Last10K.com

2U, Inc. (TWOU) SEC Filing 10-Q Quarterly report for the period ending Wednesday, September 30, 2020

SEC Filings

2U, Inc.

CIK: 1459417 Ticker: TWOU

Exhibit 99.1

 

2U, Inc. Reports Results for Third Quarter 2020

Delivers organic revenue growth of 31%

Reports significant improvement to profitability measures

Provides full-year guidance for 2020

 

LANHAM, Md. — October 27, 2020 — 2U, Inc. (Nasdaq: TWOU)

, a global leader in education technology, today reported financial and operating results for the third quarter ended September 30, 2020.

 

Results for Third Quarter 2020 Compared to Third Quarter 2019

Revenue increased 31% to $201.1 million

Graduate Program Segment revenue increased 18% to $122.0 million

Alternative Credential Segment revenue increased 57% to $79.1 million

Net loss decreased $88.6 million to $52.6 million, or $0.77 per share

Total cash balance increased to $499.6 million

 

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

Adjusted net loss improved by $9.7 million to $16.6 million, or $0.24 per share

Adjusted EBITDA improved by $14.4 million to $3.7 million

 

“2U’s evolution over the past few years puts us in an excellent position to meet the needs of lifelong learners,” Co-Founder and Chief Executive Officer, Christopher “Chip” Paucek said. “Today, we are a digital enabler bringing product strategy, technology capabilities, data analysis, marketing expertise, and student and faculty support to the best non-profit universities in the world. We are operating at the nexus of the future of education and the future of work, and the impact of accelerating demand is becoming increasingly evident in our operating results across the portfolio.”

 

“Our results for the quarter reflect the strong leading indicators we discussed in our last two earnings reports,” said Chief Financial Officer, Paul Lalljie. “Organic revenue accelerated, we continued to make progress on our profitability and free cash flow goals, and we have enhanced our liquidity position. With better visibility into the remainder of the year and continued confidence in the fundamentals of our business, we are pleased to reintroduce annual guidance.”

 

Discussion of Third Quarter 2020 Results

 

Revenue totaled $201.1 million, a 31% increase from $153.8 million in the third quarter of 2019. Graduate Program Segment revenue grew 18% to $122.0 million, primarily driven by a 17% increase in full course equivalent (“FCE”) enrollments. Alternative Credential Segment revenue grew 57% to $79.1 million, driven by a 57% increase in FCE enrollments.

 

Costs and expenses totaled $247.0 million, a 13% increase from $218.4 million in the third quarter of 2019 (excluding the impact of a $70.4 million impairment charge in the third quarter of 2019). The increase in costs was primarily driven by higher personnel and personnel-related expenses, curriculum and teaching costs, and depreciation and amortization expense. These increases were partially offset by savings related to efficiency initiatives and COVID-19 related savings, particularly from travel and related expense.

 

As of September 30, 2020, the company’s cash, cash equivalents and restricted cash totaled $499.6 million, an increase of $309.7 million from $189.9 million as of December 31, 2019. The cash balance as of September 30, 2020 reflects net proceeds from the August 2020 offering of the company’s common stock.

 

Business Outlook for Fiscal Year 2020

 

While recognizing that the COVID-19 pandemic continues to evolve, the company believes that increasing student and university demand for high-quality online education will continue. The company expects it will continue to drive growth in this dynamic environment, as evidenced by its strong performance in the third quarter of 2020 and its momentum entering the fourth quarter. With 2U’s increased visibility into the balance of fiscal year 2020, the company is providing annual guidance. Going forward, the company expects to provide annual guidance, updated quarterly, if necessary.

 

For the full year of 2020, the company expects:

 

Revenue to range from $760.0 million to $775.0 million, or growth of 32% to 35%

Net loss to range from $225.0 million to $210.0 million

Adjusted EBITDA to range from $7.0 million to $14.0 million

 

 

 

 

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), 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), foreign currency gains or losses, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. 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 foreign currency gains or losses, 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 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. For example, in this quarter the company is excluding certain litigation-related costs, consisting of fees for certain litigation and other proceedings.

