2U, Inc.
2U, Inc. (Form: 8-K, Received: 02/23/2017 16:47:08)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

February 23, 2017

 

2U, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

DELAWARE

(STATE OF INCORPORATION)

 

001-36376

 

26-2335939

(COMMISSION FILE NUMBER)

 

(IRS EMPLOYER ID. NUMBER)

 

7900 Harkins Road

 

 

Lanham, MD

 

20706

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 

(ZIP CODE)

 

(301) 892-4350

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02               Results of Operations and Financial Condition

 

On February 23, 2017, 2U, Inc. issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2016. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated by reference herein.

 

In accordance with General Instruction B.2. of Form 8-K, the information in this Item 2.02, and Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any of the Registrant’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any incorporation language in such a filing, except as expressly set forth by specific reference in such a filing.

 

Item 9.01               Financial Statements and Exhibits

 

(d)            Exhibits

 

Exhibit Number

 

Exhibit Description

99.1

 

Press release, dated February 23, 2017, “2U, Inc. Reports Fourth-Quarter and Full-Year 2016 Financial Results.”

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

2U, INC.

 

 

 

 

 

By:

/s/ Christopher J. Paucek

 

Name:

Christopher J. Paucek

 

Title:

Chief Executive Officer

 

 

Date: February 23, 2017

 

 

3



 

EXHIBIT INDEX

 

Exhibit Number

 

Exhibit Description

99.1

 

Press release, dated February 23, 2017, “2U, Inc. Reports Fourth-Quarter and Full-Year 2016 Financial Results.”

 

4


Exhibit 99.1

 

2U, Inc. Reports Fourth-Quarter and Full-Year 2016 Financial Results

 

· Full-Year 2016 Revenue Growth of 37%, Year Over Year

· Full-Year Net Loss Margin Improvement of Eight Percentage Points, Year Over Year
· Full-Year Adjusted EBITDA Margin Improvement of Seven Percentage Points, Year Over Year
· 2016 was 2U’s First Adjusted EBITDA Profitable Year

 

LANHAM, Md., Feb. 23, 2017 —  2U, Inc. (NASDAQ: TWOU) , today reported financial and operating results for the fourth quarter and full year ended December 31, 2016.

 

Fourth-Quarter 2016 Results

 

·                   Revenue was $57.4 million, an increase of 33% from $43.3 million in the fourth quarter of 2015.

·                   Net loss was $(2.2) million, or $(0.05) per share, compared to $(3.4) million, or $(0.07) per share, in the fourth quarter of 2015.

·                   Adjusted net income was $2.0 million, or $0.04 per share, compared to an adjusted net loss of $(0.1) million, or $(0.00) per share, in the fourth quarter of 2015.

·                   Adjusted EBITDA was $4.5 million, compared to $1.9 million, in the fourth quarter of 2015.

 

Full-Year 2016 Results

 

·                   Revenue was $205.9 million, an increase of 37% from $150.2 million, in 2015.

·                   Net loss was $(20.7) million, or $(0.44) per share, compared to $(26.7) million, or $(0.63) per share, in 2015.

·                   Adjusted net loss was $(4.9) million, or $(0.10) per share, compared to $(14.2) million, or $(0.34) per share, in 2015.

·                   Adjusted EBITDA was $4.5 million, compared to an adjusted EBITDA loss of $(6.6) million, in 2015.

 

“We once again produced strong financial performance for both the fourth quarter and full-year 2016.  Both periods showed significant year-over-year revenue growth as well as continued margin progress in each of our earnings measures,” said Chip Paucek, 2U’s CEO and co-founder. “2016 was the year that the first of our three earnings measures, adjusted EBITDA, turned positive, which is the result of having an increasing number of programs progressing toward and reaching steady state margins. Additionally, the launch cohort margins we reported for the year are further validation that mature programs can achieve the long-term steady state margins we target in the time frames we expect.

 

“We have now announced our full slate of 10 program launches for 2017, one more than originally promised. We have also committed to a target of 12 or more programs for 2018. With the new programs, we intend to add new university partners, new degree verticals and geographic diversity, in addition to expanding our scope in existing multiple program verticals.”

 



 

Financial Outlook

 

Based on information available as of today, 2U is issuing the following guidance for first quarter and full year of 2017.

