2U(US:TWOU)2023-04-27 16:00Revenue 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].