 

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, Inc.’s third quarter 2020 financial results conference call
When: Tuesday, October 27, 2020
Time: 4:30 p.m. ET
Live Call: (877) 359-9508
Webcast: investor.2U.com

 

About 2U, Inc. (Nasdaq: TWOU)

 

Eliminating the back row in higher education is not just a metaphor—it’s our mission. For more than a decade, 2U, Inc., a global leader in education technology, has been a trusted partner and brand steward of great universities. We build, deliver, and support more than 475 digital and in-person educational offerings, including undergraduate and graduate degrees, professional certificates, Trilogy-powered boot camps, and GetSmarter short courses. Together with our partners, 2U has positively transformed the lives of more than 275,000 students and lifelong learners. To learn more, visit 2U.com. #NoBackRow

 

 

 

 

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 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, short courses and boot camps;

 

the company’s ability to acquire new university clients and expand its degree programs, short courses and boot camps with existing university clients;

 

the company’s ability to successfully integrate the operations of its acquisitions, including Trilogy, 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 its substantial indebtedness and comply with the covenants and conversion obligations contained in the indenture governing its convertible senior notes and the credit agreement governing its 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 any natural disasters or public health emergencies, such as the coronavirus disease 2019 (“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 our Annual Report on Form 10-K for the year ended December 31, 2019, as amended and supplemented by risks and uncertainties under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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: Ken Goff, 2U, Inc., investorinfo@2U.com

 

Media Contact: Glenda Felden, 2U, Inc., media@2U.com

 

 

 

 

2U, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

   September 30,
2020
   December 31,
2019
 
   (unaudited)     
Assets          
Current assets          
Cash and cash equivalents  $481,329   $170,593 
Restricted cash   18,235    19,276 
Accounts receivable, net   95,756    33,655 
Prepaid expenses and other assets   40,270    37,424 
Total current assets   635,590    260,948 
Property and equipment, net   53,603    57,643 
Right-of-use assets   53,453    43,401 
Goodwill   407,860    418,350 
Amortizable intangible assets, net   316,405    333,075 
Other assets, non-current   85,867    73,413 
Total assets  $1,552,778   $1,186,830 
Liabilities and stockholders’ equity          
Current liabilities          
Accounts payable and accrued expenses  $84,404   $65,381 
Accrued compensation and related benefits   44,484    21,885 
Deferred revenue   91,783    48,833 
Lease liability   9,185    7,320 
Other current liabilities   17,100    12,535 
Total current liabilities   246,956    155,954 
Long-term debt   268,224    246,620 
Deferred tax liabilities, net   2,134    5,133 
Lease liability, non-current   75,621    66,974 
Other liabilities, non-current   8,270    899 
Total liabilities   601,205    475,580 
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, 71,294,706 shares issued and outstanding as of September 30, 2020; 63,569,109 shares issued and outstanding as of December 31, 2019   71    63 
Additional paid-in capital   1,629,565    1,197,379 
Accumulated deficit   (658,215)   (479,388)
Accumulated other comprehensive loss   (19,848)   (6,804)
Total stockholders’ equity   951,573    711,250 
Total liabilities and stockholders’ equity  $1,552,778   $1,186,830 

 

 

 

 

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,
 
   2020   2019   2020   2019 
   (unaudited) 
Revenue  $201,073   $153,798   $559,239   $411,493 
Costs and expenses                    
Curriculum and teaching   30,153    21,336    76,887    41,345 
Servicing and support   32,536    27,351    93,363    71,518 
Technology and content development   40,223    34,132    113,040    79,969 
Marketing and sales   100,068    93,521    297,624    260,231 
General and administrative   44,000    42,040    127,207    93,471 
Impairment charge       70,379        70,379 
Total costs and expenses   246,980    288,759    708,121    616,913 
Loss from operations   (45,907)   (134,961)   (148,882)   (205,420)
Interest income   713    924    1,380    5,087 
Interest expense   (7,564)   (5,651)   (19,575)   (8,130)
Loss on debt extinguishment           (11,671)    
Other income (expense), net   42    (710)   (1,659)   (1,093)
Loss before income taxes   (52,716)   (140,398)   (180,407)   (209,556)
Income tax benefit (expense)   162    (714)   1,580    18,918 
Net loss  $(52,554)  $(141,112)  $(178,827)  $(190,638)
Net loss per share, basic and diluted  $(0.77)  $(2.23)  $(2.69)  $(3.14)
Weighted-average shares of common stock outstanding, basic and diluted   68,580,439    63,358,890    66,368,686    60,690,536 
Other comprehensive income (loss)                    
Foreign currency translation adjustments, net of tax of $0 for all periods presented   1,667    (5,856)   (13,044)   (3,985)
Comprehensive loss  $(50,887)  $(146,968)  $(191,871)  $(194,623)