 

(in millions, except per share amounts)

 

1Q 2017

 

FY 2017

 

Revenue

 

$63.6 - $64.0

 

$267.6 - $269.8

 

Net Loss

 

$(4.1) - $(3.7)

 

$(28.0) - $(25.6)

 

Net Loss per Share

 

$(0.09) - $(0.08)

 

$(0.58) - $(0.53)

 

Adjusted Net Income (Loss)

 

$0.1 - $0.4

 

$(7.2) - $(5.2)

 

Adjusted Net Income (Loss) per Share

 

$0.00 - 0.01

 

$(0.15) -$(0.11)

 

Weighted-Average Shares of Common Stock, Basic

 

47.3

 

48.3

 

Weighted-Average Shares of Common Stock, Diluted

 

51.5

 

n/a

 

Adjusted EBITDA

 

$2.9 - $3.2

 

$8.0 - $10.0

 

Stock-Based Compensation Expense

 

$4.1 - $4.2

 

$20.4 - $20.8

 

 

2U expects that of 2017 revenue, 52% to 53% should be recognized in the second half of the year, with the year’s largest sequential revenue growth occurring in the fourth quarter. Further, as seen in prior years, we can experience significant margin variability driven by significant revenue growth combined with cost seasonality. For full-year 2017, we expect this margin variability to be distributed between the first half and the second half of the year as follows:

 

·                   net loss margin of between (11)% and (12)% for the first half of the year and between (8)% and (9)% for the second half of the year,

·                   adjusted net loss margin of between (4)% and (5)% for the first half of the year and between 0% and (1)% for the second half of the year, and

·                   adjusted EBITDA margin of between 0% and 1% for the first half of the year and between 5% and 6% for the second half of the year.

 

Note that cost seasonality in the second and fourth quarters typically reduces margins in the first half of each year and improves margins in the second half of each year, so second-half margins should not be viewed as being a run rate for the first half of the following year.

 

Non-GAAP Measures

 

To supplement the Company’s consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we use adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss) and adjusted net income (loss) per share, which are non-GAAP financial measures.

 

We define adjusted EBITDA as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization, and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. Adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

 

We define adjusted net income (loss) as net income or net loss, as applicable, before stock-based compensation expense. Adjusted net income (loss) per share is calculated as adjusted net income (loss) divided by diluted weighted-average shares of common stock outstanding for periods which result in adjusted net income, and basic weighted-average shares outstanding for periods which result in an adjusted net loss. The principal limitation of these non-GAAP financial measures is that they exclude

 



 

significant expenses that are required by GAAP to be recorded in the company’s financial statements. These non-GAAP measures are key metrics company management uses to compare the company’s performance to that of prior periods for trend analyses and for budgeting and planning purposes. These measures also provide useful information to investors and analysts relating to 2U’s financial condition and results of operations. These financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

 

For more information on 2U’s non-GAAP financial measures and reconciliations of such measures to the nearest GAAP measures, see the reconciliation tables on the last page of this press release under the heading “Reconciliation of Non-GAAP Measures.” 2U urges investors to review these reconciliations and not to rely on any single financial measure to evaluate the company’s business.

 

Conference Call Information

 

What:

2U, Inc.’s fourth-quarter and full-year 2016 financial results conference call

When:

Thursday, February 23, 2017

Time:

5 p.m. ET

Live Call:

877-359-9508

Webcast:

investor.2U.com

 

About 2U, Inc. (NASDAQ: TWOU)

 

2U partners with great colleges and universities to build what we believe is the world’s best online education. Our platform provides a comprehensive fusion of technology, services and data architecture to transform our clients, historically campus-based universities of the highest quality and rigor, into digital universities. To learn more, visit 2U.com.

 

Cautionary Language Concerning Forward-Looking Statements

 

This press release contains forward-looking statements regarding our future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this press release, including statements regarding future results of the operations and financial position of 2U, Inc., including financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. 2U has based these forward-looking statements largely on its estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs as of the date of this press release. We undertake no obligation to update these statements as a result of new information or future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from the results predicted, including, our failure to attract new colleges and universities as clients; our failure to acquire qualified students for our clients’ programs; failure of clients’ students to remain enrolled in their programs; loss, or material underperformance, of any one client; our ability to compete against current and future competitors; disruption to, or failure of, our Platform; and data privacy or security breaches. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and other reports filed with the Securities and Exchange Commission. Moreover, 2U operates in a very competitive and rapidly

 



 

changing environment. New risks emerge from time to time. It is not possible for 2U management to predict all risks, nor can 2U assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements 2U may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated.

