2U, Inc. (TWOU) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

Exhibit 99.1

2U, Inc. Reports Results for First Quarter 2020

Delivers revenue growth of 44%

LANHAM, Md. — April 30, 2020 — 2U, Inc. (Nasdaq: TWOU)

Results for First Quarter 2020 Compared to First Quarter 2019

Non-GAAP Results for First Quarter 2020 Compared to First Quarter 2019

“Our first quarter results clearly show the strength, resilience, and relevance of our business and offerings,” said Christopher “Chip” Paucek, 2U's Co-Founder and CEO. “Since the beginning of the COVID-19 pandemic, our operations and all 2U-powered educational offerings are running and enrolling new students. We believe the unprecedented impact of COVID-19 will continue to accelerate demand among universities and adult learners for high-quality online education across the Career Curriculum Continuum, and 2U is uniquely positioned to help existing and new partners meet this need now and in the future.”

Chief Financial Officer Paul Lalljie commented, “I’m very pleased with our first quarter results, which demonstrate the strong fundamentals of our business in the midst of one of the most uncertain periods in history. As demand for online education increases, we are in an excellent position to provide a range of solutions for our university partners and their students. Our recent convertible note offering bolstered our balance sheet, and we remain focused on disciplined execution of our strategic priorities and driving towards positive free cash flow.”

Discussion of First Quarter 2020 Results

Revenue totaled $175.5 million, a 44% increase from $122.2 million in the first quarter of 2019. Graduate Program Segment revenue grew 14% to $118.5 million driven by a 16% increase in full course equivalent enrollments, partially offset by a 2% decrease in average revenue per full course equivalent enrollment. Alternative Credential Segment revenue increased 216% to $57.0 million, driven by full course equivalent enrollments of 15,141.

Costs and expenses totaled $229.4 million, a 56% increase from $146.7 million in the first quarter of 2019. This $82.7 million increase was driven by $57.1 million of incremental operating costs related to Trilogy, with the remainder primarily attributable to increases in costs related to direct marketing, personnel, and curriculum and teaching. These cost increases are due to new offerings, increased depreciation and amortization expense associated with implementing new features and capabilities in the company’s platform, and content for the company’s offerings.

As of March 31, 2020, the company’s cash, cash equivalents and restricted cash totaled $157.5 million, a decrease of $32.4 million from $189.9 million as of December 31, 2019. The decrease was primarily driven by additions of amortizable intangible assets related to content and technology of $15.8 million and a use of cash from operating activities of $9.9 million. As of March 31, 2020, the company reported outstanding debt of $254.1 million principally related to its term loan facility.

Recent Developments

On April 23, 2020, the company issued 2.25% Convertible Senior Notes due 2025 (the “Notes”) in an aggregate principal amount of $330.0 million. On April 29, 2020 the initial purchasers of the Notes exercised their option, in full, to purchase an additional $50.0 million in aggregate principal amount of the Notes, bringing the total aggregate principal amount of the Notes to $380.0 million. The company used a portion of the net proceeds to repay its $250.0 million term loan in full, as well as $1.3 million in accrued interest and a $2.5 million prepayment premium, and terminated its outstanding term loan facility.

Following repayment of the term loan and after deducting the initial purchasers’ discounts and commissions, estimated offering expenses payable by the company and the cost of entering into the privately negotiated capped call transactions with affiliates of the initial purchasers of the Notes, the company expects to have $65.3 million remaining for working capital or other general corporate purposes.