 

 

 

 

2U, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

   Nine Months Ended September 30, 
   2020   2019 
   (unaudited) 
Cash flows from operating activities          
Net loss  $(178,827)  $(190,638)
Adjustments to reconcile net loss to net cash used in operating activities:          
Non-cash interest expense   13,161    883 
Depreciation and amortization expense   71,406    46,639 
Stock-based compensation expense   63,962    36,086 
Non-cash lease expense   11,181    8,407 
Provision for credit losses   2,703    1,785 
Impairment charge       70,379 
Loss on debt extinguishment   11,671     
Changes in operating assets and liabilities, net of assets and liabilities acquired:          
Accounts receivable, net   (65,095)   (39,743)
Payments to university clients   2,171    (22,257)
Prepaid expenses and other assets   (17,153)   (6,760)
Accounts payable and accrued expenses   15,281    12,712 
Accrued compensation and related benefits   22,737    (109)
Deferred revenue   43,138    20,162 
Other liabilities, net   (5,680)   (24,263)
Other   2,486    1,056 
Net cash used in operating activities   (6,858)   (85,661)
Cash flows from investing activities          
Purchase of a business, net of cash acquired   (949)   (388,004)
Additions of amortizable intangible assets   (46,750)   (50,950)
Purchases of property and equipment   (5,516)   (11,306)
Purchase of investments       (10,000)
Proceeds from maturities of investments       25,000 
Advances made to university clients       (100)
Advances repaid by university clients   925    350 
Net cash used in investing activities   (52,290)   (435,010)
Cash flows from financing activities          
Proceeds from issuance of common stock, net of offering costs   299,796     
Proceeds from debt   371,681    243,726 
Payments on debt   (250,479)    
Payment of debt issuance costs   (3,419)   (1,953)
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)    
Proceeds from exercise of stock options   3,123    2,942 
Tax withholding payments associated with settlement of restricted stock units   (470)   (2,573)
Proceeds from employee stock purchase plan share purchases   1,771    1,895 
Payments for acquisition of amortizable intangible assets       (1,283)
Net cash provided by financing activities   368,935    242,754 
Effect of exchange rate changes on cash   (92)   (1,025)
Net increase (decrease) in cash, cash equivalents and restricted cash   309,695    (278,942)
Cash, cash equivalents and restricted cash, beginning of period   189,869    449,772 
Cash, cash equivalents and restricted cash, end of period  $499,564   $170,830 

 

 

 

 

2U, Inc.

Reconciliation of Non-GAAP Measures

(unaudited)

 

The following table presents a reconciliation of net loss to adjusted net loss and adjusted EBITDA (loss), for each of the periods indicated:

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2020   2019   2020   2019 
   (in thousands, except share and per share amounts) 
Net loss  $(52,554)  $(141,112)  $(178,827)  $(190,638)
Stock-based compensation expense   22,001    16,535    63,962    36,086 
Foreign currency (gain) loss   (42)   710    1,659    1,093 
Amortization of acquired intangible assets   10,669    11,096    32,057    17,863 
Income tax benefit on amortization of acquired intangible assets   (347)   (393)   (1,057)   (1,165)
Acquisition-related income tax benefit       1,504        (17,758)
Loss on debt extinguishment           11,671     
Impairment charge       70,379        70,379 
Other*   3,682    15,036    10,835    23,412 
Adjusted net loss   (16,591)   (26,245)   (59,700)   (60,728)
Net interest expense   6,851    4,727    18,195    3,043 
Income tax expense (benefit)   185    (397)   (523)   5 
Depreciation and amortization expense   13,267    11,192    39,349    28,776 
Adjusted EBITDA (loss)  $3,712   $(10,723)  $(2,679)  $(28,904)
                     
Net loss per share, basic and diluted  $(0.77)  $(2.23)  $(2.69)  $(3.14)
Adjusted net loss per share, basic and diluted  $(0.24)  $(0.41)  $(0.90)  $(0.97)
Weighted-average shares of common stock outstanding, basic and diluted   68,580,439    63,358,890    66,368,686    60,690,536 

 

 

*Includes (i) transaction and integration costs of $0.4 million and $2.5 million in the three months ended September 30, 2020 and 2019, respectively and $1.5 million and $7.0 million in the nine months ended September 30, 2020 and 2019, respectively, (ii) restructuring-related costs of $2.7 million and $6.6 million in the three months ended September 30, 2020 and 2019, respectively and $3.2 million and $7.2 million in the nine months ended September 30, 2020 and 2019, respectively, (iii) stockholder activism costs of $5.6 million in the nine months ended September 30, 2020, (iv) litigation-related costs of $0.6 million in each of the three- and nine-month periods ended September 30, 2020, and (v) deferred revenue fair value adjustments of $5.9 million and $9.3 million in the three and nine months ended September 30, 2019, respectively.

