Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 02, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | 2U, Inc. | |
Entity Central Index Key | 1,459,417 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 52,222,343 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 202,434 | $ 168,730 |
Accounts receivable, net | 42,332 | 7,860 |
Prepaid expenses and other assets | 12,950 | 8,108 |
Total current assets | 257,716 | 184,698 |
Property and equipment, net | 45,025 | 15,596 |
Goodwill | 67,600 | |
Amortizable intangible assets, net | 84,795 | 34,131 |
Prepaid expenses and other assets, non-current | 21,214 | 9,895 |
Total assets | 476,350 | 244,320 |
Current liabilities | ||
Accounts payable and accrued expenses | 32,496 | 14,724 |
Accrued compensation and related benefits | 15,031 | 16,491 |
Deferred revenue | 16,628 | 3,137 |
Other current liabilities | 9,795 | 6,717 |
Total current liabilities | 73,950 | 41,069 |
Non-current lease-related liabilities | 17,626 | 7,620 |
Deferred government grant obligations | 3,500 | |
Deferred tax liabilities, net | 9,602 | |
Other non-current liabilities | 2,160 | 394 |
Total liabilities | 106,838 | 49,083 |
Commitments and contingencies (Note 6) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued | ||
Common stock, $0.001 par value, 200,000,000 shares authorized, 52,136,056 shares issued and outstanding as of September 30, 2017; 47,151,635 shares issued and outstanding as of December 31, 2016 | 52 | 47 |
Additional paid-in capital | 579,422 | 371,455 |
Accumulated deficit | (206,345) | (176,265) |
Accumulated other comprehensive loss | (3,617) | |
Total stockholders' equity | 369,512 | 195,237 |
Total liabilities and stockholders' equity | $ 476,350 | $ 244,320 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Condensed Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 52,136,056 | 47,151,635 |
Common stock, shares outstanding | 52,136,056 | 47,151,635 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||
Revenue | $ 70,250 | $ 51,960 | $ 200,074 | $ 148,514 |
Costs and expenses | ||||
Curriculum and teaching | 1,792 | 1,792 | ||
Servicing and support | 12,939 | 10,351 | 37,322 | 30,123 |
Technology and content development | 12,735 | 8,670 | 33,080 | 24,787 |
Marketing and sales | 41,311 | 28,165 | 113,223 | 79,304 |
General and administrative | 17,227 | 11,569 | 44,821 | 32,960 |
Total costs and expenses | 86,004 | 58,755 | 230,238 | 167,174 |
Loss from operations | (15,754) | (6,795) | (30,164) | (18,660) |
Interest income | 18 | 37 | 267 | 220 |
Interest expense | (36) | (37) | (35) | |
Other income (expense), net | 59 | (972) | ||
Loss before income taxes | (15,713) | (6,758) | (30,906) | (18,475) |
Income tax benefit | 974 | 974 | ||
Net loss | $ (14,739) | $ (6,758) | $ (29,932) | $ (18,475) |
Net loss per share, basic and diluted (in dollars per share) | $ (0.30) | $ (0.14) | $ (0.62) | $ (0.40) |
Weighted-average shares of common stock outstanding, basic and diluted (in shares) | 48,961,914 | 46,903,628 | 47,962,201 | 46,453,480 |
Other comprehensive loss | ||||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | $ (3,617) | $ (3,617) | ||
Comprehensive loss | $ (18,356) | $ (6,758) | $ (33,549) | $ (18,475) |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Other comprehensive loss | |
Foreign currency translation adjustments, tax | $ 0 |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Balance at Dec. 30, 2016 | $ 47 | $ 371,455 | $ (176,265) | $ 195,237 | |
Balance (in shares) at Dec. 30, 2016 | 47,151,635 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative-effect of accounting change (Note 2) | 148 | (148) | |||
Balance at Dec. 31, 2016 | $ 47 | 371,603 | (176,413) | $ 195,237 | |
Balance (in shares) at Dec. 31, 2016 | 47,151,635 | 47,151,635 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Exercise of stock options | 4,118 | $ 4,118 | |||
Exercise of stock options (in shares) | 485,146 | ||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | $ 1 | (1,310) | (1,309) | ||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 451,775 | ||||
Issuance of common stock, net of issuance costs | $ 4 | 189,474 | 189,478 | ||
Issuance of common stock, net of issuance costs (in shares) | 4,047,500 | ||||
Stock-based compensation expense | 15,537 | 15,537 | |||
Net loss | (29,932) | (29,932) | |||
Foreign currency translation adjustment | $ (3,617) | (3,617) | |||
Balance at Sep. 30, 2017 | $ 52 | $ 579,422 | $ (206,345) | $ (3,617) | $ 369,512 |
Balance (in shares) at Sep. 30, 2017 | 52,136,056 | 52,136,056 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities | ||
Net loss | $ (29,932) | $ (18,475) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 13,318 | 7,060 |
Stock-based compensation expense | 15,537 | 11,593 |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable, net | (33,915) | (19,999) |
Increase in prepaid expenses and other assets | (1,638) | (316) |
Increase in accounts payable and accrued expenses | 6,101 | 2,810 |
(Decrease) increase in accrued compensation and related benefits | (1,447) | 386 |
Increase in deferred revenue | 11,723 | 421 |
(Increase) decrease in payments to university clients | (12,146) | 1,320 |
Increase in other liabilities, net | 5,349 | 778 |
Other | 971 | |
Net cash used in operating activities | (26,079) | (14,422) |
Cash flows from investing activities | ||
Purchase of a business, net of cash acquired | (97,102) | |
Purchases of property and equipment | (20,924) | (3,665) |
Additions of amortizable intangible assets | (16,383) | (12,493) |
Net cash used in investing activities | (134,409) | (16,158) |
Cash flows from financing activities | ||
Proceeds from issuance of common stock, net of offering costs | 189,917 | |
Proceeds from exercise of stock options | 4,118 | 4,324 |
Proceeds from debt | 4,033 | |
Payments on debt | (1,517) | |
Tax withholding payments associated with settlement of restricted stock units | (1,310) | (378) |
Other | (168) | |
Net cash provided by financing activities | 195,241 | 3,778 |
Effect of exchange rate changes on cash | (1,049) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 33,704 | (26,802) |
Cash and cash equivalents, beginning of period | 168,730 | 183,729 |
Cash and cash equivalents, end of period | 202,434 | 156,927 |
Net increase (decrease) in cash, cash equivalents and restricted cash | $ 33,704 | $ (26,802) |
Organization, Basis of Presenta
Organization, Basis of Presentation and Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Basis of Presentation and Recent Accounting Pronouncements | |
Organization, Basis of Presentation and Recent Accounting Pronouncements | 1. Organization, Basis of Presentation and Recent Accounting Pronouncements 2U, Inc. (the “Company”) provides an integrated solution comprised of cloud-based software-as-a-service (“SaaS”), fused with technology-enabled services (together, the “Platform”), that allows leading colleges and universities to deliver high-quality digital graduate programs and short courses, extending the universities’ reach and distinguishing their brands. The Company’s SaaS technology consists of (i) a comprehensive learning environment, which acts as the hub for all student and faculty academic and social interaction, and (ii) a comprehensive suite of integrated applications, which the Company uses to launch, operate and support the graduate programs it enables. The Company also provides a suite of technology-enabled services optimized with data analysis and machine learning techniques that support the complete lifecycle of a higher education program, including attracting students, advising prospective students through the admissions application process, providing technical, success coaching and other support, facilitating accessibility to individuals with disabilities, and facilitating in-program field placements. On July 1, 2017, the Company completed its acquisition of all of the outstanding equity interests of Get Educated International Proprietary Limited (“GetSmarter”), a leader in collaborating with universities to offer premium online short courses to working professionals. The acquisition will enable the Company to expand its total addressable market by offering short course certificates to students not seeking a full graduate degree and to provide a better product-market fit for international audiences. As a result of the acquisition of GetSmarter, the Company now manages its operations in two operating segments: the Graduate Program Segment and the Short Course Segment. See Note 3 for further information on the GetSmarter acquisition. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). They include the assets, liabilities, results of operations and cash flows of the Company, including its wholly owned subsidiaries. As permitted under such rules, certain notes and other financial information normally required by GAAP have been condensed or omitted. The Company believes the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and nine months ended September 30, 2017 and 2016 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. All significant intercompany accounts and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by GAAP. Reclassifications The Company has reclassified capitalized technology and content development, as well as other amortizable intangible assets, into amortizable intangible assets, net on the condensed consolidated balance sheets and condensed consolidated statements of cash flows. In addition, certain other prior period amounts in the condensed consolidated balance sheets and condensed consolidated statements of cash flows have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on total assets, total liabilities, total operating activities or total investing activities previously reported for any periods presented. Use of Estimates The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position or related disclosures. