2U (TWOUQ) 2 May 242024 Q1 Earnings call transcript

Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2U, Inc.

First Quarter 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Steve Virostek.

begin. may You

and Quarter Jeannie, everyone. to Welcome Thank Earnings good Call. First XXXX XU's you, afternoon,

Joining the our Chief Executive me Lalljie, Officer; Paul on and call this Matt Norden, Chief Officer. are Financial afternoon our

be your But few for housekeeping will call cover like questions. sharing opening first, before We the remarks up items. to I'd a our

earnings and slide Investor website. release presentation the Our Relations are available on

statements future today, plans will are will our include this today refer anticipated operations, performance trends uncertainties our on risks, them. management update industry earnings reflect analysis to being These assumptions. Any we made factors statements XXXX, and statements Please the and and plans and during recorded press be changes replay made and forward-looking are initiatives sheet, and webcast made to in plans learners filings. subject available release remarks XX-Q the duty to regulations financial risk Our to as the have Form of and call our partners, report other for including our a university March matters. ability including or call our for in forward-looking balance regarding the results, and for improve our guidance Exchange SEC today. Statements described later and quarterly on and operating with our of laws, the documents ended for quarter and Securities to other and XX, filed improvement Commission. agency objectives no

in assumptions cause set differ that from our statements. may actual information forth to For materially risks, uncertainties results those and on such

isolation as non-GAAP measures we our will and GAAP be discuss in measures of a addition or believe call, results. XU's today's are financial non-GAAP during in These for we measures, substitute addition, not considered from to should performance. which supplemental useful In

website. find Relations with release press GAAP our can the page in and Investor on these reconciliations non-GAAP including comparable disclosures measures, our of additional regarding You results earnings

me hand let that, with to Paul. the So call

Steve, you, and good everyone. afternoon, Thank

are We XXXX. in solid a to off start

Our first quarter financial results exceeded expectations. our

our on the to quarter strategy, profitability. Revenue EBITDA execute As while laser-focused for we grow that we delivers to million. million, $XXX.X $XX.X are adjusted where continue our was shrink was greatest impact the on revenue

an total in have last all went of quarter up from We X,XXX in enrollments, XXX,XXX new increase to which the our seen partner programs. XX,XXX across

XX addition, In quarter. to has network XX compared million our to million learner grown last

details results continuing and executive progress are into exciting our lean product shortly. are strongly on Matt to to that performing degree We education our and financial have on share our provide further businesses. lines will some

hone This On made side, optimize with strides the business to of evaluation smart enhance we've significant and operations to decisions profitability and focus making to began resources. rigorous programs business revenue return the growth. the our for a strategies, and to

are establishing progress establishing for operational significant a the have in We framework flow. margin baseline revenue, made now and right and cash

tackling We balance also on. challenges sheet head our are

We growth navigate to hurdles sheet near in have balance fundamentals our return the XXXX. the management to and term to fix the top these and in line team

XXXX. our will Forum's and future demand the technology bullish XXXX, [ because generative creating future development. for strong to position a leading are driving World additional the jobs of require for education training the paradigm workers of workforce in and AI with XX% According force moment opportunity for Economic report of are by ] the on the in XU market industry. Advances shifts We labor of in insiding

the Although have only half to access resources. of training them currently proper

opportunity seize In presents. the we are the that immense ready forefront to this addition of wave, this to

to fully However, focus moment, and operational most foundation product to efficiency sheet. fixing opportunity, we must areas: right we this have X place. To balance this our capitalize continue make ensure on of innovation, the we the that on in

the where go-to fields with the be meeting high-demand appeal. degree the learners be met. Starting in wants first many learner quarter, a Our goal to organic new launched product. clear: programs, we is for XX to strong company In with development, workforce

As proposition under years our Most provide positive I anticipate model objective these our economics degree launches capital our begin X/X launch generating outcomes mentioned they last as they financial to quarter, and performance. a value and of programs our and we and cash the about about of objective These as strong are well X well students for for XU. deliver is require fit that future for sooner. programs to Flex that the model, the bode will outlay X under of flow best traditional

from Pepperdine partners ] encouraged by Recently, partnership XX. robust total to launch number programs, with Pepperdine University the bringing offerings. educational we remain our the expanded degree our our of X to we -- for continue [ degrees demand We with new

