | ) | (5,513 | ) | |||||||
| Accounts payable and accrued expenses |
(42,735 | ) | 21,212 | 41,959 | ||||||||
| Deferred revenue |
5,326 | 9,388 | 26,061 | |||||||||
| Other liabilities, net |
(41,915 | ) | (26,969 | ) | (5,364 | ) | ||||||
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| Net cash provided by (used in) operating activities |
10,927 | (18,074 | ) | 29,604 | ||||||||
| Cash flows from investing activities |
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| Purchase of a business, net of cash acquired |
5,010 | (761,118 | ) | (949 | ) | |||||||
| Additions of amortizable intangible assets |
(62,445 | ) | (60,546 | ) | (62,784 | ) | ||||||
| Purchases of property and equipment |
(11,755 | ) | (9,788 | ) | (6,517 | ) | ||||||
| Purchase of investment |
— | (1,000 | ) | — | ||||||||
| Proceeds from sale of investment |
— | 38,818 | — | |||||||||
| Advances made to university clients |
(310 | ) | — | — | ||||||||
| Advances repaid by university clients |
200 | 200 | 925 | |||||||||
| Other |
(50 | ) | — | — | ||||||||
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| Net cash used in investing activities |
(69,350 | ) | (793,434 | ) | (69,325 | ) | ||||||
| Cash flows from financing activities |
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| Proceeds from issuance of common stock, net of offering costs |
— | — | 299,796 | |||||||||
| Proceeds from debt |
696 | 569,477 | 371,681 | |||||||||
| Payments on debt |
(7,181 | ) | (4,334 | ) | (837 | ) | ||||||
| Extinguishment of long-term facility |
— | — | (250,000 | ) | ||||||||
| Purchases of capped calls in connection with issuance of convertible senior notes |
— | — | (50,540 | ) | ||||||||
| Prepayment premium on extinguishment of senior secured term loan facility |
— | — | (2,528 | ) | ||||||||
| Payment of debt issuance costs |
— | (11,575 | ) | (3,419 | ) | |||||||
| Tax withholding payments associated with settlement of restricted stock units |
(2,850 | ) | (18,780 | ) | (4,784 | ) | ||||||
| Proceeds from exercise of stock options |
1,128 | 6,489 | 4,177 | |||||||||
| Proceeds from employee stock purchase plan share purchases |
1,282 | 3,583 | 3,960 | |||||||||
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| Net cash (used in) provided by financing activities |
(6,925 | ) | 544,860 | 367,506 | ||||||||
| Effect of exchange rate changes on cash |
(1,983 | ) | (2,309 | ) | 1,212 | |||||||
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| Net (decrease) increase in cash, cash equivalents and restricted cash |
(67,331 | ) | (268,957 | ) | 328,997 | |||||||
| Cash, cash equivalents and restricted cash, beginning of period |
249,909 | 518,866 | 189,869 | |||||||||
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| Cash, cash equivalents and restricted cash, end of period |
$ | 182,578 | $ | 249,909 | $ | 518,866 | ||||||
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|
|
|
|
|||||||
2U, Inc.
Reconciliation of Non-GAAP Measures
(unaudited)
The following table presents a reconciliation of adjusted EBITDA to net loss for each of the periods indicated.
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (in thousands, except share and per share amounts) | ||||||||||||||||
| Revenue |
$ | 236,049 | $ | 243,624 | $ | 963,080 | $ | 945,682 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (11,843 | ) | $ | (67,261 | ) | $ | (322,151 | ) | $ | (194,766 | ) | ||||
| Stock-based compensation expense |
17,480 | 23,021 | 80,220 | 97,766 | ||||||||||||
| Other (income) expense, net |
(427 | ) | 406 | 3,815 | (22,324 | ) | ||||||||||
| Amortization of acquired intangible assets |
10,901 | 12,455 | 53,417 | 43,863 | ||||||||||||
| Income tax benefit on amortization of acquired intangible assets |
(1 | ) | (238 | ) | (1,202 | ) | (1,083 | ) | ||||||||
| Impairment charges |
— | — | 138,291 | — | ||||||||||||
| Loss on debt extinguishment |
— | — | — | 1,101 | ||||||||||||
| Restructuring charges |
4,067 | 1,330 | 33,239 | 8,544 | ||||||||||||
| Other* |