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company early adopted this ASU in the third quarter of 2017, in connection with the acquisition of GetSmarter. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash , a consensus of the FASB Emerging Issues Task Force. The ASU requires companies to explain the changes in the combined total of restricted and unrestricted cash balances in the statement of cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. Adoption of the ASU is retrospective to each prior period presented. The Company early adopted this ASU in the second quarter of 2017. Adoption of this standard did not have a material impact on the presentation of prior periods. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the effect that this standard will have on its consolidated statements of cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The ASU simplifies various aspects related to the accounting and presentation of share-based payments. The guidance also allows employers to withhold shares to satisfy minimum statutory withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. Additionally, the guidance stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax withholding purposes should be classified as a financing activity on the statement of cash flows, and allows companies to elect an accounting policy to either estimate the share-based award forfeitures (and expense) or account for forfeitures (and expense) as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017. In connection with the adoption of this standard, the Company elected to no longer apply an estimated forfeiture rate and will instead account for forfeitures as they occur. Accordingly, the Company applied the modified retrospective adoption approach, which resulted in a $0.1 million cumulative-effect reduction to retained earnings with an offset to additional paid-in-capital. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. Lessor accounting remains substantially similar to current U.S. GAAP. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the effect that this ASU will have on its consolidated financial position and related disclosures, and believes that this standard may materially increase its other non-current assets and non-current liabilities on the consolidated balance sheets in order to record right-of-use assets and related liabilities for its existing operating leases. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The ASU requires that an entity’s management evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments in this ASU are effective for annual reporting periods ending after December 15, 2016. The Company adopted this ASU on January 1, 2017. Adoption of this standard did not have a material impact on the Company’s financial reporting process. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB deferred the mandatory effective date of this ASU by one year from January 1, 2017 to January 1, 2018. Early application is permitted, but not prior to the original effective date of January 1, 2017. Subsequently, the FASB has issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . The Company must adopt ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 with ASU No. 2014-09 (collectively, the “new revenue standard”). The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. While we are still in the process of finalizing our assessment, primarily related to costs associated with revenue and revenue related to the Company’s Short Course Segment (established in July 2017 in connection with the Company’s acquisition of GetSmarter), the Company has concluded that the impact of the new revenue standard related to its Graduate Program Segment will not have a material impact on the amount and timing of revenue recognized. The Company will adopt the new revenue standard on January 1, 2018 and will determine the method of adoption in part based on the Company’s completion of its overall assessment. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Business Combinations The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity of the net of the amounts assigned to the assets acquired and liabilities assumed is recognized as goodwill. The net assets and results of operations of an acquired entity are included in the Company’s condensed consolidated financial statements from the acquisition date. Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of the business acquired. The Company reviews goodwill at least annually, as of October 1, for possible impairment. Goodwill is reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the two-step goodwill impairment review. The Company will review its goodwill for impairment using the two-step process if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on its qualitative assessment. Upon the completion of the two-step process, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the goodwill recorded. Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash is held at financial institutions that management believes to be of high credit quality. The Company’s bank accounts exceed federally insured limits at times. The Company has not experienced any losses on cash to date. To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts, if needed. During the third quarter of 2017, four university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $19.6 million, $10.8 million, $7.2 million and $7.1 million, which equals 28%, 15%, 10% and 10% of the segment’s total revenue, respectively. During the third quarter of 2016, three university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $18.4 million, $8.7 million and $5.5 million, which equals 35%, 17% and 11% of the segment’s total revenue, respectively. During the first nine months of 2017, four university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $58.4 million, $34.6 million, $21.0 million and $20.3 million, which equals 30%, 17%, 11% and 10% of the segment’s total revenue, respectively. During the first nine months of 2016, three university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $53.9 million, $25.5 million and $15.8 million, which equals 36%, 17% and 11% of the segment’s total revenue, respectively. As of September 30, 2017, three university clients each accounted for 10% or more of the Graduate Program Segment’s accounts receivable balance, as follows: $14.4 million, $6.7 million and $6.4 million, which equals 34%, 16% and 15% of the segment’s total accounts receivable, respectively. As of December 31, 2016, two university clients each accounted for 10% or more of the Graduate Program Segment’s accounts receivable balance, as follows: $5.8 million and $1.4 million, which equals 74% and 17% of the segment’s total accounts receivable, respectively. During the third quarter and first nine months of 2017, Short Course Segment revenue associated with two university clients each accounted for 10% or more of the segment’s total revenue, as follows: $2.4 million and $1.1 million, which equals 56% and 26% of the segment’s total revenue, respectively. Government Grants Government grants awarded to the Company in the form of forgivable loans are recorded as deferred government grant obligations within long-term liabilities on the condensed consolidated balance sheets until all contingencies are resolved and the grant is determined to be realized. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations; this evaluation is made on an ongoing basis. In the event the Company was to determine that it was able to realize net deferred income tax assets in the future in excess of their net recorded amount, the Company would record an adjustment to the valuation allowance, which would reduce the provision for income taxes. Revenue Recognition Consistent with the Company’s revenue recognition policy related to the Graduate Program Segment, revenue related to the Short Course Segment is recognized when all of the following conditions are met: (i) persuasive evidence of an arrangement exists, (ii) rendering of services is complete, (iii) fees are fixed or determinable and (iv) collection of fees is reasonably assured. Please refer to Note 2 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of the Company’s Annual Report on Form 10-K, filed with the SEC on February 24, 2017, for the significant accounting policy on revenue recognition of the Graduate Program Segment. With respect to the Company’s Graduate Program Segment, the Company recognizes revenue based on its share of net program proceeds from its university clients. With respect to the Company’s Short Course Segment, the Company derives its revenue from providing premium online short courses to working professionals. A portion of revenues is shared with the university clients, in the form of a royalty, for providing the content and certifying the course. The Company has determined that it is the principal in this arrangement