One have first ability degree consistently growth effectively placement enrollments College from strengths our of to from possess in in Health degree established enrollments network record. expect When these fields demonstrated and where in in newly extensive centers core its our in our profitable masters new is to a and success, leveraging of this our University program speech language degrees, ability combined segment year-over-year and and programs year. of competencies, with perfectly we aligns we proven our strategic of pathology vertical. Building most scale track focus deliver launched a growth with programs, our confidence have on have Pepperdine next continuing this We for we kind programs. its newly the a This Science.

online unprecedented technological on emerging seeing good important track on upskilling workforces are most capture this education long-term we facing changes. tool delivering prospects Alternative looking learner the of strong our based opportunity. for record Our scale pipeline, a positive as to We intend are the robust is segment, outcomes. In also that Credential

new contracts offer will softer to coding. believe in This camps, boot mitigate signed seeing we X we we're demand quarter, which AI the help

deliver we efficiently to our as as possible these innovations as in Just delivery important, programs through are working model.

achieved remain accelerated rates growth, at strong XX% of ed, forefront the our to quarter, the ed exec camps. for outcomes see for all business boot our decision-making. experience student and offered our led by expect As of is in we our with council recently by In exec continuity In in completions Padesh to first student we alone. MIT The the of improvements, of XX% signed completion an students to continue delivering higher Antra with month over program our courses and a India. Oxford, continue. We education Sloan start ] and this course of XXX in subscription-based trend contract off AI [ impressive with the first

to available Our X courses valuable state's now universities, the resource. million online providing learning high-quality are XX across students a over

of boot Camp, predictability up our in business Our difficult. for remains in boot camp the the shortfall, particularly demand, Executive boot business well for is the weaker demand in overall some is although business performing coating, Education and experiencing camp making

to Now turning operating efficiency.

reduced our expenses We prior annual are million by basis. which have actions, on on $XX building operating an already approximately our

that yield performing specific allowing costs improve Our processes. These are of Marketplace we costs. [ types speed and optimization, stack effectiveness, superior generation. to us second, partners efforts. Two engine focus a of points our efficiency optimizing efficiency to cost on expect are quality greater in strategically areas. If areas we functions changes to our of The The cost that of search of our examples and and ourselves, marketing first, partner improved incremental introduction reducing to differently. competency. ] collaboration market costs. activities we're into technology scale. remains EdX include And through our this on us and and and unlocking cross-sell reduce and our marketing organically increase marketing various powerful our prioritize Through specific our how technology and the by delivery while and financial market support are excel over those a on can are: segmentation, teaming dollars key we'll is reducing with benefits to the fixed in operating from focus demonstrates core efficiency our while reach lead and gives revenue up our fronts, to from technology scale looking These value structure personnel ways all increase increasing generation. reach organic

balance Turning now to the sheet.

to We trajectory impetus us head our which sheet. cash are are to balance challenges and balance higher a fixing on deliver meant put the flow, becomes return in business the on. profitability The for sheet tackling improvements

the our will continue lenders for the balance as conversations expect coming we begun months the have We those fixing over work collaboratively and of terms. with working sheet by the possible process best

are the of monitoring our partners closely our needs we As employees. plans, we and students, implement

a includes price value strive that that students, their For way at good value we want need, life to continue the a the they content represents delivering that that learn goals. to fits support outcomes and delivery compelling proposition they

partners, need and in For programs their future advance in structure. program support while flexibility that missions we deliver university providing to

for partner have the place, we a important, in as valued come. many be to need Just continue right years that we to plan to demonstrate

employees, for partnerships to of their technology, on sheet. And our our to partners. In the talking and is commitment without our return to possess of and are I for a valuable we the none want unwavering of especially that significant We growth. day-to-day period to regularly, balance and emphasize as focus partners thank work contributions employees. change the top conclusion, students our this colleagues, In we to mission, our company, possible necessary my we fixing line resources the

we in upcoming programs launches, to in Our relevant efficient new and the achieve quarter in top manner. priced confident XXXX. range the we our and competitively primary expand most product will the are growth delivered launches is new offering goal are by that With line first

Additionally, measures flow implementing. we and to improve expect the due we cost-saving our are cash to profitability

a our structure reputation call good I'll we are that top-tier sheet company. And our the that, We with have a reputation turn as balance to matches we so company capital Matt. over poised to while solid maintaining our a can as that ensure fix

