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
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