(1,677 | ) | 15,437 | 3,348 | 19,257 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted net income (loss) |
18,500 | (14,850 | ) | (11,023 | ) | (47,642 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net interest expense |
18,127 | 17,921 | 61,069 | 49,747 | ||||||||||||
| Income tax (benefit) expense |
(428 | ) | (510 | ) | 299 | (113 | ) | |||||||||
| Depreciation and amortization expense |
22,182 | 18,416 | 74,736 | 64,585 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 58,381 | $ | 20,977 | $ | 125,081 | $ | 66,577 | ||||||||
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|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA margin |
25 | % | 9 | % | 13 | % | 7 | % | ||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Net loss per share, basic and diluted |
$ | (0.15 | ) | $ | (0.89 | ) | $ | (4.17 | ) | $ | (2.61 | ) | ||||
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|
|
|
|
|
|
|
|||||||||
| Adjusted net income (loss) per share, basic |
$ | 0.24 | $ | (0.20 | ) | $ | (0.14 | ) | $ | (0.64 | ) | |||||
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|
|
|
|
|
|
|||||||||
| Adjusted net income (loss) per share, diluted |
$ | 0.23 | $ | (0.20 | ) | $ | (0.14 | ) | $ | (0.64 | ) | |||||
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|
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|
|||||||||
| Weighted-average shares of common stock outstanding, basic |
78,261,601 | 75,509,253 | 77,327,850 | 74,580,115 | ||||||||||||
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|
|
|
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| Weighted-average shares of common stock outstanding, diluted |
78,921,457 | 75,509,253 | 77,327,850 | 74,580,115 | ||||||||||||
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| * | Includes (i) transaction and integration expense of $0.2 million and $14.3 million for the three months ended December 31, 2022 and 2021, respectively, and $3.6 million and $16.9 million for the years ended December 31, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $(1.9) million and $1.2 million for the three months ended December 31, 2022 and 2021, respectively, and $(0.3) million and $2.4 million for the years ended December 31, 2022 and 2021, respectively. |
2U, Inc.
Reconciliation of Non-GAAP Measures
(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 December 31, |
Three Months Ended December 31, |
Three Months Ended December 31, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Revenue |
$ | 137,109 | $ | 152,404 | $ | 98,940 | $ | 91,220 | $ | 236,049 | $ | 243,624 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) |
$ | 15,093 | $ | (25,614 | ) | $ | (26,936 | ) | $ | (41,647 | ) | $ | (11,843 | ) | $ | (67,261 | ) | |||||||
| Adjustments: |
||||||||||||||||||||||||
| Stock-based compensation expense |
9,754 | 15,467 | 7,726 | 7,554 | 17,480 | 23,021 | ||||||||||||||||||
| Other (income) expense, net |
(806 | ) | (525 | ) | 379 | 931 | (427 | ) | 406 | |||||||||||||||
| Net interest expense (income) |
18,197 | 17,988 | (70 | ) | (67 | ) | 18,127 | 17,921 | ||||||||||||||||
| Income tax expense (benefit) |
132 | 404 | (561 | ) | (1,152 | ) | (429 | ) | (748 | ) | ||||||||||||||
| Depreciation and amortization expense |
16,506 | 15,324 | 16,577 | 15,547 | 33,083 | 30,871 | ||||||||||||||||||
| Restructuring charges |
3,292 | 1,049 | 775 | 281 | 4,067 | 1,330 | ||||||||||||||||||
| Other |
(1,705 | ) | 15,262 | 28 | 175 | (1,677 | ) | 15,437 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total adjustments |
45,370 | 64,969 | 24,854 | 23,269 | 70,224 | 88,238 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total adjusted EBITDA (loss) |
$ | 60,463 | $ | 39,355 | $ | (2,082 | ) | $ | (18,378 | ) | $ | 58,381 | $ | 20,977 | ||||||||||
|
|
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|
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|
|
|
|
|
|
|||||||||||||
| Adjusted EBITDA margin |
44 | % | 26 | % | (2 | )% | (20 | )% | 25 | % | 9 | % | ||||||||||||
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|||||||||||||
2U, Inc.