Thanks, everyone. afternoon, and good Paul,

start with in the mind. few results, I keep themes Before wanted walking to through key you to for a

we've position. heard as to taken bolster you calls, our on First, prior steps financial

and first While results. impact driven are positive quarter, to to enrollment actions exceeded optimization ed our actions. we of strong revenue have first cost in pleased of the exec Notably, for the of over see work these reflected impact we the our of of the do, with profitability we XXXX the the expectations quarter our first quarter prior more XX% by business growth performance and positive

possible. first the address to quarter, us in a balance performance issues as Second, of our soon as the putting implementing position goal improvement in strong initiatives our we sheet began with

year the full seeing us we're We our which adjusted about later enable the achieve EBITDA expect to that initiatives in trends notwithstanding more I'll expectations, talk bootcamp these call. business, will in

of year-over-year, segment. The segment decline in a decline present quarter XXXX. the decrease P&L, status XX% extensive XX% decline our those the of impact the enrollments fourth then to to in $XXX.X XXXX. by quarter where as quarter on and conclude from of fourth on the number higher cash the the of the flow prior In the reveals which in But the XXXX on and that of light revenue enrollments which the operating additional improvement current programs segment's then and of the quarter. Also, X% second revenue of the segment the transformation was the new and guidance. With driven quarter, the portfolio, and enrollments the results. degree fourth decline portfolio again update strong in I'll launched our an a including first due the have to as XXXX, we who in walking that driven these of with student increased the management. declined in $XXX.X pandemic portfolio we start portfolio sheet discussions enrolled new an on of reported total in by quarter, activities over the the outlook the X% In EBITDA new the of the as performance, case move balance business. our on was work note themes during number current our I'll grew our first with we of this excluding quarter primarily we XX% degree primarily student this from X% did evaluated excludes call, underway with first of update on was analysis mind, we'll we let's significant the are year, I'll we're detail only generated degree X% to gain momentum the new is This thoughts in enrollment segment Cred by remainder quarter million, revenue. the graduates the shows XX adjusted management a new due maintaining a first debt decline in and I'll This compared due first to a we in Third, initiatives, was year-over-year. to the Also statement. performance perspective improvement better year holders. Starting revenue our on XXXX. fewer the some in enrollment quarter and and XX% XXXX through programs, for programs the steady-state increase, we provide what in and an our the the quarter, from degree from driving new million quarter. the share degree full Alt

overall, segment's performance trajectory similar we the fourth the So with impacted the in Alt it's in in first quarter. degree quarter pleased were was on. Decline experienced the quite revenue we in those by quarter the Cred factors to and

same executive revenue executive the XX% revenue strength in declined by compared softness offset camps, boot quarter XXXX, XX% Boot first while particularly increased camp offerings, in our continued period. over the Continued AI. coding, to partially education education particularly of

the to operating of optimization activities. recent impact reflecting our Operating on board, across improved the Moving expense cost expenses.

operating quarter paid driven For decrease decrease quarter, and a a first decrease personnel-related XX% This and of million the million, $XX.X expense the by $XXX.X expense was XXXX. being in to costs was a implement decrease $X.X our in expense from first primarily personnel flat resulted year-over-year. was decrease G&A marketing million This initiatives, partially improvement relatively $X costs. which by in offset million performance in

now Turning of million to in compared expense EBITDA profitability and mentioned for Net the for I previously. million quarter measures. quarter drivers Adjusted totaled our first $XX.X XXXX, the revenue loss the the reflecting operating margin $XX.X that of mentioned by largely of operating to This XXXX. compared earlier, in fewer the to $XX.X I was driven factors primarily quarter decreased the same programs XX% the quarter as steady-state first a million, to quarter X%.

the of XX%. a at Degree for Looking adjusted quarter, profitability segment segment. was million by margin EBITDA $XX