as the Company is the entity that has promised to provide the short course to the student. Therefore, revenues for the Short Course Segment reflect gross proceeds from students and the university client royalty amounts are recorded as an expense within curriculum and teaching on the condensed consolidated statements of operations and comprehensive loss. Foreign Currency Translation For the portion of the Company’s non-U.S. business where the local currency is the functional currency, operating results are translated into U.S. dollars using the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of stockholder’s equity and comprehensive loss. For any transaction that is in a currency different from the entity’s functional currency, the Company records a gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) as other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. Non-cash Investing and Financing Activities During the first nine months of 2017, the Company had new capital asset additions of $49.6 million, which was comprised of $25.0 million of leasehold improvements, $17.0 million in capitalized technology and content development and $7.6 million of other property and equipment. The $49.6 million increase consisted of $37.3 million in cash capital expenditures, with the remainder primarily comprised of landlord funded leasehold improvements. During the first nine months of 2016, the Company had new capital asset additions of $18.4 million, which was primarily comprised of $4.4 million of leasehold improvements and $13.0 million in capitalized technology and content development. The $18.4 million increase consisted of $16.2 million in cash capital expenditures, with the remainder primarily comprised of landlord funded leasehold improvements. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2017 | |
Business Combination | |
Business Combination | 3. Business Combination On July 1, 2017, the Company, through a wholly owned subsidiary (“2U South Africa”), completed its acquisition of all of the outstanding equity interests of GetSmarter pursuant to a Share Sale Agreement, dated as of May 1, 2017 (the “Share Sale Agreement”), as amended by an addendum, dated as of June 29, 2017, for a net purchase price of $98.7 million in cash. In addition, 2U South Africa agreed to pay a potential earn out payment of up to $20.0 million, subject to the achievement of certain financial milestones in calendar years 2017 and 2018. Under the terms of the Share Sale Agreement, the Company has issued restricted stock units for shares of its common stock, par value $0.001 per share, to certain employees and officers of GetSmarter. These awards are subject to the 2014 2U, Inc. Equity Incentive Plan and will vest over either a two or four-year period. As a result of the transaction, GetSmarter became an indirect wholly owned subsidiary of the Company. The net assets and results of operations of GetSmarter are included in the Company’s condensed consolidated financial statements and in the newly established Short Course Segment as of July 1, 2017. The Company has completed its provisional valuation of the assets acquired and liabilities assumed of GetSmarter. The fair values assigned to the intangible assets acquired were based on preliminary estimates, assumptions, and other information compiled by management. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition: Estimated Average Purchase Price (in thousands) Cash and cash equivalents $ Current assets Property and equipment, net Amortizable intangible assets: Capitalized technology 3 Capitalized content development 4 University client relationships 9 Trade names and domain names 10 Goodwill* Current liabilities ) Non-current liabilities** ) $ * During the third quarter of 2017, the provisional goodwill balance changed as a result of a currency translation adjustment of approximately $2.6 million. ** Included in non-current liabilities is contingent consideration in the amount of $1.9 million. The Company’s provisional valuation of the assets acquired and liabilities assumed is preliminary and the fair values recorded were based upon provisional valuations and estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period (up to one year from the acquisition date). As of September 30, 2017, the Company is awaiting information to finalize the valuation, primarily related to the recording of intangible assets, contingent consideration, the related deferred taxes and the final amount of residual goodwill. The goodwill balance is primarily attributed to the assembled workforce, expanded market opportunities and cost and other operating synergies anticipated upon the integration of the operations of 2U and GetSmarter. The goodwill resulting from the acquisition is not expected to be tax deductible. The unaudited pro forma combined financial information below is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combination occurred as of the dates indicated or what the results would be for any future periods. The following table presents the Company’s unaudited pro forma combined revenue and pro forma combined net loss, for the three and nine months ended September 30, 2017 and 2016 as if the acquisition of GetSmarter had occurred on January 1, 2016: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Pro forma revenue $ $ $ $ Pro forma net loss ) ) ) ) Pro forma net loss per share, basic and diluted $ ) $ ) $ ) $ ) |
Amortizable Intangible Assets
Amortizable Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Amortizable Intangible Assets | |
Amortizable Intangible Assets | 4. Amortizable Intangible Assets Amortizable intangible assets consisted of the following as of: September 30, 2017 December 31, 2016 Estimated Gross Accumulated Net Gross Accumulated Net (in thousands) Capitalized technology 3 $ $ ) $ $ $ ) $ Capitalized content development 4 ) ) University client relationships 9 ) — — — Trade names and domain names 10 ) ) Total amortizable intangible assets, net $ $ ) $ $ $ ) $ Included in the amounts presented above are $10.5 million and $8.7 million of in process capitalized technology and content development as of September 30, 2017 and December 31, 2016, respectively. The Company recorded amortization expense related to amortizable intangible assets of $3.6 million and $2.1 million for the third quarter of 2017 and 2016, respectively. The Company recorded amortization expense related to amortizable intangible assets of $8.7 million and $5.7 million for the first nine months of 2017 and 2016, respectively. As of September 30, 2017, the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands): Remainder of 2017 $ 2018 2019 2020 2021 Thereafter Total $ |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2017 | |
Accrued Expenses | |
Accrued Expenses | 5. Accrued Expenses As of September 30, 2017, accrued expenses included $12.5 million in marketing costs and $5.6 million in facility costs for both operational expenses and improvements. As of December 31, 2016, accrued expenses included $5.6 million of marketing costs. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 6. Commitments and Contingencies Legal Contingencies From time to time, the Company may become involved in legal proceedings or other contingencies in the ordinary course of its business. The Company is not presently involved in any legal proceeding or other contingency that, if determined adversely to it, would individually or in the aggregate have a material adverse effect on its business, operating results, financial condition or cash flows. Accordingly, the Company does not believe that there is a reasonable possibility that a material loss exceeding amounts already recognized may have been incurred as of the date of the balance sheets presented herein. Operating Leases In February 2017, the Company signed a lease for new office space in Brooklyn, New York, which is expected to be occupied beginning in 2018. The lease covers three floors totaling approximately 80,000 square feet, requires total future minimum lease payments of approximately $51.8 million and will expire approximately eleven years and nine months after the July 1, 2017 lease commencement date. Related to this lease, the Company could be eligible for certain state and local incentives that are dependent on construction build, employment levels, the Company’s taxable income and other factors. The Company is in the process of applying for such eligibility, but is not currently able to assess the potential benefit these incentives may yield over the lease term. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt | |
Debt | 7. Debt Lines of Credit In June 2017, the Company and Comerica amended its credit agreement for a $25.0 million revolving line of credit pursuant to which, among other things, Comerica consented to the Company’s acquisition of GetSmarter and the Company’s formation of certain subsidiaries in connection therewith, and the parties extended the maturity date through July 31, 2017. In the third quarter of 2017, the Company further amended its credit agreement to extend the maturity date through December 31, 2017. No amounts were outstanding under this credit agreement as of September 30, 2017 or December 31, 2016. The Company intends to extend this agreement under comparable terms, prior to expiration. Certain of the Company’s operating lease agreements entered into prior to September 30, 2017 require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of September 30, 2017, the Company has entered into standby letters of credit totaling $11.5 million as security deposits for the applicable leased facilities. Additionally, in June 2017, the Company entered into standby letters of credit totaling $3.5 million in connection with two government grants, as described later in this Note. These letters of credit reduced the aggregate amount the Company may borrow under its revolving line of credit to $10.0 million. The Company’s Short Course Segment has $1.9 million of revolving debt facilities. All of the facilities mature on December 31, 2017 with payment due on January 1, 2018. As of September 30, 2017, no significant amounts were outstanding under these facilities and the interest rate was 10.25%. Government Grants On June 22, 2017, the Company executed a conditional loan agreement and received financing from Prince George’s County, Maryland that provides for a grant in the form of a forgivable loan of $1.5 million. The financing was secured by a letter of credit pursuant to the Company’s line of credit with Comerica Bank. The conditional loan obligation is recorded as “Deferred government grant obligations” on the condensed consolidated balance sheets. The proceeds from this loan are to be used in connection with the relocation of 2U’s headquarters, leasehold improvements thereto and other purposes. The loan has a maturity date of June 22, 2027, and bears interest at a rate of 3% per annum. If 2U does not employ at least 650 employees at its Lanham headquarters at any time during the term of the loan period or otherwise defaults on the loan, the entire principal balance, plus accrued interest, will become due and payable. If 2U does not employ at least 1,300 employees at its Lanham headquarters by January 1, 2020, the Company will be required to repay a prorated portion of the loan ($2,252 per employee, for every employee below 1,300), plus interest. During the third quarter and first nine months of 2017, the Company did not incur a material amount of interest expense on this forgivable loan. On June 27, 2017, 2U Harkins Road LLC (a wholly owned subsidiary of the Company) executed a loan agreement and received financing from the Department of Commerce (a principal department of the State of Maryland) that provides for a grant in the form of a forgivable loan of $2.0 million. The financing was secured by a letter of credit pursuant to the Company’s line of credit with Comerica Bank. The conditional loan obligation is recorded as “Deferred government grant obligations” on the condensed consolidated balance sheets. The proceeds from this loan are to be used in connection with the relocation of 2U’s headquarters, leasehold improvements thereto and other purposes. The loan has a maturity date of December 31, 2026, and bears interest at a rate of 3% per annum. If 2U does not employ at least 650 employees at its Lanham headquarters at any time during the term of the loan period or otherwise defaults on the loan, the entire principal balance, plus accrued interest, will become due and payable. If 2U does not employ at least 1,600 employees at its Lanham headquarters by December 31, 2020, and at each December 31st thereafter through 2026, the Company will be required to repay a prorated portion of the loan ($2,105 per employee, for every employee below 1,600), plus interest. During the third quarter and first nine months of 2017, the Company did not incur a material amount of interest expense on this forgivable loan. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Income Taxes | 8. Income Taxes During the third quarter and first nine months of 2017, the Company recognized a $1.0 million tax benefit. The tax benefit primarily relates to the amortization of intangible assets established in connection with the GetSmarter acquisition and losses generated from the acquired operations. To date, the Company has not been required to pay U.S. federal income taxes because of its current and accumulated net operating losses. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | 9. Stockholders’ Equity On September 7, 2017, the Company sold 4,047,500 shares of its common stock to the public, including 547,500 shares sold pursuant to the underwriters’ over-allotment option. The Company received net proceeds of $189.5 million, which the Company intends to use for general corporate purposes, including expenditures for graduate program and short course marketing, technology and content development, in connection with new graduate program and short course launches and growing existing graduate programs and short courses. As of September 30, 2017, the Company was authorized to issue 205,000,000 total shares of capital stock, consisting of 200,000,000 shares of common stock and 5,000,000 shares of preferred stock. At September 30, 2017, the Company had reserved a total of 10,757,992 of its authorized shares of common stock for future issuance as follows: Outstanding stock options Possible future issuance under 2014 Equity Incentive Plan Outstanding restricted stock units Total shares of common stock reserved for future issuance The Compensation Committee of the Company’s board of directors, acting under authority delegated from the board of directors, granted in October 2017 option awards to employees to purchase an aggregate of 32,356 shares of common stock at a weighted-average exercise price of $56.77 and restricted stock unit awards for an aggregate of 20,126 shares of common stock, in each case under the 2014 Equity Incentive Plan (as defined in Note 10 below). |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | 10. Stock-Based Compensation The Company provides equity-based compensation awards to employees, independent contractors and directors as an effective means for attracting, retaining and motivating such individuals. The Company maintains two share-based compensation plans: the 2014 Equity Incentive Plan (the “2014 Plan”) and the 2008 Stock Incentive Plan (the “2008 Plan”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards and began using the 2014 Plan for grants of new equity awards. The number of shares of the Company’s common stock that may be issued under the 2014 Plan will automatically increase on January 1st of each year, for a period of ten years, from January 1, 2015 continuing through January 1, 2024, by 5% of the total number of shares of the Company’s common stock outstanding on December 31 st of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. The shares available for issuance increased by 2,357,579 and 2,288,820 on January 1, 2017 and 2016, respectively, pursuant to the automatic share reserve increase provision under the 2014 Plan. Stock-Based Compensation Expense Stock-based compensation expense related to stock-based awards is included in the following line items in the accompanying condensed consolidated statements of operations and comprehensive loss: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Curriculum and teaching $ $ — $ $ — Servicing and support Technology and content development Marketing and sales General and administrative Total stock-based compensation expense $ $ $ $ Employee Stock Purchase Plan On June 5, 2017, 2U’s stockholders voted upon and approved the Company’s 2017 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for (i) multiple offering periods each year and (ii) that the purchase price for shares of 2U common stock purchased under the ESPP will not be less than 85% of the fair market value of the Company’s common stock on the purchase date. Notwithstanding the foregoing, the Compensation Committee of the Company’s Board of Directors may exercise its discretion, subject to certain conditions, to make changes to certain aspects of the ESPP including, but not limited to, the length of the offering periods and that the purchase price will be 85% of the lesser of the fair market value of 2U’s common stock on the purchase date or the fair market value of 2U’s common stock on the first day of the offering period. The first offering period is expected to begin on January 1, 2018, and will end on June 30, 2018. Eligible employees will be able to select a rate of payroll deduction between 1% and 15% of their salary or wage compensation received from the Company as in effect at the start of the offering period, subject to a maximum payroll deduction per calendar year of $25,000. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 1,000,000 shares of 2U’s common stock may be issued under the ESPP, subject to adjustments for certain capital transactions. |
Net Loss per Share
Net Loss per Share | 9 Months Ended |
Sep. 30, 2017 | |
Net Loss per Share | |