Reconciliation of Non-GAAP Measures
(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 | ||||||||||||||||||||||
| Year Ended December 31, |
Year Ended December 31, |
Year Ended December 31, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Revenue |
$ | 571,608 | $ | 592,288 | $ | 391,472 | $ | 353,394 | $ | 963,080 | $ | 945,682 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss |
$ | (10,797 | ) | $ | (46,360 | ) | $ | (311,354 | ) | $ | (148,406 | ) | $ | (322,151 | ) | $ | (194,766 | ) | ||||||
| Adjustments: |
||||||||||||||||||||||||
| Stock-based compensation expense |
44,378 | 66,033 | 35,842 | 31,733 | 80,220 | 97,766 | ||||||||||||||||||
| Other (income) expense, net |
882 | (28,079 | ) | 2,933 | 5,755 | 3,815 | (22,324 | ) | ||||||||||||||||
| Net interest expense (income) |
61,341 | 49,917 | (272 | ) | (170 | ) | 61,069 | 49,747 | ||||||||||||||||
| Income tax expense (benefit) |
5 | 629 | (908 | ) | (1,825 | ) | (903 | ) | (1,196 | ) | ||||||||||||||
| Depreciation and amortization expense |
57,779 | 56,420 | 70,374 | 52,028 | 128,153 | 108,448 | ||||||||||||||||||
| Impairment charges |
— | — | 138,291 | — | 138,291 | — | ||||||||||||||||||
| Loss on debt extinguishment |
— | 1,101 | — | — | — | 1,101 | ||||||||||||||||||
| Restructuring charges |
24,528 | 7,736 | 8,711 | 808 | 33,239 | 8,544 | ||||||||||||||||||
| Other |
2,611 | 18,744 | 737 | 513 | 3,348 | 19,257 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total adjustments |
191,524 | 172,501 | 255,708 | 88,842 | 447,232 | 261,343 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total adjusted EBITDA (loss) |
$ | 180,727 | $ | 126,141 | $ | (55,646 | ) | $ | (59,564 | ) | $ | 125,081 | $ | 66,577 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Adjusted EBITDA margin |
32 | % | 21 | % | (14 | )% | (17 | )% | 13 | % | 7 | % | ||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
2U, Inc.
Reconciliation of Non-GAAP Measures
(unaudited)
The following table presents a reconciliation of unlevered free cash flow to net cash (used in) provided by operating activities for each of the twelve-month periods indicated.
| December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
|||||||||||||
| (in thousands) | ||||||||||||||||
| Net cash provided by (used in) operating activities |
$ | 10,927 | $ | (16,378 | ) | $ | 12,765 | $ | (25,766 | ) | ||||||
| Additions of amortizable intangible assets |
(62,445 | ) | (65,522 | ) | (65,533 | ) | (63,814 | ) | ||||||||
| Purchases of property and equipment |
(11,755 | ) | (13,168 | ) | (12,555 | ) | (10,716 | ) | ||||||||
| Payments to university clients |
6,775 | 6,775 | 7,025 | 7,150 | ||||||||||||
| Non-ordinary cash payments* |
24,157 | 30,812 | 25,229 | 23,943 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Free cash flow |
(32,341 | ) | (57,481 | ) | (33,069 | ) | (69,203 | ) | ||||||||
| Cash interest payments on debt |
43,826 | 56,175 | 44,532 | 35,082 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Unlevered free cash flow |
$ | 11,485 | $ | (1,306 | ) | $ | 11,463 | $ | (34,121 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | 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 |
$ | (92.5 | ) | |
| Stock-based compensation expense |
70.0 | |||
| Amortization of acquired intangible assets |
30.0 | |||
| Loss on debt extinguishment |
15.0 | |||
|
|
|
|||
| Adjusted net income |
22.5 | |||
|
|
|
|||
| Net interest expense |
65.0 | |||
| Depreciation and amortization expense |
70.0 | |||
|
|
|
|||
| Adjusted EBITDA |
$ | 157.5 | ||
|
|
|
|||
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.
| Q4 ‘22 | Q3 ‘22 | Q2 ‘22 | Q1 ‘22 | Q4 ‘21 | Q3 ‘21 | Q2 ‘21 | Q1 ‘21 | |||||||||||||||||||||||||
| Degree Program Segment FCE enrollments |
53,631 | 57,092 | 60,303 | 62,609 | 58,967 | 57,842 | 60,429 | 60,007 | ||||||||||||||||||||||||
| Degree Program Segment average revenue per FCE enrollment |
$ | 2,557 | $ | 2,404 | $ | 2,373 | $ | 2,462 | $ | 2,585 | $ | 2,555 | $ | 2,420 | $ | 2,431 | ||||||||||||||||
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.
| Q4 ‘22 | Q3 ‘22 | Q2 ‘22 | Q1 ‘22 | Q4 ‘21 | Q3 ‘21 | Q2 ‘21 | Q1 ‘21 | |||||||||||||||||||||||||
| Alternative Credential Segment FCE enrollments |
24,236 | 23,128 | 23,443 | 22,664 | 21,153 | 20,174 | 23,679 | 21,078 | ||||||||||||||||||||||||
| Alternative Credential Segment average revenue per FCE enrollment |
$ | 3,840 | $ | 3,850 | $ | 3,891 | $ | 4,012 | $ | 4,312 | $ | 4,193 | $ | 3,843 | $ | 4,108 | ||||||||||||||||
| * | FCE enrollments and average revenue per FCE enrollment include enrollments in edX degree offerings and revenue from these offerings of $3.1 million and $12.0 million for the three months and year ended December 31, 2022, respectively. |
| ** | FCE enrollments and average revenue per FCE enrollment exclude the impact of enrollments in edX offerings and the related revenue of $5.9 million and $27.2 million for the three months and year ended December 31, 2022, respectively. |
