Organizational structure sets up 2U to improve profitability, cash flow, and future growthLANHAM, Md., Jan. 3, 2024 /PRNewswire/ -- 2U, Inc. (Nasdaq: TWOU), a leading online education platform company, today announced that it has created two executive roles to lead each of the company's business segments. Andrew Hermalyn has been appointed President of the Degree Program Segment, and Aaron McCullough has been appointed President of the Alternative Credential Segment. From Left: Andrew Hermalyn, Presiden ...

So, the fact is, it surprised us. It's definitely the story of the quarter for us, and we just have to own it, move ahead and build that business better. But the other bootcamps were up. Couple more on the program management activity. Just wanted to confirm, when that revenue comes in, does it drop pretty much straight to EBITDA? [Operator Instructions]. Your next question is from George Tong. We're in the late innings. Yes, yes, it's been a very active process. So, we're feeling good about how we've done a ...

Financial Performance - Revenue for Q3 2023 was $229.7 million [4], while net loss was $47.4 million [4] - Adjusted EBITDA for Q3 2023 was $28.6 million, representing a 12% margin [4] - The company's outlook for 2023 includes revenue between $965 million and $990 million, a net loss between $240 million and $250 million, and adjusted EBITDA between $165 million and $175 million [9] - Adjusted unlevered free cash flow for the trailing twelve months ending Q3 2023 was $31.9 million [11] Segment Performance - Degree Program revenue for Q3 2023 was $137.6 million [6], with an adjusted EBITDA margin of 32% [6] - Alternative Credential revenue for Q3 2023 was $92.1 million [6], with an adjusted EBITDA margin of -16% [6] Costs and Expenses - Total costs and expenses (excluding depreciation & amortization and stock-based compensation) for Q3 2023 were $216.9 million [16, 23] - Marketing and sales expenses accounted for 38% of revenue in Q3 2023 [23] - Impairment charges were $79.5 million in Q3 2022, but $0 in Q3 2023 [6, 23] Strategic Initiatives - The company is focused on executing its platform strategy to improve operating efficiency and enhance value to learners and partners [27] - The company launched 159 new edX courses from 49 unique institutions [38] - A generative AI-powered learning assistant, edX Xpert, is being rolled out across all boot camps [38]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36376 2U, INC. (Address of Principal Executive Offices) (Zip Code) (301) 892-4350 (Registrant's telephone ...

Financial Data and Key Metrics Changes - Revenue for Q2 2023 totaled $222.1 million, down 8% year-over-year, driven by a 9% decrease in Full Course Equivalents (FCEs) to 76,300 [19] - Adjusted EBITDA for the quarter was $21.8 million, with a margin of 10%, compared to a 9% margin for the same period last year [46] - Net loss for the quarter was $173.7 million, compared to a net loss of $62.9 million in Q2 2022, reflecting a non-cash impairment charge of $134.1 million [69] Business Line Data and Key Metrics Changes - Degree Program segment revenue decreased 16% to $119.5 million, primarily due to a 16% decrease in FCEs [43] - Revenue from the Alternative Credential segment increased 4% to $102.6 million, driven by a 10% increase in FCEs, while revenue per FCE decreased 8% [19] - Enterprise revenue grew 35% this quarter, with annualized bookings approaching $100 million [66] Market Data and Key Metrics Changes - The company is experiencing a shift towards alternative credentials, which are expected to surpass degree business in 2024 for the first time [32] - The demand for the new flex revenue share model is strong, with universities showing a preference for this model [11][39] - The boot camp business continues to grow, particularly in cybersecurity, while the coding segment has softened due to a tech recession [15] Company Strategy and Development Direction - The company has adopted a platform strategy following the edX acquisition, aiming to lower costs and create new revenue synergies [5] - There is a focus on expanding offerings from highly selective programs to more accessible and affordable options [6] - The introduction of a flat fee model is expected to provide predictable revenue and attract clients who prefer not to engage in revenue sharing [39][40] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the company's ability to navigate the regulatory environment and believes the platform strategy is effective for achieving long-term profitability [4][30] - The company anticipates a 15% increase in revenue for the second half of 2023 compared to the first half, driven by enterprise contracts and degree segment revenue growth [71] - Management highlighted the importance of AI in enhancing operational efficiency and driving user engagement [16][17] Other Important Information - The company ended the quarter with cash and cash equivalents of $6 million, a decrease of $42.6 million from the previous quarter [23] - Stock-based compensation expense decreased by 51% to $11 million due to a reduction in equity awards granted [22] - The company is committed to continuous portfolio management to ensure alignment with evolving customer needs [34] Q&A Session Summary Question: Can you discuss the expected capital intensity of the new degree program launches and the anticipated impact on free cash flow generation? - Management indicated that the new offerings are CapEx-light, with many not requiring course build, leading to quicker revenue generation [137] Question: Are there any updates on the regulatory front related to oversight of OPMs? - Management stated that the flat fee model was not driven by regulatory reasons but rather to provide additional options for university partners [95] Question: What is the timeline to achieve profitability for the Alternative Credential segment? - Management expects to reach profitability for the Alternative Credential segment by the end of 2023, with significant growth anticipated in Q4 [114]

2U Appendix This presentation includes the following non-GAAP financial measures: adjusted EBITDA, 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 presentation to the most directly comparable GAAP financial measure. The company defines adjusted EBITDA as net income or net loss, as applicable, before net interest income (expense), foreign ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36376 2U, INC. (Exact name of registrant as specified in its charter) Delaware 26-2335939 (State or other jurisdiction of incorp ...

