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2U Reports Results for the Third Quarter of 2020

EdTech Capital

Two days ago, the global leader of education technology 2U has reported its financial and operating results for the third quarter of 2020.

In a nutshell:

  • 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
The revenue growth of 2U

The acquisitions of 2U (GetSmarter and Trilogy) are starting to pay off. The alternative credential segment (short courses and bootcamps) grew by 57% to $79.1 million.

The historical business (Graduate Programs) increased its growth, from 15% last year to 18% now, benefiting from the pandemic. The company also increased its liquidity thanks to a record $300 million equity offering. 2U's net loss amounted to $52.6 million.

"We're seeing growing interest from new and existing partners in launching not just alternative credential and grad programs, but also online undergrad degrees, which is, by far, the largest part of the addressable higher education market and an area that has become hot for 2U.  Our LSE and University of London undergrad degree offerings have officially expanded again with the addition of 2 signature degrees, a BSc in Finance and a BSc in Mathematics and Economics. And the first LSE undergrad cohort successfully launched in August, with the upcoming fall cohort expected to come in well above our initial targets," said the CEO Chip Paucek during the earnings call.

"We first saw the strategic and growth potential in this segment of the market 4 years ago before acquiring the short course business, and our acquisition of the boot camp business 5 quarters ago further demonstrated our commitment to expanding nondegree offerings. Today, those deals are bearing fruit. We believe that 2U's Alternative Credential segment generates more annual revenue than any of the other MOOC and alternative credential providers based anywhere outside of China. These nondegree offerings serve directly as an on-ramp to degrees, a way to supplement existing degree offerings and an avenue for current degree holders to upskill or reskill. They are a natural complement, too, not a replacement for our degree business."

"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."

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