 

Investor Relations Contact:  Ed Goodwin, VP of Investor Relations, 2U, Inc., egoodwin@2U.com

 

Media Contact:  Cassie France-Kelly, VP of Public Relations, 2U, Inc., cfrance-kelly@2U.com

 



 

2U, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

December 31,

 

 

 

2016

 

2015

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

168,730

 

$

183,729

 

Accounts receivable, net

 

7,860

 

975

 

Advances to clients

 

567

 

1,508

 

Prepaid expenses and other assets

 

7,541

 

6,695

 

Total current assets

 

184,698

 

192,907

 

Property and equipment, net

 

15,596

 

3,621

 

Capitalized technology and content development costs, net

 

31,867

 

22,628

 

Advances to clients, non-current

 

2,100

 

1,042

 

Prepaid expenses, non-current

 

7,052

 

7,099

 

Other non-current assets

 

3,007

 

3,744

 

Total assets

 

$

244,320

 

$

231,041

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

3,729

 

$

4,544

 

Accrued compensation and related benefits

 

16,491

 

13,405

 

Accrued expenses and other liabilities

 

17,712

 

12,039

 

Deferred revenue

 

3,137

 

2,609

 

Total current liabilities

 

41,069

 

32,597

 

Non-current liabilities

 

8,014

 

2,655

 

Total liabilities

 

49,083

 

35,252

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2016 and 2015

 

 

 

Common stock, $0.001 par value, 200,000,000 shares authorized, 47,151,635 shares issued and outstanding as of December 31, 2016; 45,776,455 shares issued and outstanding as of December 31, 2015

 

47

 

46

 

Additional paid-in capital

 

371,455

 

351,324

 

Accumulated deficit

 

(176,265

)

(155,581

)

Total stockholders’ equity

 

195,237

 

195,789

 

Total liabilities and stockholders’ equity

 

$

244,320

 

$

231,041

 

 



 

2U, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(unaudited)

 

(unaudited)

 

 

 

Revenue

 

$

57,350

 

$

43,252

 

$

205,864

 

$

150,194

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Servicing and support

 

10,859

 

8,749

 

40,982

 

32,047

 

Technology and content development

 

8,496

 

7,529

 

33,283

 

27,211

 

Program marketing and sales

 

27,306

 

20,231

 

106,610

 

82,911

 

General and administrative

 

13,061

 

10,064

 

46,021

 

34,123

 

Total costs and expenses

 

59,722

 

46,573

 

226,896

 

176,292

 

Loss from operations

 

(2,372

)

(3,321

)

(21,032

)

(26,098

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(173

)

(35

)

(552

)

Interest income

 

163

 

94

 

383

 

167

 

Other

 

 

 

 

(250

)

Total other income (expense)

 

163

 

(79

)

348

 

(635

)

Loss before income taxes

 

(2,209

)

(3,400

)

(20,684

)

(26,733

)

Income tax expense

 

 

 

 

 

Net loss

 

(2,209

)

(3,400

)

(20,684

)

(26,733

)

Net loss per share, basic and diluted

 

$

(0.05

)

$

(0.07

)

$

(0.44

)

$

(0.63

)

Weighted average common shares outstanding, basic and diluted

 

47,075,167

 

45,651,475

 

46,609,751

 

42,420,356

 

 



 

2U, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Year Ended December 31,

 

 

 

2016

 

2015

 

2014

 

 

 

(unaudited)

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

 

$

(20,684

)

$

(26,733

)

$

(28,999

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

9,750

 

7,220

 

5,572

 

Stock-based compensation expense

 

15,823

 

12,499

 

7,527

 

Charge related to execution of new lease agreement

 

 

884

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable, net

 

(6,885

)

(625

)

1,485

 

Increase in advances to clients

 

(117

)

(875

)

(1,094

)

Increase in prepaid expenses and other current assets

 

(973

)

(4,001

)

(374

)

(Decrease) increase in accounts payable

 

(815

)

2,251

 

(2,565

)

Increase in accrued compensation and related benefits

 

3,086

 

4,317

 

3,123

 

Increase in accrued expenses and other liabilities

 

1,052

 

1,216

 

2,978

 

Increase in deferred revenue

 

528

 

703

 

640

 

Decrease (increase) in payments to clients

 

2,234

 

(3,664

)

(826

)

Decrease (increase) in other assets and other liabilities, net

 

2,211

 

(2,709

)

153

 

Other

 

 

250

 

695

 

Net cash provided by (used in) operating activities

 

5,210

 

(9,267

)

(11,685

)

Cash flows from investing activities

 