Net Loss per Share | 11. Net Loss per Share Diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive, given the Company’s net loss. The following securities have been excluded from the calculation of weighted-average shares of common stock outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2017 and 2016: Three and Nine Months Ended 2017 2016 Stock options Restricted stock units Basic and diluted net loss per share is calculated as follows: Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator (in thousands): Net loss $ ) $ ) $ ) $ ) Denominator: Weighted-average shares of common stock outstanding, basic and diluted Net loss per share, basic and diluted $ ) $ ) $ ) $ ) |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Segment Information | 12. Segment Information As a result of the acquisition of GetSmarter on July 1, 2017, the Company’s operations consist of two operating segments and two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities primarily in the United States to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals. The reportable segments represent businesses for which separate financial information is utilized by the chief operating decision maker for the purpose of allocating resources and evaluating performance. Segment Performance The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Revenue by segment* Graduate Program Segment $ $ $ $ Short Course Segment** — — Total revenue $ $ $ $ Adjusted EBITDA (loss) by segment Graduate Program Segment $ ) $ ) $ $ ) Short Course Segment ) — ) — Total adjusted EBITDA (loss) $ ) $ ) $ ) $ ) * The Company did not have any material intersegment revenues for any periods presented. ** Revenue excludes $0.7 million which is related to an adjustment recorded as part of the provisional valuation of GetSmarter (see Note 3). The following table reconciles net loss to adjusted EBITDA (loss): Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Net loss $ ) $ ) $ ) $ ) Adjustments: Interest income ) ) ) ) Interest expense — Foreign currency (gain) loss ) — — Depreciation and amortization expense Income tax benefit ) — ) — Stock-based compensation expense Total adjustments Adjusted EBITDA (loss)* $ ) $ ) $ ) $ ) * The Company evaluates segment performance based on adjusted EBITDA, that it defines as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. The Company’s total assets by segment are as follows: September 30, December 31, (in thousands) Total assets Graduate Program Segment $ $ Short Course Segment* — Total assets $ $ * Total goodwill recorded in connection with the acquisition of GetSmarter has been allocated to the Short Course Segment. The assessment of goodwill to reporting units for purposes of future assessments of goodwill impairment has not been completed as September 30, 2017. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). They include the assets, liabilities, results of operations and cash flows of the Company, including its wholly owned subsidiaries. As permitted under such rules, certain notes and other financial information normally required by GAAP have been condensed or omitted. The Company believes the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and nine months ended September 30, 2017 and 2016 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. All significant intercompany accounts and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by GAAP. |
Reclassifications | Reclassifications The Company has reclassified capitalized technology and content development, as well as other amortizable intangible assets, into amortizable intangible assets, net on the condensed consolidated balance sheets and condensed consolidated statements of cash flows. In addition, certain other prior period amounts in the condensed consolidated balance sheets and condensed consolidated statements of cash flows have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on total assets, total liabilities, total operating activities or total investing activities previously reported for any periods presented. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position or related disclosures. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company early adopted this ASU in the third quarter of 2017, in connection with the acquisition of GetSmarter. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash , a consensus of the FASB Emerging Issues Task Force. The ASU requires companies to explain the changes in the combined total of restricted and unrestricted cash balances in the statement of cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. Adoption of the ASU is retrospective to each prior period presented. The Company early adopted this ASU in the second quarter of 2017. Adoption of this standard did not have a material impact on the presentation of prior periods. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the effect that this standard will have on its consolidated statements of cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The ASU simplifies various aspects related to the accounting and presentation of share-based payments. The guidance also allows employers to withhold shares to satisfy minimum statutory withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. Additionally, the guidance stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax withholding purposes should be classified as a financing activity on the statement of cash flows, and allows companies to elect an accounting policy to either estimate the share-based award forfeitures (and expense) or account for forfeitures (and expense) as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017. In connection with the adoption of this standard, the Company elected to no longer apply an estimated forfeiture rate and will instead account for forfeitures as they occur. Accordingly, the Company applied the modified retrospective adoption approach, which resulted in a $0.1 million cumulative-effect reduction to retained earnings with an offset to additional paid-in-capital. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. Lessor accounting remains substantially similar to current U.S. GAAP. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the effect that this ASU will have on its consolidated financial position and related disclosures, and believes that this standard may materially increase its other non-current assets and non-current liabilities on the consolidated balance sheets in order to record right-of-use assets and related liabilities for its existing operating leases. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The ASU requires that an entity’s management evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments in this ASU are effective for annual reporting periods ending after December 15, 2016. The Company adopted this ASU on January 1, 2017. Adoption of this standard did not have a material impact on the Company’s financial reporting process. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB deferred the mandatory effective date of this ASU by one year from January 1, 2017 to January 1, 2018. Early application is permitted, but not prior to the original effective date of January 1, 2017. Subsequently, the FASB has issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . The Company must adopt ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 with ASU No. 2014-09 (collectively, the “new revenue standard”). The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. While we are still in the process of finalizing our assessment, primarily related to costs associated with revenue and revenue related to the Company’s Short Course Segment (established in July 2017 in connection with the Company’s acquisition of GetSmarter), the Company has concluded that the impact of the new revenue standard related to its Graduate Program Segment will not have a material impact on the amount and timing of revenue recognized. The Company will adopt the new revenue standard on January 1, 2018 and will determine the method of adoption in part based on the Company’s completion of its overall assessment. |
Business Combinations | Business Combinations The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity of the net of the amounts assigned to the assets acquired and liabilities assumed is recognized as goodwill. The net assets and results of operations of an acquired entity are included in the Company’s condensed consolidated financial statements from the acquisition date. |
Goodwill | Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of the business acquired. The Company reviews goodwill at least annually, as of October 1, for possible impairment. Goodwill is reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the two-step goodwill impairment review. The Company will review its goodwill for impairment using the two-step process if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on its qualitative assessment. Upon the completion of the two-step process, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the goodwill recorded. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash is held at financial institutions that management believes to be of high credit quality. The Company’s bank accounts exceed federally insured limits at times. The Company has not experienced any losses on cash to date. To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts, if needed. During the third quarter of 2017, four university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $19.6 million, $10.8 million, $7.2 million and $7.1 million, which equals 28%, 15%, 10% and 10% of the segment’s total revenue, respectively. During the third quarter of 2016, three university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $18.4 million, $8.7 million and $5.5 million, which equals 35%, 17% and 11% of the segment’s total revenue, respectively. During the first nine months of 2017, four university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $58.4 million, $34.6 million, $21.0 million and $20.3 million, which equals 30%, 17%, 11% and 10% of the segment’s total revenue, respectively. During the first nine months of 2016, three university clients each accounted for 10% or more of the Graduate Program Segment’s revenue, as follows: $53.9 million, $25.5 million and $15.8 million, which equals 36%, 17% and 11% of the segment’s total revenue, respectively. As of September 30, 2017, three university clients each accounted for 10% or more of the Graduate Program Segment’s accounts receivable balance, as follows: $14.4 million, $6.7 million and $6.4 million, which equals 34%, 16% and 15% of the segment’s total accounts receivable, respectively. As of December 31, 2016, two university clients each accounted for 10% or more of the Graduate Program Segment’s accounts receivable balance, as follows: $5.8 million and $1.4 million, which equals 74% and 17% of the segment’s total accounts receivable, respectively. During the third quarter and first nine months of 2017, Short Course Segment revenue associated with two university clients each accounted for 10% or more of the segment’s total revenue, as follows: $2.4 million and $1.1 million, which equals 56% and 26% of the segment’s total revenue, respectively. |
