Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 07, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-36376 | |
Entity Registrant Name | 2U, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-2335939 | |
Entity Address, Address Line One | 7900 Harkins Road | |
Entity Address, City or Town | Lanham, | |
Entity Address, State or Province | MD | |
Entity Address, Postal Zip Code | 20706 | |
City Area Code | 301 | |
Local Phone Number | 892-4350 | |
Title of 12(b) Security | Common stock, $0.001 par value per share | |
Trading Symbol | TWOU | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 82,069,164 | |
Entity Central Index Key | 0001459417 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 41,141 | $ 167,518 |
Restricted cash | 12,710 | 15,060 |
Accounts receivable, net | 113,202 | 62,826 |
Other receivables, net | 29,196 | 33,813 |
Prepaid expenses and other assets | 37,722 | 43,090 |
Total current assets | 233,971 | 322,307 |
Other receivables, net, non-current | 18,388 | 14,788 |
Property and equipment, net | 42,387 | 45,855 |
Right-of-use assets | 65,292 | 72,361 |
Goodwill | 712,644 | 734,620 |
Intangible assets, net | 386,272 | 549,755 |
Other assets, non-current | 78,981 | 71,173 |
Total assets | 1,537,935 | 1,810,859 |
Current liabilities | ||
Accounts payable and accrued expenses | 128,316 | 110,020 |
Deferred revenue | 116,276 | 90,161 |
Lease liability | 15,106 | 13,909 |
Accrued restructuring liability | 11,451 | 6,692 |
Other current liabilities | 43,485 | 58,210 |
Total current liabilities | 314,634 | 278,992 |
Long-term debt | 878,124 | 928,564 |
Deferred tax liabilities, net | 310 | 282 |
Lease liability, non-current | 86,381 | 99,709 |
Other liabilities, non-current | 2,007 | 1,796 |
Total liabilities | 1,281,456 | 1,309,343 |
Commitments and contingencies (Note 5) | ||
Stockholders’ equity | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued | 0 | 0 |
Common stock, $0.001 par value, 200,000,000 shares authorized, 81,630,808 shares issued and outstanding as of September 30, 2023; 78,334,666 shares issued and outstanding as of December 31, 2022 | 82 | 78 |
Additional paid-in capital | 1,738,092 | 1,700,855 |
Accumulated deficit | (1,455,131) | (1,179,972) |
Accumulated other comprehensive loss | (26,564) | (19,445) |
Total stockholders’ equity | 256,479 | 501,516 |
Total liabilities and stockholders’ equity | $ 1,537,935 | $ 1,810,859 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, issued (in shares) | 81,630,808 | 78,334,666 |
Common stock, outstanding (in shares) | 81,630,808 | 78,334,666 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Statement [Abstract] | ||||
Total revenue | $ 229,699 | $ 232,238 | $ 690,292 | $ 727,031 |
Costs and expenses | ||||
Curriculum and teaching | 32,143 | 31,558 | 99,085 | 96,933 |
Servicing and support | 31,484 | 36,110 | 101,178 | 112,795 |
Technology and content development | 45,877 | 43,976 | 135,611 | 140,649 |
Marketing and sales | 96,256 | 94,311 | 292,313 | 341,643 |
General and administrative | 36,801 | 39,388 | 108,708 | 131,146 |
Restructuring charges | 14,085 | 11,632 | 22,582 | 29,172 |
Impairment charges | 0 | 79,509 | 134,117 | 138,291 |
Total costs and expenses | 256,646 | 336,484 | 893,594 | 990,629 |
Loss from operations | (26,947) | (104,246) | (203,302) | (263,598) |
Interest income | 363 | 269 | 1,099 | 767 |
Interest expense | (19,167) | (15,913) | (55,040) | (43,709) |
Debt modification expense and loss on debt extinguishment | 0 | 0 | (16,735) | 0 |
Other income (expense), net | (1,585) | (1,845) | (751) | (4,242) |
Loss before income taxes | (47,336) | (121,735) | (274,729) | (310,782) |
Income tax (expense) benefit | (107) | 59 | (430) | 474 |
Net loss | $ (47,443) | $ (121,676) | $ (275,159) | $ (310,308) |
Net loss per share, basic (in dollars per share) | $ (0.58) | $ (1.57) | $ (3.42) | $ (4.03) |
Net loss per share, diluted (in dollars per share) | $ (0.58) | $ (1.57) | $ (3.42) | $ (4.03) |
Weighted-average shares of common stock outstanding, basic (in shares) | 81,515,246 | 77,692,911 | 80,470,221 | 77,013,180 |
Weighted-average shares of common stock outstanding, diluted (in shares) | 81,515,246 | 77,692,911 | 80,470,221 | 77,013,180 |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | $ 185 | $ (5,637) | $ (7,119) | $ (5,982) |
Comprehensive loss | $ (47,258) | $ (127,313) | $ (282,278) | $ (316,290) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustments, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Additional Paid-In Capital | Additional Paid-In Capital Cumulative Effect, Period of Adoption, Adjustment | Accumulated Deficit | Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment | Accumulated Other Comprehensive Loss |
Beginning balance (in shares) at Dec. 31, 2021 | 75,754,663 | |||||||
Beginning balance at Dec. 31, 2021 | $ 829,155 | $ (81,734) | $ 76 | $ 1,735,628 | $ (114,551) | $ (890,638) | $ 32,817 | $ (15,911) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 577,416 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (919) | $ 1 | (920) | |||||
Exercise of stock options (in shares) | 284,455 | |||||||
Exercise of stock options | 875 | 875 | ||||||
Stock-based compensation expense | 24,424 | 24,424 | ||||||
Net loss | (125,780) | (125,780) | ||||||
Foreign currency translation adjustment | 7,329 | 7,329 | ||||||
Ending balance (in shares) at Mar. 31, 2022 | 76,616,534 | |||||||
Ending balance at Mar. 31, 2022 | 653,350 | $ 77 | 1,645,456 | (983,601) | (8,582) | |||