Revenue Performance - Revenue for Q1 2023 decreased by $14.8 million, or 5.9%, to $238.5 million compared to $253.3 million in Q1 2022[245]. - Revenue from the Degree Program Segment decreased by $13.7 million, or 8.9%, with Full Course Equivalent (FCE) enrollments down by 7,118, or 11.4%[245]. - Revenue from the Alternative Credential Segment decreased by $1.1 million, or 1.1%, with FCE enrollments down by 674, or 3.0%[246]. - Total revenue decreased by $14.8 million, or 5.9%, to $238.5 million compared to $253.3 million in 2022[264]. Profitability and Losses - The company recorded a loss from operations of $20.2 million, significantly improved from a loss of $111.4 million in the prior year[244]. - Degree Program Segment profitability increased by $11.4 million, or 31.8%, to $47.2 million compared to $35.8 million in 2022[265]. - Alternative Credential Segment profitability improved by $6.5 million, or 27.7%, to $(17.0) million compared to $(23.5) million in 2022[266]. - The net loss for the three months ended March 31, 2023, was $54.1 million, adjusted for non-cash charges, resulting in a net income of $12.5 million[282]. - Adjusted EBITDA for the three months ended March 31, 2023, was $30.2 million, compared to $12.3 million for the same period in 2022[335]. Expenses - Marketing and sales expense decreased by $30.8 million, or 23.5%, to $100.2 million, attributed to a more efficient marketing framework[249]. - General and administrative expense decreased by $11.0 million, or 21.9%, to $39.3 million, primarily due to reductions in personnel-related expenses[251]. - Technology and content development expense decreased by $5.6 million, or 10.9%, to $45.5 million, mainly due to a decrease in personnel-related expenses[248]. - Servicing and support expense decreased by $3.5 million, or 8.9%, to $36.1 million, primarily due to a reduction in personnel-related expenses[247]. Cash Flow and Liquidity - As of March 31, 2023, cash and cash equivalents totaled $94.2 million, available for working capital and general corporate purposes[267]. - Net cash provided by operating activities for the three months ended March 31, 2023, was $27.5 million, a significant increase from a net cash used of $66 thousand in the same period of 2022[279]. - Cash used in investing activities was $11.8 million, primarily due to $10.6 million for the addition of amortizable intangible assets and $1.2 million for property and equipment purchases[285]. - Net cash used in financing activities was $89.5 million, driven by net cash outflows of $90.4 million under the Second Amended Credit Agreement and the 2030 Notes[287]. Restructuring and Strategic Plans - The company recorded $4.9 million in restructuring charges, reflecting ongoing adjustments from the 2022 Strategic Realignment Plan[243]. - The company expects further profitability improvements from the implementation of the 2022 Strategic Realignment Plan[227]. - The company expects further profitability improvements due to the implementation of the 2022 Strategic Realignment Plan and long-term revenue contracts[274]. Debt and Interest - Net interest expense rose by $4.0 million, or 29.0%, to $17.6 million from $13.6 million in 2022, primarily due to a $2.2 million increase in interest expense under the Second Amended Credit Agreement[254]. - The company recorded a loss on debt extinguishment of $12.1 million and $4.6 million in debt modification expense during the three months ended March 31, 2023[255]. - As of March 31, 2023, borrowings under the Second Amended Credit Agreement were $379.1 million, with interest rates of 5.50% for base rate loans and 6.50% for Term SOFR loans[338]. Asset Management and Impairment - The company recorded impairment charges of $28.8 million and $30.0 million to goodwill and indefinite-lived intangible assets during the three months ended March 31, 2022, due to carrying values exceeding estimated fair values[314]. - The company is evaluating the impact of recent declines in market capitalization on the assessment of goodwill and indefinite-lived intangible asset balances[321]. - As of March 31, 2023, the goodwill balance was $732.3 million, and the indefinite-lived intangible asset balance was $195.7 million, remaining unchanged from December 31, 2022[321]. Enrollment and Demand - Full Course Equivalent (FCE) enrollments in the Degree Program Segment decreased from 62,609 in Q1 2022 to 55,491 in Q1 2023, while average revenue per FCE enrollment increased from $2,462 to $2,532[330]. - In the Alternative Credential Segment, FCE enrollments decreased from 22,664 in Q1 2022 to 21,990 in Q1 2023, with average revenue per FCE enrollment rising from $4,012 to $4,193[330]. - Cash provided by deferred revenue was $24.7 million, indicating strong demand and enrollment in educational programs[283]. Market Risks and Controls - The company does not believe inflation has materially affected its business for the three months ended March 31, 2023, but continues to monitor inflation-driven costs[342]. - No changes were made in internal control over financial reporting during the three months ended March 31, 2023 that materially affected internal controls[345]. - The company maintains effective disclosure controls and procedures as of March 31, 2023, ensuring timely and accurate reporting[344]. - There have been no material changes to market risk since the last annual report filed on February 21, 2023[337].