Government Grants | Government Grants Government grants awarded to the Company in the form of forgivable loans are recorded as deferred government grant obligations within long-term liabilities on the condensed consolidated balance sheets until all contingencies are resolved and the grant is determined to be realized. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations; this evaluation is made on an ongoing basis. In the event the Company was to determine that it was able to realize net deferred income tax assets in the future in excess of their net recorded amount, the Company would record an adjustment to the valuation allowance, which would reduce the provision for income taxes. |
Revenue Recognition | Revenue Recognition Consistent with the Company’s revenue recognition policy related to the Graduate Program Segment, revenue related to the Short Course Segment is recognized when all of the following conditions are met: (i) persuasive evidence of an arrangement exists, (ii) rendering of services is complete, (iii) fees are fixed or determinable and (iv) collection of fees is reasonably assured. Please refer to Note 2 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of the Company’s Annual Report on Form 10-K, filed with the SEC on February 24, 2017, for the significant accounting policy on revenue recognition of the Graduate Program Segment. With respect to the Company’s Graduate Program Segment, the Company recognizes revenue based on its share of net program proceeds from its university clients. With respect to the Company’s Short Course Segment, the Company derives its revenue from providing premium online short courses to working professionals. A portion of revenues is shared with the university clients, in the form of a royalty, for providing the content and certifying the course. The Company has determined that it is the principal in this arrangement as the Company is the entity that has promised to provide the short course to the student. Therefore, revenues for the Short Course Segment reflect gross proceeds from students and the university client royalty amounts are recorded as an expense within curriculum and teaching on the condensed consolidated statements of operations and comprehensive loss. |
Foreign Currency Translation | Foreign Currency Translation For the portion of the Company’s non-U.S. business where the local currency is the functional currency, operating results are translated into U.S. dollars using the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of stockholder’s equity and comprehensive loss. For any transaction that is in a currency different from the entity’s functional currency, the Company records a gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) as other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. |
Non-cash investing and financing activities | Non-cash Investing and Financing Activities During the first nine months of 2017, the Company had new capital asset additions of $49.6 million, which was comprised of $25.0 million of leasehold improvements, $17.0 million in capitalized technology and content development and $7.6 million of other property and equipment. The $49.6 million increase consisted of $37.3 million in cash capital expenditures, with the remainder primarily comprised of landlord funded leasehold improvements. During the first nine months of 2016, the Company had new capital asset additions of $18.4 million, which was primarily comprised of $4.4 million of leasehold improvements and $13.0 million in capitalized technology and content development. The $18.4 million increase consisted of $16.2 million in cash capital expenditures, with the remainder primarily comprised of landlord funded leasehold improvements. |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Combination | |
Schedule of estimated fair values of the assets acquired and liabilities assumed | Estimated Average Purchase Price (in thousands) Cash and cash equivalents $ Current assets Property and equipment, net Amortizable intangible assets: Capitalized technology 3 Capitalized content development 4 University client relationships 9 Trade names and domain names 10 Goodwill* Current liabilities ) Non-current liabilities** ) $ * During the third quarter of 2017, the provisional goodwill balance changed as a result of a currency translation adjustment of approximately $2.6 million. ** Included in non-current liabilities is contingent consideration in the amount of $1.9 million. |
Schedule of unaudited pro forma combined revenue and net loss | Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Pro forma revenue $ $ $ $ Pro forma net loss ) ) ) ) Pro forma net loss per share, basic and diluted $ ) $ ) $ ) $ ) |
Amortizable Intangible Assets (
Amortizable Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Amortizable Intangible Assets | |
Schedule of amortizable intangible assets | September 30, 2017 December 31, 2016 Estimated Gross Accumulated Net Gross Accumulated Net (in thousands) Capitalized technology 3 $ $ ) $ $ $ ) $ Capitalized content development 4 ) ) University client relationships 9 ) — — — Trade names and domain names 10 ) ) Total amortizable intangible assets, net $ $ ) $ $ $ ) $ |
Schedule of estimated future amortization expense for amortizable intangible assets | As of September 30, 2017, the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands): Remainder of 2017 $ 2018 2019 2020 2021 Thereafter Total $ |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity | |
Schedule of shares of common stock reserved for future issuance | At September 30, 2017, the Company had reserved a total of 10,757,992 of its authorized shares of common stock for future issuance as follows: Outstanding stock options Possible future issuance under 2014 Equity Incentive Plan Outstanding restricted stock units Total shares of common stock reserved for future issuance |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stock options | |
Stock-Based Compensation | |
Schedule of stock-based compensation expense included in the consolidated statements of operations and comprehensive loss | Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Curriculum and teaching $ $ — $ $ — Servicing and support Technology and content development Marketing and sales General and administrative Total stock-based compensation expense $ $ $ $ |
Net Loss per Share (Tables)
Net Loss per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Net Loss per Share | |
Schedule of potential dilutive securities that would have been anti-dilutive due to net loss | Three and Nine Months Ended 2017 2016 Stock options Restricted stock units |
Schedule of calculation of basic and diluted net loss per share attributable to common stockholders | Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator (in thousands): Net loss $ ) $ ) $ ) $ ) Denominator: Weighted-average shares of common stock outstanding, basic and diluted Net loss per share, basic and diluted $ ) $ ) $ ) $ ) |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Schedule of revenue and adjusted EBITDA (loss) by segment | Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Revenue by segment* Graduate Program Segment $ $ $ $ Short Course Segment** — — Total revenue $ $ $ $ Adjusted EBITDA (loss) by segment Graduate Program Segment $ ) $ ) $ $ ) Short Course Segment ) — ) — Total adjusted EBITDA (loss) $ ) $ ) $ ) $ ) * The Company did not have any material intersegment revenues for any periods presented. ** Revenue excludes $0.7 million which is related to an adjustment recorded as part of the provisional valuation of GetSmarter (see Note 3). |
Schedule of reconciliation of net loss to adjusted EBITDA (loss) | Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Net loss $ ) $ ) $ ) $ ) Adjustments: Interest income ) ) ) ) Interest expense — Foreign currency (gain) loss ) — — Depreciation and amortization expense Income tax benefit ) — ) — Stock-based compensation expense Total adjustments Adjusted EBITDA (loss)* $ ) $ ) $ ) $ ) * The Company evaluates segment performance based on adjusted EBITDA, that it defines as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. |