 

 

 

 

 

 

Capitalized technology and content development cost expenditures

 

(16,728

)

(12,358

)

(9,454

)

Purchases of property and equipment

 

(7,648

)

(1,256

)

(1,499

)

Other

 

(142

)

(2,331

)

(29

)

Net cash used in investing activities

 

(24,518

)

(15,945

)

(10,982

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

4,859

 

5,336

 

2,282

 

Proceeds from issuance of common stock, net of offering costs

 

 

117,112

 

100,302

 

Proceeds from revolving line of credit

 

 

 

5,000

 

Payment on revolving line of credit

 

 

 

(5,000

)

Other

 

(550

)

(436

)

 

Net cash provided by financing activities

 

4,309

 

122,012

 

102,584

 

Net (decrease) increase in cash and cash equivalents

 

(14,999

)

96,800

 

79,917

 

Cash and cash equivalents, beginning of period

 

183,729

 

86,929

 

7,012

 

Cash and cash equivalents, end of period

 

$

168,730

 

$

183,729

 

$

86,929

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

 

Accrued capital expenditures

 

$

6,729

 

$

415

 

$

557

 

Accretion of issuance costs on redeemable convertible preferred stock

 

 

 

89

 

Common stock granted in exchange for consulting services received

 

 

 

55

 

 



 

2U, Inc.

Reconciliation of Non-GAAP Measures

(unaudited)

 

The following table presents a reconciliation of net loss to adjusted net income (loss) for each of the periods indicated:

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(in thousands, except share and per share amounts)

 

Net loss

 

$

(2,209

)

$

(3,400

)

$

(20,684

)

$

(26,733

)

Adjustments:

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

4,230

 

3,282

 

15,823

 

12,499

 

Total adjustments

 

4,230

 

3,282

 

15,823

 

12,499

 

Adjusted net income (loss)

 

$

2,021

 

$

(118

)

$

(4,861

)

$

(14,234

)

Net loss per share (1)

 

$

(0.05

)

$

(0.07

)

$

(0.44

)

$

(0.63

)

Weighted-average shares of common stock outstanding, basic (1)

 

47,075,167

 

45,651,475

 

46,609,751

 

42,420,356

 

Adjusted net income (loss) per share (2)

 

$

0.04

 

$

(0.00

)

$

(0.10

)

$

(0.34

)

Weighted-average shares of common stock outstanding, basic or diluted (2)

 

50,843,497

 

45,651,475

 

46,609,751

 

42,420,356

 

 


(1)    The Company computes net loss per share using basic weighted-average shares of common stock outstanding.

 

(2)    The Company computes adjusted net income (loss) per share using diluted weighted-average shares of common stock outstanding for periods which result in adjusted net income, and uses basic weighted-average shares outstanding for periods which result in an adjusted net loss.

 

The following table presents a reconciliation of net loss to adjusted EBITDA (loss) for each of the periods indicated:

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(in thousands)

 

Net loss

 

$

(2,209

)

$

(3,400

)

$

(20,684

)

$

(26,733

)

Adjustments:

 

 

 

 

 

 

 

 

 

Interest expense

 

 

173

 

35

 

552

 

Interest income

 

(163

)

(93

)

(383

)

(167

)

Depreciation and amortization expense

 

2,690

 

1,932

 

9,750

 

7,220

 

Stock-based compensation expense

 

4,230

 

3,282

 

15,823

 

12,499

 

Total adjustments

 

6,757

 

5,294

 

25,225

 

20,104

 

Adjusted EBITDA (loss)

 

$

4,548

 

$

1,894

 

$

4,541

 

$

(6,629

)

 



 

Launch Cohort Financial Performance

 

Adjusted EBITDA loss improvement over the periods presented in this earnings release for the year ended December 31, 2016 is due partly to the maturing of programs within our entire program portfolio. Because we incur program marketing and sales expenses prior to generating the revenue related to those expenses, programs will typically show an adjusted EBITDA loss for several years prior to reaching adjusted EBITDA profitability. The following table presents a reconciliation, after allocation of all corporate costs, of full-year 2016 net income (loss) margin to adjusted EBITDA (loss) margin for our client programs, grouped by the length of time since program launch, as of December 31, 2016.