 


The following information was filed by 2U, Inc. (TWOU) on Tuesday, October 27, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

View differences made from one quarter to another to evaluate 2U, Inc.'s financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 10-Q Quarterly Report to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by 2U, Inc..

Continue

Assess how 2U, Inc.'s management team is paid from their Annual Proxy

Definitive Proxy Statement (Form DEF 14A)
Screenshot example of actual Proxy Statement

2U, Inc.'s Definitive Proxy Statement (Form DEF 14A) filed after their 2020 10-K Annual Report includes:

  • Voting Procedures
  • Board Members
  • Executive Team
  • Salaries, Bonuses, Perks
  • Peers / Competitors

Continue

SEC Filing Tools

Rating

Learn More
Bullish Bearish Neutral
Filter Sentiment:
All
Positive
Negative
Filter Category:
All
Revenue
Financial
M & A
Other
Filter Subcategory:
All
Product
Cash Flow
Expense
Earnings
Shares
Income
Other
Inside 2U, Inc.'s 10-Q Quarterly Report:

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Cover Page
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (Parenthetical)
Condensed Consolidated Statements Of Cash Flows
Condensed Consolidated Statements Of Changes In Stockholders' Equity
Condensed Consolidated Statements Of Operations And Comprehensive Loss
Condensed Consolidated Statements Of Operations And Comprehensive Loss (Parenthetical)
Accrued Expenses
Accrued Expenses (Details)
Accrued Expenses (Tables)
Business Combination
Business Combination (Tables)
Business Combination - Additional Information (Details)
Business Combination - Pro Forma Information (Details)
Commitments And Contingencies
Commitments And Contingencies (Details)
Debt
Debt (Tables)
Debt - Additional Information (Details)
Debt - Long-Term Debt (Details)
Goodwill And Amortizable Intangible Assets
Goodwill And Amortizable Intangible Assets (Tables)
Goodwill And Amortizable Intangible Assets - Amortizable Intangible Assets (Details)
Goodwill And Amortizable Intangible Assets - Estimated Future Amortization Expense (Details)
Goodwill And Amortizable Intangible Assets - Narrative (Details)
Income Taxes
Income Taxes (Details)
Leases
Leases (Tables)
Leases - Additional Information (Details)
Leases - Lease Cost (Details)
Leases - Operating Lease Liabilities Due (Details)
Net Loss Per Share
Net Loss Per Share (Details)
Net Loss Per Share (Tables)
Organization
Organization (Details)
Segment And Geographic Information
Segment And Geographic Information (Tables)
Segment And Geographic Information - Concentration Risk (Details)
Segment And Geographic Information - Contract Acquisition Costs (Details)
Segment And Geographic Information - Geographical Information (Details)
Segment And Geographic Information - Revenue And Total Assets By Segment (Details)
Significant Accounting Policies
Significant Accounting Policies (Policies)
Significant Accounting Policies (Tables)
Significant Accounting Policies - Change In Provision For Credit Losses (Details)
Significant Accounting Policies - Convertible Senior Notes (Details)
Stockholders' Equity
Stockholders' Equity (Tables)
Stockholders' Equity - Common Stock And Stock-Based Compensation (Details)
Stockholders' Equity - Restricted And Performance Restricted Stock Units (Details)
Stockholders' Equity - Stock Options (Details)
Stockholders' Equity - Stock-Based Compensation Expense (Details)
Supplemental Cash Flow Information
Supplemental Cash Flow Information (Details)
Ticker: TWOU
CIK: 1459417
Form Type: 10-Q Quarterly Report
Accession Number: 0001459417-20-000012
Submitted to the SEC: Tue Oct 27 2020 4:06:04 PM EST
Accepted by the SEC: Tue Oct 27 2020
Period: Wednesday, September 30, 2020
Industry: Prepackaged Software

External Resources:
Stock Quote
Social Media

Bookmark the Permalink:
https://last10k.com/sec-filings/twou/0001459417-20-000012.htm