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36376 2U, INC. (Exact name of registrant as specified in its charter) Delaware 26-2335939 (State or other jurisdiction of incorporation or orga ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements show decreased assets and equity, with revenue growth offset by a wider net loss due to impairment and restructuring charges [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity declined while total liabilities increased, driven by goodwill reduction and higher long-term debt Condensed Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$2,033,234** | **$2,109,006** | | Total Current Assets | $418,967 | $393,852 | | Goodwill | $788,021 | $834,539 | | Intangible assets, net | $611,886 | $665,523 | | **Total Liabilities** | **$1,427,584** | **$1,279,851** | | Total Current Liabilities | $403,961 | $333,507 | | Long-term debt | $927,746 | $845,316 | | **Total Stockholders' Equity** | **$605,650** | **$829,155** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenue grew modestly, but the net loss widened significantly in H1 2022 due to substantial impairment and restructuring charges Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $241,464 | $237,209 | $494,793 | $469,682 | | Loss from operations | $(47,984) | $(37,091) | $(159,352) | $(74,223) | | Net loss | $(62,852) | $(21,831) | $(188,632) | $(67,395) | | Net loss per share | $(0.82) | $(0.29) | $(2.46) | $(0.91) | - The company recorded **impairment charges of $58.8 million** and **restructuring charges of $17.5 million** in the first six months of 2022, which were significant contributors to the increased net loss[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved significantly in H1 2022, though overall cash decreased due to investing and financing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $28,644 | $(2,194) | | Net cash (used in) provided by investing activities | $(35,179) | $4,812 | | Net cash (used in) provided by financing activities | $(2,975) | $450,563 | | **Net (decrease) increase in cash** | **$(12,124)** | **$452,468** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures cover segment reporting, the edX acquisition, significant impairment charges, a strategic realignment plan, and debt composition - The company operates through two reportable segments: the **Degree Program Segment** and the **Alternative Credential Segment**[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - In Q1 2022, a significant decline in market capitalization triggered an interim impairment assessment, resulting in **impairment charges of $58.8 million** within the Alternative Credential Segment[54](index=54&type=chunk) - During Q2 2022, the company initiated the **'2022 Strategic Realignment Plan'**, expecting to incur **$35-$40 million in restructuring charges** to accelerate its transition to a platform company[102](index=102&type=chunk)[103](index=103&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth driven by the edX acquisition, a wider net loss, and a strategic realignment plan to generate cost savings - The company is accelerating its transition to a platform company through the **'2022 Strategic Realignment Plan'**, which is expected to generate approximately **$70 million in annualized cost savings**[221](index=221&type=chunk) - As of June 30, 2022, the company's principal sources of liquidity were **cash and cash equivalents of $220.8 million**, which management believes is sufficient for the next 12 months[280](index=280&type=chunk)[286](index=286&type=chunk) H1 2022 vs H1 2021 Performance Summary (in thousands) | Metric | H1 2022 | H1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $494,793 | $469,682 | 5.3% | | Loss from Operations | $(159,352) | $(74,223) | 114.7% | | Net Loss | $(188,632) | $(67,395) | 179.9% | | Adjusted EBITDA | $34,182 | $30,860 | 10.8% | [Results of Operations](index=43&type=section&id=Results%20of%20Operations) H1 2022 revenue grew 5.3%, but the net loss expanded significantly due to major impairment and restructuring charges - Q2 2022 revenue increased by **$4.3 million (1.8%)**, which includes **$10.0 million from the newly acquired edX**[242](index=242&type=chunk) - H1 2022 revenue increased by **$25.1 