For segment, quarter adjusted the million Cred the over of million, was XXXX. improvement loss $X.X first Alt EBITDA $XX.X a

million cash, the equivalents $XX that This December includes in prior balance statement. restricted turn with on the sale cash and received million connection ended cash $XXX.X referenced receivables of increase $XX certain the from let's We with million, XX, to an XXXX. and cash, Now flow call. sheet our quarter of in quarter increase the we

the adjusted on cost capital $XXX.X was show provided and flow more working ending impact the We compared XX, the Looking December Cash the some XXXX, to at that quarter. I'll operating XX improvement our months liquidity by the delivered now unlevered million These quarter. XX of XX, million cash the in XXXX. for cash March results detail regarding $XX.X for statement. provide million months ending free activities flow and their positive for performance our optimization initiatives had initiatives financial implications. $XX.X

our As Paul sheet. stronger efficiency improve to this to put to fix mentioned, is a in operating key a significantly goal plan balance position us of

initiatives realize run the specific company, $XXX actions In in $XX highlight from few took addition to additional of underpinning fully now we the XXXX, to savings million optimization we've across a to identified million of XXXX. To the we the expect initiatives end rate of by cost cost plan. the which

the use operation streamlining rate approximately product approximately locations continue leveraging for platform to run functions and of our on simplifying of can believe this savings to arrangements processes. $XX and of and marketing Also $XX run infrastructure, technology technology edX outsourcing improve reduce initiative. basis. lower and the by and marketing the our a we sales various and We've efficiency and cost million back-office our spend we further million standardizing by through from identified expect technology We rate

identified remaining various to are have other We from initiatives. organization, corporate various run savings. at approximately process opportunities initiatives where million identified improvements real that savings come including take estate, hygiene to rate related the a entire look and continuing also G&A we've across $X hard of The we

outlook to second Turning revenue. a our full of and XXXX, year for starting discussion with the quarter now

Our guidance range quarter $XXX for from the revenue million second calls to to for million. $XXX

I as revenue prior from million mentioned $XXX revenue For to million. affirming the we're expected range guidance our year, $XXX previously, to with

to calls million. adjusted to range For for second adjusted quarter the for our EBITDA $XX million from EBITDA, guidance $XX

affirming reflects EBITDA outlook throughout by in expected This with range For adjusted for of to partially again prior rest XXXX. ed headwinds million the from year. continued continued year, $XXX EBITDA guidance boot camps, exec $XXX strong our coding we're adjusted offset the performance full million to the

all evaluating as possible. camp currently as options mitigate are much We to boot performance

year, already, initiatives in for which revenue taken while launch on full exec adjusted other optimizing to many reduce portfolio could delivery the this have improvement offerings camp across some ed reallocating strength of we we're model, the improving EBITDA. Also, the plan. X of steps While and AI capitalizing our on evaluating camp AI boot and still boot the refining camps performance working by implementing boot We're our new like options the quarter. resources

So along time. we do EBITDA But us impact plan expectations on exact XXXX, flux performance. EBITDA that we still believe in-year full the XXXX is our to in in boot impact improvement the actions the some year, adjusted with from enable at regardless of for our took meet camp optimization cost this performance adjusted will

to But facilities. timely to credit briefly our Before the and I covenant debt dialogue address our our the the position status we for XX, the XXXX, satisfy overall company we the I -- term. current in the holders. June company not constructive on quarter, covenant revenue to recurring with long comment wanted the to best revenue continued have second best our do discussions the find expect creditors for the to guidance months ended revenue XX on position a conclude, Based best have solution for for to of with contained

a with to the of executing transaction goal in term. near We the expect those discussions continue

exceeded our for a partners solid first the We operating support expectations providing and ability to fully students. To the any would transaction start company's continue marking the we year. services for conclude, expect our and that quarter, to

crucial capital the our position, enhancing strengthening to remains and highly is Our committed success. structure which financial for company's long-term our team securing

our enable well We let to begin to position. the call back hand the actively implementing deliver the will session. for optimistic thrive for are me our improvement to performance our us value are and operator into and initiatives market prospects about stakeholders. And This the that, with our reinforcing future Q&A

[Operator Baer Instructions] first line your Josh And the Stanley. from question with Morgan of comes

into launched programs. to the Wanted dig newly

or the sooner payback, X model. shallower about free talked sorry, -- X cash of years kind to steeper flow flex under the You the

year all free impact this look the at you a help you what revenue XX, a the from quantify launched and If the for next cash flow perspective? programs, can is year newly to and

start Matt to in $XX million and in XX us and between revenue of said expenses, of this approximately we'll call, that we calendar $XX Josh, here off $XX about million, programs On $XX let jump million will me that the shortly. in quarter's will last million year. -- cost we XXXX in XX somewhere total, launched have

bottom X calendar or projects we in have you'd know the anything XXXX. Matt, million. provided a point launch on we between X -- will state year XXX bit said. other, expect as data I that we about well. because was of the very other -- The that add I the X sometimes remember we $XXX for I cohort years $XXX very of million, them of which X, in that's don't to comes know expect a and get which probably other -- think million we well really $XXX you $XXX if steady-state And steady this these years that forward. numbers little is don't going those state you revenue steady revenue that programs million, the have else? But later, exactly line is top and cohort

the I No, key points. hit you all think

the on one then efficiency. And operational great. That's Okay.