Beginning balance (in shares) at Dec. 31, 2021 | 75,754,663 | |||||||
Beginning balance at Dec. 31, 2021 | 829,155 | $ (81,734) | $ 76 | 1,735,628 | $ (114,551) | (890,638) | $ 32,817 | (15,911) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net loss | (310,308) | |||||||
Foreign currency translation adjustment | (5,982) | |||||||
Ending balance (in shares) at Sep. 30, 2022 | 77,845,436 | |||||||
Ending balance at Sep. 30, 2022 | 493,916 | $ 78 | 1,683,860 | (1,168,129) | (21,893) | |||
Beginning balance (in shares) at Mar. 31, 2022 | 76,616,534 | |||||||
Beginning balance at Mar. 31, 2022 | $ 653,350 | $ 77 | 1,645,456 | (983,601) | (8,582) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with employee stock purchase plan (in shares) | 136,039 | |||||||
Issuance of common stock in connection with employee stock purchase plan | $ 1,282 | 1,282 | ||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 464,984 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (822) | (822) | ||||||
Exercise of stock options (in shares) | 2,278 | |||||||
Exercise of stock options | 17 | 17 | ||||||
Stock-based compensation expense | 22,349 | 22,349 | ||||||
Net loss | (62,852) | (62,852) | ||||||
Foreign currency translation adjustment | (7,674) | (7,674) | ||||||
Ending balance (in shares) at Jun. 30, 2022 | 77,219,835 | |||||||
Ending balance at Jun. 30, 2022 | 605,650 | $ 77 | 1,668,282 | (1,046,453) | (16,256) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 595,369 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (579) | $ 1 | (580) | |||||
Exercise of stock options (in shares) | 30,232 | |||||||
Exercise of stock options | 191 | 191 | ||||||
Stock-based compensation expense | 15,967 | 15,967 | ||||||
Net loss | (121,676) | (121,676) | ||||||
Foreign currency translation adjustment | (5,637) | (5,637) | ||||||
Ending balance (in shares) at Sep. 30, 2022 | 77,845,436 | |||||||
Ending balance at Sep. 30, 2022 | $ 493,916 | $ 78 | 1,683,860 | (1,168,129) | (21,893) | |||
Beginning balance (in shares) at Dec. 31, 2022 | 78,334,666 | 78,334,666 | ||||||
Beginning balance at Dec. 31, 2022 | $ 501,516 | $ 78 | 1,700,855 | (1,179,972) | (19,445) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with employee stock purchase plan (in shares) | 207,160 | |||||||
Issuance of common stock in connection with employee stock purchase plan | 1,177 | $ 1 | 1,176 | |||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 1,047,765 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (361) | $ 1 | (362) | |||||
Exercise of stock options (in shares) | 17,166 | |||||||
Exercise of stock options | 110 | 110 | ||||||
Stock-based compensation expense | 14,563 | 14,563 | ||||||
Net loss | (54,062) | (54,062) | ||||||
Foreign currency translation adjustment | (3,303) | (3,303) | ||||||
Ending balance (in shares) at Mar. 31, 2023 | 79,606,757 | |||||||
Ending balance at Mar. 31, 2023 | $ 459,640 | $ 80 | 1,716,342 | (1,234,034) | (22,748) | |||
Beginning balance (in shares) at Dec. 31, 2022 | 78,334,666 | 78,334,666 | ||||||
Beginning balance at Dec. 31, 2022 | $ 501,516 | $ 78 | 1,700,855 | (1,179,972) | (19,445) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Exercise of stock options (in shares) | 17,166 | |||||||
Net loss | $ (275,159) | |||||||
Foreign currency translation adjustment | $ (7,119) | |||||||
Ending balance (in shares) at Sep. 30, 2023 | 81,630,808 | 81,630,808 | ||||||
Ending balance at Sep. 30, 2023 | $ 256,479 | $ 82 | 1,738,092 | (1,455,131) | (26,564) | |||
Beginning balance (in shares) at Mar. 31, 2023 | 79,606,757 | |||||||
Beginning balance at Mar. 31, 2023 | 459,640 | $ 80 | 1,716,342 | (1,234,034) | (22,748) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with employee stock purchase plan (in shares) | 255,169 | |||||||
Issuance of common stock in connection with employee stock purchase plan | 925 | 925 | ||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 1,095,728 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (375) | $ 1 | (376) | |||||
Stock-based compensation expense | 10,983 | 10,983 | ||||||
Net loss | (173,654) | (173,654) | ||||||
Foreign currency translation adjustment | (4,001) | (4,001) | ||||||
Ending balance (in shares) at Jun. 30, 2023 | 80,957,654 | |||||||
Ending balance at Jun. 30, 2023 | 293,518 | $ 81 | 1,727,874 | (1,407,688) | (26,749) | |||
Increase (Decrease) in Stockholders' Equity | ||||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 673,154 | |||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (221) | $ 1 | (222) | |||||
Stock-based compensation expense | 10,440 | 10,440 | ||||||
Net loss | (47,443) | (47,443) | ||||||
Foreign currency translation adjustment | $ 185 | 185 | ||||||
Ending balance (in shares) at Sep. 30, 2023 | 81,630,808 | 81,630,808 | ||||||
Ending balance at Sep. 30, 2023 | $ 256,479 | $ 82 | $ 1,738,092 | $ (1,455,131) | $ (26,564) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities | ||
Net loss | $ (275,159) | $ (310,308) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Non-cash interest expense | 10,488 | 9,929 |
Depreciation and amortization expense | 86,846 | 95,070 |
Stock-based compensation expense | 35,986 | 62,740 |
Non-cash lease expense | 13,164 | 16,507 |
Restructuring charges | 838 | 9,523 |
Impairment charges | 134,117 | 138,291 |
Provision for credit losses | 6,558 | 6,129 |
Loss on debt extinguishment | 12,123 | 0 |
Other | 794 | 4,660 |
