2U(TWOU) - 2021 Q4 - Annual Report

Revenue Growth - Revenue for the year ended December 31, 2021, increased by $171.1 million, or 22.1%, to $945.7 million compared to $774.5 million in 2020[285] - Revenue from the Degree Program Segment increased by $105.6 million, or 21.7%, driven by a growth of 39,102 full course equivalent (FCE) enrollments, a 19.7% increase[285] - Revenue from the Alternative Credential Segment increased by $65.5 million, or 22.8%, due to a 15.3% increase in average revenue per FCE enrollment, from $3,561 to $4,105[285] - Total revenue grew by $171.1 million, or 22%, to $945.7 million in 2021 from $774.5 million in 2020[300] - The company recorded revenue of $353 million for the Alternative Credential Segment for the year ended December 31, 2021[392] Expenses and Costs - Total costs and expenses for the year ended December 31, 2021, were $1,113.1 million, an increase of $159.7 million, or 16.7%, compared to $953.5 million in 2020[284] - Marketing and sales expenses increased by $65.9 million, or 16.9%, to $456.1 million, primarily due to a $59.6 million increase in marketing expenses[289] - Curriculum and teaching expenses increased by $22.8 million, or 21.2%, to $130.8 million, primarily due to an increase of $17.4 million owed to university clients[286] - Servicing and support expenses increased by $12.7 million, or 10.1%, to $138.5 million, mainly due to an increase in personnel-related expenses[287] - Technology and content development expenses increased by $23.1 million, or 14.8%, to $179.1 million, driven by higher depreciation and amortization expenses[288] - General and administrative expenses increased by $35.1 million, or 20.2%, to $208.6 million compared to $173.5 million in 2020[290] Profitability and Loss - Net loss for the year ended December 31, 2021, was $194.8 million, a decrease of $21.7 million, or 10.0%, compared to a net loss of $216.5 million in 2020[284] - Degree Program Segment profitability surged by $76.5 million, or 154%, to $126.1 million, driven by revenue growth of $105.6 million[301] - Alternative Credential Segment profitability declined by $26.0 million, or 78%, to $(59.6) million, primarily due to increased marketing expenses[302] - The company reported a loss from operations of $167.4 million in 2021, slightly improved from a loss of $178.9 million in 2020[411] Cash Flow and Financial Position - As of December 31, 2021, the company's cash and cash equivalents totaled $232.9 million, designated for working capital and general corporate purposes[316] - The company reported a net cash used in operating activities of $18.1 million for 2021, a decrease of $47.7 million from net cash provided by operating activities of $29.6 million in 2020[328] - Net cash used in investing activities increased significantly to $793.4 million in 2021, primarily due to $761.1 million for the acquisition of edX[332] - Financing activities generated $544.9 million in net cash for 2021, an increase of $177.4 million from $367.5 million in 2020, largely due to increased long-term debt borrowings[333] - Cash and cash equivalents decreased to $232.9 million in 2021 from $500.6 million in 2020, a decline of 53%[409] - The company’s cash, cash equivalents, and restricted cash decreased to $249.909 million at the end of the period from $518.866 million at the beginning[417] Acquisitions and Growth - The company acquired substantially all assets of edX Inc. in November 2021, expanding its digital education offerings and adding over 42 million registered learners[259] - The company completed the edX Acquisition on November 16, 2021, for a preliminary purchase price of $773 million, which will impact future revenue streams[355] - The company now serves more than 230 global universities and offers over 3,600 online learning opportunities, positioning itself as a comprehensive online learning platform[422] - The company expects edX to be the primary brand for its products and services, enhancing its market presence in online education[422] Assets and Liabilities - Total assets increased to $2.1 billion as of December 31, 2021, up from $1.5 billion in 2020, reflecting a 36% growth[409] - Current liabilities rose to $333.5 million in 2021, compared to $237.4 million in 2020, indicating a 40% increase[409] - Long-term debt increased significantly to $845.3 million in 2021, up from $273.2 million in 2020, marking a 210% rise[409] - The company has contractual obligations totaling $1.3 billion as of December 31, 2021, with significant payments due in the next 1-3 years[336] Revenue Recognition and Accounting Policies - Deferred revenue represents amounts billed or received in advance of service delivery, reflecting a current liability on the balance sheet, with payments typically received early in each academic term[352] - The company recognizes unbilled revenue in the Degree Program Segment, as billings occur after the academic term has started, representing contract assets[350] - Payments to university clients for marketing and other rights are capitalized as assets and amortized over the life of the contract, impacting revenue recognition[348] - The company capitalizes costs related to content development for courses, which are amortized over an estimated useful life of four to five years[360] - The company uses significant estimates and assumptions in the purchase price allocation process for acquisitions, particularly regarding intangible assets[354] Internal Controls and Compliance - The company maintained effective internal control over financial reporting as of December 31, 2021, according to the auditor's opinion[400] - The Company maintains a full valuation allowance against deferred tax assets in the U.S. and certain foreign jurisdictions[453] - The Company records a liability for unrecognized tax benefits from uncertain tax positions, recognizing interest and penalties related to these as income tax expense[454]