And savings, mentioned You this drive tech makes of to cost sense. introduction the technology. clearly,

takes some it also time investment. think and I

you're how impact. of technology some So to any use those cost of and the have about do initiatives to where to you savings think examples looking drive specific

Yes.

outsourcing So around lower-cost I a falls what buckets. of couple think Certainly, and some office it moving into back -- I to low-cost mentioned functions locations.

would where mentioned, there upfront is be also related think might what there. Also that way the than areas on of tech think multiple in automate to the we side, marketing marketing business. and of to you top our marketing I side, the AI an which funnel have to the and Ultimately really takes business, experience to are those engage less that investment more for know on a the in the some probably department, more as to expect And at the throughout of I say, add rate thinking I savings if in only would operations Some processes is I a of with about. make opportunities $XX efficient. side, lot students activities. And there's students. Paul, not we deploy the million a efficient business you the but better I of run leading don't opportunities of anything to

presence would I The do only in a add is we have Town. that thing Cape

-- we there lower base I employee that do have operations of our cost we off can Our we think base talented as broadening environment. of build a think tremendous there, into employee

the of Needham Your MacDonald next with line Ryan question from comes & Company.

offering Great in and to a environment particular. results seemingly growth executive some that well to and customers? just learning spend? of tough with see you development Can what what with sort on is be education strong And corporate for the talk nice resonating seems about

let Ryan, join again, And in. start Matt me may off.

partners that to S doing have content a all I hit-driven as and is -- in growth goes sustainable about us that can great always appropriate topics, credential. have MIT sustainable the of education. Look, continue that making have underestimate us the Our programs It's and allows and what we for executive about alternative Oxford really our to partners. new new can't great a really, trajectory to all new We currently, curve is that objective so very have partners. and here And having definitely and education courses the are executive do the to well continue it's fundamentals on grow that content. sure business. have have top to we launch we back to for in appropriate us. are It you objective and

is the Pradesh alone. different us. and significant And XXX,XXX Most allows said, [ recurring that course different forward. credentials first ] what is it in had I from thing like something I'd offered. to completions market. point have we for is and a of the alternative deal to us start. on an a a it's deal month unique it's -- It importantly, to that Antra as general, other impressive off highlight and And go think in is model, this as traditionally subscription-based revenue we is done we The

Very follow-up maybe a topic the just shoring balance helpful. And on as of the up sheet.

I as think balance you've of the more steps do there. guess, to resolution maybe need savings, -- EBITDA. it think progression see Or you've like to of to talks? do in adjusted on further lenders generating the sheet, do need here, kind to we What, next seems you drive continue you Just about closer kind you where get identified sort a efficiencies bolstered need the execute to to to cash those on of operational more additional progress

Yes.

that's on in As we and would obviously I with a frequency, increasing our dialogue this constructive last say. lenders, we said have the call, call and

So necessarily. think to I don't else anything they need see

a coming the can imagine, up where the page I possible on question where as are. we company we as getting you that solution as for we are, think with to to hyper-focused And turn it's quickly are. of from given solution the right

to near really to think that I resolution we the have future we're up success. set as term, in for So will said a you going

And we're fortunate. Ryan,

we that We and lenders. to number number of concentrated, It's one. times. we've number players are of familiar have with, of very a a consists two, spoken group And it

the well. frame. The have lenders. to our was through students to for anything this, a of this would first we and the more makes fix quarter we to one And day. we're delivering discussion plan, this going where and about the of right with We're proud our things. to are every them That's -- and of go do making get with and what developing to But base all are that the I the our none our spear through very serve the those we to two Matt us want sheet. this are highest we operationally, the as the do quality it be the what commitment all do now, to our things. nothing and team have of It that the make as the students this But to priority sure this employee we trying education, of focus all tip of of has has for shorter That's So us. on point balance the convenient operational in none partners with balance separate absolutely framework make to do operations, sheet. we time

[Operator Q&A conference call. your session. today's you This participation. for concludes our Instructions] That concludes Thank

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