million (5.3%)**, including **$20.9 million from edX**[255](index=255&type=chunk) - Significant charges in H1 2022 included **$58.8 million in impairment charges** and **$17.5 million in restructuring charges**[254](index=254&type=chunk)[262](index=262&type=chunk) [Business Segment Operating Results](index=47&type=section&id=Business%20Segment%20Operating%20Results) The Degree Program segment's profitability grew, while the Alternative Credential segment's loss widened due to edX acquisition costs Segment Performance for Six Months Ended June 30 (in thousands) | Segment | Revenue 2022 | Revenue 2021 | Profitability 2022 | Profitability 2021 | | :--- | :--- | :--- | :--- | :--- | | Degree Program | $297,257 | $292,089 | $75,357 | $53,861 | | Alternative Credential | $197,536 | $177,593 | $(41,175) | $(23,001) | | **Total** | **$494,793** | **$469,682** | **$34,182** | **$30,860** | - The **Degree Program Segment's profitability increased by $21.5 million (39.9%)** in H1 2022 due to revenue growth and operational efficiency initiatives[278](index=278&type=chunk) - The **Alternative Credential Segment's loss increased by $18.2 million (79.0%)** in H1 2022, mainly due to **$35.4 million in operating expenses from edX**[279](index=279&type=chunk) [Key Business and Financial Performance Metrics](index=55&type=section&id=Key%20Business%20and%20Financial%20Performance%20Metrics) Full Course Equivalent (FCE) enrollments showed mixed results, with growth in Degree Program FCEs and a slight decline in Alternative Credential FCEs FCE Enrollments and Average Revenue per FCE | Segment & Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **Degree Program** | | | | | | FCE enrollments | 60,303 | 60,429 | 122,912 | 120,436 | | Avg. revenue per FCE | $2,373 | $2,420 | $2,418 | $2,425 | | **Alternative Credential** | | | | | | FCE enrollments | 23,443 | 23,679 | 46,107 | 44,757 | | Avg. revenue per FCE | $3,891 | $3,843 | $3,951 | $3,968 | [Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and potential future impacts of accelerating inflation - The company's primary foreign currency exposures relate to revenue and expenses in **South Africa and the United Kingdom**[342](index=342&type=chunk) - For the six months ended June 30, 2022, the company recognized a **foreign currency translation loss of $0.3 million** and **foreign currency exchange losses of $2.8 million**[343](index=343&type=chunk)[344](index=344&type=chunk) - While inflation has not had a material effect to date, management is monitoring **accelerating inflation as a potential risk** that could harm future business[346](index=346&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective, excluding the recently acquired edX business pending integration - Management concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2022[347](index=347&type=chunk) - The evaluation of controls **excluded the newly acquired edX business**, which constituted approximately 3% of consolidated assets and revenues[347](index=347&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) A securities class action lawsuit has reached a settlement in principle, fully covered by the company's insurers - A securities class action lawsuit has reached a settlement in principle, with the **$37.0 million payment to be fully funded by the company's insurers**[91](index=91&type=chunk) [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) Key risks include potential future impairment charges and the successful execution of the 2022 Strategic Realignment Plan - There is a risk of **further impairment of intangible assets and goodwill**, which could be triggered by failure to achieve business targets or further declines in market capitalization[352](index=352&type=chunk)[353](index=353&type=chunk) - The success of the **2022 Strategic Realignment Plan is not guaranteed** and faces risks such as unexpected costs and employee attrition[354](index=354&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or issuer repurchases were conducted during the reporting period - There were **no unregistered sales of equity securities** or issuer repurchases of equity securities during the quarter[355](index=355&type=chunk)[356](index=356&type=chunk) [Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[356](index=356&type=chunk) [Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - None[357](index=357&type=chunk) [Other Information](index=60&type=section&id=Item%205.%20Other%20Information) No other material information was required to be disclosed for the period - None[358](index=358&type=chunk) [Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including required CEO and CFO certifications - The exhibits filed include **certifications from the CEO and CFO** pursuant to the Sarbanes-Oxley Act of 2002 and XBRL interactive data files[360](index=360&type=chunk)