Schedule of total assets by segment | September 30, December 31, (in thousands) Total assets Graduate Program Segment $ $ Short Course Segment* — Total assets $ $ * Total goodwill recorded in connection with the acquisition of GetSmarter has been allocated to the Short Course Segment. The assessment of goodwill to reporting units for purposes of future assessments of goodwill impairment has not been completed as September 30, 2017. |
Organization, Basis of Presen27
Organization, Basis of Presentation and Recent Accounting Pronouncements - Other organizational information (Details) | Jul. 01, 2017segment |
Organization, Basis of Presentation and Recent Accounting Pronouncements | |
Number of operating segments | 2 |
Organization, Basis of Presen28
Organization, Basis of Presentation and Recent Accounting Pronouncements - Recent Accounting Pronouncements (Details) $ in Millions | Mar. 31, 2016USD ($) |
ASU 2016-09 | |
Recent Accounting Pronouncements | |
Amount of cumulative-effect reduction to retained earnings with an offset to additional paid-in-capital | $ 0.1 |
Summary of Significant Accoun29
Summary of Significant Accounting Policies - Concentration Risk (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($)item | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($)item | Dec. 31, 2016USD ($)item | |
Concentration of Credit Risk | |||||
Revenue | $ 70,250 | $ 51,960 | $ 200,074 | $ 148,514 | |
Accounts receivable, net | $ 42,332 | $ 42,332 | $ 7,860 | ||
Revenue | Customer concentration risk | |||||
Concentration of Credit Risk | |||||
Number of clients who account for more then 10% | item | 4 | 3 | 4 | 3 | |
Revenue | Customer concentration risk | University client A | |||||
Concentration of Credit Risk | |||||
Revenue | $ 19,600 | $ 18,400 | $ 58,400 | $ 53,900 | |
Percentage of concentration of credit risk | 28.00% | 35.00% | 30.00% | 36.00% | |
Revenue | Customer concentration risk | University client B | |||||
Concentration of Credit Risk | |||||
Revenue | $ 10,800 | $ 8,700 | $ 34,600 | $ 25,500 | |
Percentage of concentration of credit risk | 15.00% | 17.00% | 17.00% | 17.00% | |
Revenue | Customer concentration risk | University client C | |||||
Concentration of Credit Risk | |||||
Revenue | $ 7,200 | $ 5,500 | $ 21,000 | $ 15,800 | |
Percentage of concentration of credit risk | 10.00% | 11.00% | 11.00% | 11.00% | |
Revenue | Customer concentration risk | University client D | |||||
Concentration of Credit Risk | |||||
Revenue | $ 7,100 | $ 20,300 | |||
Percentage of concentration of credit risk | 10.00% | 10.00% | |||
Accounts receivable | Credit concentration risk | |||||
Concentration of Credit Risk | |||||
Number of clients who account for more then 10% | item | 3 | 2 | |||
Accounts receivable | Credit concentration risk | University client A | |||||
Concentration of Credit Risk | |||||
Percentage of concentration of credit risk | 34.00% | 74.00% | |||
Accounts receivable, net | $ 14,400 | $ 14,400 | $ 5,800 | ||
Accounts receivable | Credit concentration risk | University client B | |||||
Concentration of Credit Risk | |||||
Percentage of concentration of credit risk | 16.00% | 17.00% | |||
Accounts receivable, net | 6,700 | $ 6,700 | $ 1,400 | ||
Accounts receivable | Credit concentration risk | University client C | |||||
Concentration of Credit Risk | |||||
Percentage of concentration of credit risk | 15.00% | ||||
Accounts receivable, net | 6,400 | $ 6,400 | |||
Graduate Program Segment | |||||
Concentration of Credit Risk | |||||
Revenue | 65,924 | $ 51,960 | 195,748 | $ 148,514 | |
Short Course Segment | |||||
Concentration of Credit Risk | |||||
Revenue | $ 4,326 | $ 4,326 | |||
Short Course Segment | Revenue | Customer concentration risk | |||||
Concentration of Credit Risk | |||||
Number of clients who account for more then 10% | item | 2 | 2 | |||
Short Course Segment | Revenue | Customer concentration risk | University client A | |||||
Concentration of Credit Risk | |||||
Revenue | $ 2,400 | $ 2,400 | |||
Percentage of concentration of credit risk | 56.00% | 56.00% | |||
Short Course Segment | Revenue | Customer concentration risk | University client B | |||||
Concentration of Credit Risk | |||||
Revenue | $ 1,100 | $ 1,100 | |||
Percentage of concentration of credit risk | 26.00% | 26.00% |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Non-cash investing and financing activities (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Non-cash investing and financing activities | ||
Capital asset additions during the period | $ 49.6 | $ 18.4 |
Cash capital expenditure | 37.3 | 16.2 |
Leasehold improvements | ||
Non-cash investing and financing activities | ||
Capital asset additions during the period | 25 | 4.4 |
Capitalized technology and content development | ||
Non-cash investing and financing activities | ||
Capital asset additions during the period | 17 | $ 13 |
Other property and equipment | ||
Non-cash investing and financing activities | ||
Capital asset additions during the period | $ 7.6 |
Business Combination - Estimate
Business Combination - Estimated fair values of the assets acquired and liabilities assumed (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 01, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Acquisition | |||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Goodwill | $ 67,600 | ||
GetSmarter | |||
Acquisition | |||
Cash consideration | $ 98,700 | ||
Potential earnout payment | $ 20,000 | ||
Common stock, par value (in dollars per share) | $ 0.001 | ||
Cash and Cash Equivalents | $ 1,584 | ||
Current assets | 3,568 | ||
Property and equipment, net | 479 | ||
Goodwill | 70,147 | ||
Current Liabilities | (9,110) | ||
Non-Current Liabilities | (12,782) | ||
Total | 98,686 | ||
Change in goodwill balance as a result of a currency translation adjustment | $ 2,600 | ||
Contingent consideration liability | $ 1,900 | ||
GetSmarter | Minimum | |||
Acquisition | |||
Vesting Period (in years) | 2 years | ||
GetSmarter | Maximum | |||
Acquisition | |||
Vesting Period (in years) | 4 years | ||
Capitalized technology | GetSmarter | |||
Acquisition | |||
Amortizable Intangible Assets | $ 3,000 | ||
Capitalized content development | GetSmarter | |||
Acquisition | |||
Amortizable Intangible Assets | 7,700 | ||
University client relationships | GetSmarter | |||
Acquisition | |||
Amortizable Intangible Assets | 25,000 | ||
Trade names and domain names | GetSmarter | |||
Acquisition | |||
Amortizable Intangible Assets | $ 9,100 |
Business Combination - Estima32
Business Combination - Estimated Average Useful Life (Details) | Jul. 01, 2017 | Sep. 30, 2017 |
Capitalized technology | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 3 years | |
Capitalized content development | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 4 years | |
University client relationships | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 9 years | |
Trade names and domain names | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 10 years | |
GetSmarter | Capitalized technology | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 3 years | |
GetSmarter | Capitalized content development | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 4 years | |
GetSmarter | University client relationships | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 9 years | |
GetSmarter | Trade names and domain names | ||
Useful lives | ||
Estimated Average Useful Life (in years) | 10 years |
Business Combination - Pro form
Business Combination - Pro forma combined revenue and net loss (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Business Combination | ||||
Pro forma revenue | $ 70,250 | $ 58,703 | $ 207,768 | $ 160,508 |
Pro forma net loss | $ (14,739) | $ (7,386) | $ (34,306) | $ (24,535) |
Pro forma net loss per share, basic and diluted | $ (0.30) | $ (0.16) | $ (0.72) | $ (0.53) |
Amortizable Intangible Assets -
Amortizable Intangible Assets - Amortizable Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Gross Carrying Amount | $ 116,760 | $ 116,760 | $ 57,817 | ||
Accumulated Amortization | (31,965) | (31,965) | (23,686) | ||
Net Carrying Amount | 84,795 | 84,795 | 34,131 | ||
Amortization expense | 3,600 | $ 2,100 | $ 8,700 | $ 5,700 | |
Capitalized technology | |||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Estimated Average Useful Life (in years) | 3 years | ||||
Gross Carrying Amount | 26,678 | $ 26,678 | 17,100 | ||
Accumulated Amortization | (10,457) | (10,457) | (7,822) | ||
Net Carrying Amount | 16,221 | $ 16,221 | 9,278 | ||
Capitalized content development | |||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Estimated Average Useful Life (in years) | 4 years | ||||
Gross Carrying Amount | 54,365 | $ 54,365 | 37,956 | ||
Accumulated Amortization | (19,913) | (19,913) | (15,367) | ||
Net Carrying Amount | 34,452 | $ 34,452 | 22,589 | ||
University client relationships | |||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Estimated Average Useful Life (in years) | 9 years | ||||
Gross Carrying Amount | 24,162 | $ 24,162 | |||
Accumulated Amortization | (671) | (671) | |||
Net Carrying Amount | 23,491 | $ 23,491 | |||
Trade names and domain names | |||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Estimated Average Useful Life (in years) | 10 years | ||||
Gross Carrying Amount | 11,555 | $ 11,555 | 2,761 | ||
Accumulated Amortization | (924) | (924) | (497) | ||
Net Carrying Amount | 10,631 | 10,631 | 2,264 | ||
In process capitalized technology and content development | |||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||