 

 

 

Less than
2 Years(4)

 

2-3 Years(5)

 

3-4 Years(6)

 

Greater than 4
Years(7)

 

Total

 

Net income (loss)

 

(155

)%

(19

)%

6

%

28

%

(10

)%

Interest expense(3)

 

0

%

0

%

0

%

0

%

0

%

Interest income(3)

 

0

%

0

%

0

%

0

%

0

%

Depreciation and amortization expense(3)

 

9

%

6

%

5

%

3

%

5

%

Stock-based compensation expense(3)

 

16

%

7

%

7

%

5

%

7

%

Adjusted EBITDA (loss)

 

(130

)%

(6

)%

18

%

36

%

2

%

 


(3)          We consider interest expense, interest income, and the non-program specific portions of depreciation and amortization expense and stock-based compensation expense to be corporate expenses, and therefore we allocate those expenses to the above groupings based on our corporate allocation methodology.

 

(4)          Includes programs launched in 2016 and 2015 and expenses incurred in connection with programs not yet launched.

 

(5)          Includes programs launched in 2014.

 

(6)          Includes programs launched in 2013.

 

(7)          Includes all programs launched prior to 2012.

 

2U, Inc.

Reconciliation of Non-GAAP Measures

(unaudited)

 

The following table presents a reconciliation of net loss guidance to adjusted net income (loss) guidance and for each of the periods indicated:

 

 

 

Three Months
Ended

March 31,

 

Year Ended
December 31,

 

 

 

2017

 

2017

 

 

 

(in thousands, except share and
per share amounts)

 

Net loss

 

$

(3,900

)

$

(26,800

)

Adjustments:

 

 

 

 

 

Stock-based compensation expense

 

4,150

 

20,600

 

Total adjustments

 

4,150

 

20,600

 

Adjusted net income (loss)

 

$

250

 

$

(6,200

)

Net income (loss) per share (8)

 

$

(0.08

)

$

(0.55

)

Weighted-average shares of common stock outstanding, basic or diluted (8)

 

47,341,000

 

48,320,000

 

Adjusted net income (loss) per share (9)

 

$

0.00

 

$

(0.13

)

Weighted-average shares of common stock outstanding, basic or diluted (9)

 

51,461,000

 

48,320,000

 

 


(8)          The Company computes net income (loss) per share using diluted weighted-average shares of common stock outstanding for periods which result in net income, and uses basic weighted-average shares outstanding for periods which result in a net loss.

 

(9)          The Company computes adjusted net income (loss) per share using basic and diluted weighted-average shares of common stock outstanding for periods which result in adjusted net income, and uses basic weighted-average shares outstanding for periods which result in an adjusted net loss.

 



 

2U, Inc.

Reconciliation of Non-GAAP Measures

(unaudited)

 

The following table presents a reconciliation of net loss guidance to adjusted EBITDA guidance for each of the periods indicated:

 

 

 

Three Months
Ended

March 31,

 

Year Ended
December 31,

 

 

 

2017

 

2017

 

 

 

(in thousands)

 

Net loss

 

$

(3,900

)

$

(26,800

)

Adjustments:

 

 

 

 

 

Interest expense

 

100

 

175

 

Interest income

 

(150

)

(475

)

Depreciation and amortization expense

 

2,850

 

15,500

 

Stock-based compensation expense

 

4,150

 

20,600

 

Total adjustments

 

6,950

 

35,800

 

Adjusted EBITDA

 

$

3,050

 

$

9,000

 

 

Key Financial Performance Metrics

(unaudited)

 

Platform Revenue Retention Rate

 

The following table sets forth our platform revenue retention rate for the periods presented, as well as the number of programs included in the platform revenue retention rate calculation.

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

Platform revenue retention rate

 

127.7

%

127.0

%

123.0

%

120.2

%

Number of programs included in comparison (10)

 

16

 

12

 

12

 

9

 

 


(10)   Reflects the number of programs operating both in the reported period and in the prior year comparative period.

 

Full Course Equivalent Enrollments

 

The following table sets forth the full course equivalent enrollments and average revenue per full course equivalent enrollment in our clients’ programs for the last eight quarters.

 

 

 

Q1 ’15

 

Q2 ’15

 

Q3 ’15

 

Q4 ’15

 

Q1 ’16

 

Q2 ’16

 

Q3 ’16

 

Q4 ’16

 

Full course equivalent enrollments in our clients’ programs

 

13,093

 

13,557

 

13,840

 

16,530

 

17,709

 

18,823

 

19,126

 

21,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average revenue per full course equivalent enrollment in our clients’ programs

 

$

2,644

 

$

2,599

 

$

2,680

 

$

2,617

 

$

2,679

 

$

2,609

 

$

2,717

 

$

2,645