Net Carrying Amount | $ 10,500 | $ 10,500 | $ 8,700 |
Amortizable Intangible Assets35
Amortizable Intangible Assets - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Future amortization expense | ||
Net Carrying Amount | $ 84,795 | $ 34,131 |
Excluding in process capitalized technology and content development | ||
Future amortization expense | ||
Remainder of 2017 | 4,538 | |
2,018 | 18,215 | |
2,019 | 16,248 | |
2,020 | 10,040 | |
2,021 | 6,666 | |
Thereafter | 18,566 | |
Net Carrying Amount | $ 74,273 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Accrued Expenses | ||
Accrued marketing costs | $ 12.5 | $ 5.6 |
Accrued facility costs | $ 5.6 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Leased facility in Brooklyn, New York $ in Millions | 1 Months Ended |
Feb. 28, 2017USD ($)ft²floor | |
Operating Leases | |
Number of floors leased | floor | 3 |
Area of office space leased | ft² | 80,000 |
Total future minimum lease payments | $ | $ 51.8 |
Term of the lease | 11 years 9 months |
Debt (Details)
Debt (Details) | Jun. 27, 2017USD ($)employee | Jun. 22, 2017USD ($)employee | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($)item | Dec. 31, 2016USD ($) |
Lines of Credit | |||||
Aggregate borrowing base | $ 25,000,000 | ||||
Amount outstanding | $ 0 | $ 0 | |||
Security deposit | 11,500,000 | ||||
Number of government grants | item | 2 | ||||
Government Grants | |||||
Amount of Loan | 3,500,000 | ||||
Prince George's County, Maryland | |||||
Government Grants | |||||
Amount of Loan | $ 1,500,000 | ||||
Loan interest rate (in percentage) | 3.00% | ||||
Minimum number of employees required to avoid default of loan for payment principal and accrued interest | employee | 650 | ||||
Minimum number of employees required to avoid default of loan for payment prorated portion and interest | employee | 1,300 | ||||
Amount of prorated portion of loan per employee | $ 2,252 | ||||
Standby letters of credit | |||||
Lines of Credit | |||||
Aggregate borrowing base | $ 10,000,000 | ||||
Short Course Segment | |||||
Lines of Credit | |||||
Amount outstanding | $ 0 | ||||
Interest rate (in percentage) | 10.25% | ||||
Short Course Segment | Revolving working capital facility | |||||
Lines of Credit | |||||
Aggregate borrowing base | $ 1,900,000 | ||||
Harkins Road LLC | Department of Commerce | |||||
Government Grants | |||||
Amount of Loan | $ 2,000,000 | ||||
Loan interest rate (in percentage) | 3.00% | ||||
Minimum number of employees required to avoid default of loan for payment principal and accrued interest | employee | 650 | ||||
Minimum number of employees required to avoid default of loan for payment prorated portion and interest | employee | 1,600 | ||||
Amount of prorated portion of loan per employee | $ 2,105 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Income Taxes | ||
Income tax benefit | $ (974) | $ (974) |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 07, 2017 | Oct. 31, 2017 | Sep. 30, 2017 | Jan. 01, 2017 | Dec. 31, 2016 | Jan. 01, 2016 |
Stockholders' Equity | ||||||
Stock Issued During Period, Value, New Issues | $ 189,478 | |||||
Authorized shares of capital stock | 205,000,000 | |||||
Authorized shares of common stock | 200,000,000 | 200,000,000 | ||||
Authorized shares of preferred stock | 5,000,000 | 5,000,000 | ||||
Shares of common stock reserved for future issuance | ||||||
Outstanding stock options | 4,912,509 | |||||
Possible future issuance under 2014 Equity Incentive Plan | 4,410,303 | |||||
Outstanding restricted stock units | 1,435,180 | |||||
Total shares of common stock reserved for future issuance | 10,757,992 | |||||
Equity Incentive Plan 2014 | ||||||
Shares of common stock reserved for future issuance | ||||||
Total shares of common stock reserved for future issuance | 2,357,579 | 2,288,820 | ||||
Equity Incentive Plan 2014 | Stock options | ||||||
Stockholders equity compensation | ||||||
Granted (in shares) | 32,356 | |||||
Weighted-average exercise price (in dollars per share) | $ 56.77 | |||||
Equity Incentive Plan 2014 | Restricted Stock Units | ||||||
Stockholders equity compensation | ||||||
Number of restricted stock units granted (in shares) | 20,126 | |||||
Underwriters' over-allotment option | ||||||
Stockholders' Equity | ||||||
Shares issued | 547,500 | |||||
Common Stock | ||||||
Stockholders' Equity | ||||||
Shares issued | 4,047,500 | 4,047,500 | ||||
Stock Issued During Period, Value, New Issues | $ 4 | |||||
Additional Paid-In Capital | ||||||
Stockholders' Equity | ||||||
Stock Issued During Period, Value, New Issues | $ 189,474 |
Stock-Based Compensation - Expe
Stock-Based Compensation - Expense (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017USD ($)itemshares | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)itemshares | Sep. 30, 2016USD ($) | Dec. 31, 2015 | Jan. 01, 2017shares | Jan. 01, 2016shares | |
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Number of share-based employee compensation plans | item | 2 | 2 | |||||
Common stock reserved for issuance | shares | 10,757,992 | 10,757,992 | |||||
Stock-based compensation expense | $ 6,147 | $ 4,073 | $ 15,537 | $ 11,593 | |||
Curriculum and teaching | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Stock-based compensation expense | 2 | 2 | |||||
Servicing and support | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Stock-based compensation expense | 1,100 | 825 | 2,956 | 2,399 | |||
Technology and content development | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Stock-based compensation expense | 904 | 633 | 2,447 | 1,739 | |||
Marketing and sales | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Stock-based compensation expense | 463 | 360 | 1,235 | 973 | |||
General and administrative | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Stock-based compensation expense | $ 3,678 | $ 2,255 | $ 8,897 | $ 6,482 | |||
Equity Incentive Plan 2014 | |||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | |||||||
Period of annual automatic increase in the number of shares authorized | 10 years | ||||||
Percentage applied on total number of shares of common stock outstanding on previous calendar year for automatic inclusion in the plan | 5.00% | ||||||
Common stock reserved for issuance | shares | 2,357,579 | 2,288,820 |
Stock-Based Compensation - Empl
Stock-Based Compensation - Employee Stock Purchase Plan (Details) | Jun. 05, 2017USD ($)shares |
Employee Stock Purchase Plan | |
Percentage of purchase price to fair market value | 85.00% |
Maximum payroll deduction amount per calendar year | $ | $ 25,000 |
Minimum | |
Employee Stock Purchase Plan | |
Percentage of payroll deduction | 1.00% |
Maximum | |
Employee Stock Purchase Plan | |
Percentage of payroll deduction | 15.00% |
Maximum shares of common stock issued under ESPP | shares | 1,000,000 |
Net Loss per Share - Antidiluti
Net Loss per Share - Antidilutive (Details) - shares | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Restricted Stock Units | ||
Potential dilutive securities that would have been anti-dilutive | ||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 1,435,180 | 1,411,878 |
Stock options | ||
Potential dilutive securities that would have been anti-dilutive | ||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 4,912,509 | 4,943,556 |
Net Loss per Share - Other (Det
Net Loss per Share - Other (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Numerator | ||||
Net loss | $ (14,739) | $ (6,758) | $ (29,932) | $ (18,475) |
Denominator: | ||||
Weighted-average shares of common stock outstanding, basic and diluted | 48,961,914 | 46,903,628 | 47,962,201 | 46,453,480 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.30) | $ (0.14) | $ (0.62) | $ (0.40) |
Segment Information - Revenue a
Segment Information - Revenue and Total assets by segment (Details) $ in Thousands | Jul. 01, 2017segment | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) |
Segment Information | ||||||
Number of operating segments | segment | 2 | |||||
Number of reportable segments | segment | 2 | |||||
Revenue by segment | ||||||
Total revenue | $ 70,250 | $ 51,960 | $ 200,074 | $ 148,514 | ||
Adjusted EBITDA (loss) by segment | ||||||
Total adjusted EBITDA (loss) | (3,720) | (188) | (1,309) | (7) | ||
Adjustment recorded upon provisional valuation of GetSmarter acquisition | 700 | 700 | ||||
Net loss | (14,739) | (6,758) | (29,932) | (18,475) | ||
Adjustments: | ||||||
Interest income | 18 | 37 | 267 | 220 | ||
Interest expense | (36) | (37) | (35) | |||
Foreign currency (gain) loss | 59 | (972) | ||||
Depreciation and amortization expense | (5,887) | (2,534) | (13,318) | (7,060) | ||
Income tax benefit | 974 | 974 | ||||
Stock-based compensation expense | (6,147) | (4,073) | (15,537) | (11,593) | ||
Total adjustments | (11,019) | (6,570) | (28,623) | (18,468) | ||
Total assets | ||||||
Total assets | 476,350 | 476,350 | $ 244,320 | |||
Graduate Program Segment | ||||||
Revenue by segment | ||||||
Total revenue | 65,924 | 51,960 | 195,748 | 148,514 | ||
Adjusted EBITDA (loss) by segment | ||||||
Total adjusted EBITDA (loss) | (718) | $ (188) | 1,693 | $ (7) | ||
Total assets | ||||||
Total assets | 361,455 | 361,455 | $ 244,320 | |||
Short Course Segment | ||||||
Revenue by segment | ||||||
Total revenue | 4,326 | 4,326 | ||||
Adjusted EBITDA (loss) by segment | ||||||
Total adjusted EBITDA (loss) | (3,002) | (3,002) | ||||
Total assets | ||||||
Total assets | $ 115,514 | $ 115,514 |