Changes in operating assets and liabilities, net of assets and liabilities acquired: | ||
Accounts receivable, net | (54,612) | (36,253) |
Other receivables, net | (2,207) | (2,867) |
Prepaid expenses and other assets | (1,095) | 1,973 |
Accounts payable and accrued expenses | 19,888 | (12,964) |
Deferred revenue | 26,348 | 43,252 |
Other liabilities, net | (31,597) | (27,124) |
Net cash used in operating activities | (17,520) | (1,442) |
Cash flows from investing activities | ||
Purchase of a business, net of cash acquired | 0 | 5,010 |
Additions of amortizable intangible assets | (32,442) | (50,155) |
Purchases of property and equipment | (4,335) | (8,777) |
Advances made to university clients | 0 | (310) |
Advances repaid by university clients | 200 | 200 |
Other | 1 | (17) |
Net cash used in investing activities | (36,576) | (54,049) |
Cash flows from financing activities | ||
Proceeds from debt | 309,223 | 530 |
Payments on debt | (373,914) | (5,313) |
Prepayment premium on extinguishment of senior secured term loan facility | (5,666) | 0 |
Payment of debt issuance costs | (4,411) | 0 |
Tax withholding payments associated with settlement of restricted stock units | (957) | (2,320) |
Proceeds from exercise of stock options | 110 | 1,083 |
Proceeds from employee stock purchase plan share purchases | 2,102 | 1,282 |
Net cash used in financing activities | (73,513) | (4,738) |
Effect of exchange rate changes on cash | (1,118) | (4,530) |
Net decrease in cash, cash equivalents and restricted cash | (128,727) | (64,759) |
Cash, cash equivalents and restricted cash, beginning of period | 182,578 | 249,909 |
Cash, cash equivalents and restricted cash, end of period | $ 53,851 | $ 185,150 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization 2U, Inc. (together with its subsidiaries, the “Company”) is a leading online education platform company. The Company’s mission is to expand access to high-quality education and unlock human potential. As a trusted partner to top-ranked nonprofit universities and other leading organizations, the Company delivers technology and services that enable its clients to bring their educational offerings online at scale. The Company provides 81 million people worldwide with access to world-class education in partnership with 250 top-ranked global universities and other leading organizations. Through edX, its education consumer marketplace, the Company offers more than 4,400 high-quality online learning opportunities, including open courses, executive education offerings, boot camps, micro-credentials, professional certificates as well as undergraduate and graduate degree programs. The Company’s offerings cover a wide range of topics including technology, business, healthcare, science, education, social work, and sustainability. Many of the offerings are stackable, providing learners with an affordable pathway to achieve both short-term and long-term professional and educational goals. The Company’s platform provides its clients with the digital infrastructure to launch world-class online education offerings and allow students to easily access high-quality, job-relevant education without the barriers of cost or location. The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment. The Company’s Degree Program Segment provides the technology and services to nonprofit colleges and universities to enable the online delivery of degree programs. Students enrolled in these programs are generally seeking an undergraduate or graduate degree of the same quality they would receive on campus. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company 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 Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the 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, 2023 and 2022 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, 2022. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2022 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. Use of Estimates The preparation of 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. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill and indefinite-lived intangible assets, deferred tax assets, and the fair value of the convertible senior notes. 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. Fair Value Measurements The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability. U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 3 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows: • Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 —Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 —Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of September 30, 2023 and December 31, 2022. Refer to Note 8 for more information regarding the Company’s convertible senior notes. Goodwill and Other Indefinite-lived Intangible Assets The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, as of October 1, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value. Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. During the second quarter of 2023, the Company completed the update of its internal financial reporting structure to better align with the executive structure following the 2022 Strategic Realignment. As a result of this update, the Company’s three reporting units within the Alternative Credential Segment (Executive Education, Boot Camp, and Open Courses) were combined into a single reporting unit (Alternative Credential). The Degree Program Segment continues to have one reporting unit (Degree Program). The Company performed impairment assessments before and after the change in reporting units. Refer to the Interim Impairment Assessments section below for further information regarding the results of these assessments. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach 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 a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit. The Company determines the fair value of a reporting unit by utilizing a weighted combination of income-based and market-based approaches. The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, and forecasts of revenue and margins. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns. In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value. Other Indefinite-lived Intangible Assets In November 2021, the Company acquired an indefinite-lived intangible asset, which represented the established edX trade name. The Company concluded that due to changes in facts and circumstances, effective July 1, 2023, the edX trade name should no longer have an indefinite useful life. The Company began amortizing the edX trade name on a straight-line basis over its estimated remaining useful life of 25 years. The impact of this change in accounting estimate was immaterial to the Company’s condensed consolidated statements of operations for each of the three and nine months ended September 30, 2023. The Company expects the impact to be immaterial in future quarters. Interim Impairment Assessments During both the first and third quarter of 2022, the Company experienced a significant decline in its market capitalization. Management deemed these declines triggering events related to the Company’s goodwill and indefinite-lived intangible asset. The Company performed interim impairment assessments as of March 1, 2022 and September 30, 2022. For the quantitative interim impairment assessment performed as of March 1, 2022, management determined the carrying value of the Open Courses reporting unit and the carrying value of an indefinite-lived intangible asset, both within the Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, the Company recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. For the quantitative interim impairment assessment performed as of September 30, 2022, management determined the carrying value of two of the reporting units and the carrying value of an indefinite-lived intangible asset, each within the Company’s Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, the Company recorded impairment charges of $50.2 million to goodwill, of which $43.0 million related to the Open Courses reporting unit and $7.2 million related to the Executive Education reporting unit, and $29.3 million to the indefinite-lived intangible asset. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. During the second quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill and indefinite-lived intangible asset. In addition, as a result of the change in the Company’s reporting units in the second quarter of 2023, the Company performed interim impairment assessments before and after the change in reporting units. The Company performed these interim impairment assessments as of May 1, 2023. For the quantitative interim impairment assessment performed as of May 1, 2023, before the change in reporting units, management determined the carrying value of the Open Courses reporting unit and the carrying value of an indefinite-lived intangible asset, both within the Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended June 30, 2023, the Company recorded impairment charges of $16.7 million to goodwill, all of which related to the Open Courses reporting unit, and $117.4 million to the indefinite-lived intangible asset. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. For the interim impairment assessment performed as of May 1, 2023, after the change in reporting units, management determined it was not more likely than not that the fair values of the Degree Program reporting unit and the Alternative Credential reporting unit were less than their respective carrying amounts. As such, the Company concluded that the goodwill relating to those reporting units was not impaired and further quantitative impairment assessment was not necessary. During the third quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of September 30, 2023. The estimated fair value of each of the Company’s reporting units exceeded their respective carrying value by more than 10%. It is possible that future changes in circumstances, such as a decline in our market capitalization, or in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, could require us to record additional impairment charges in the future. For each of the interim impairment assessments, the Company utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and an income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included discount rates, terminal growth rates, royalty rates, and forecasts of revenue and margins based upon each respective reporting unit’s or indefinite-lived intangible asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result. Convertible Senior Notes In April 2020, the Company issued 2.25% convertible senior notes due May 1, 2025 (the “2025 Notes”) in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional 2025 Notes, in a private offering. Refer to Note 8 for more information regarding the 2025 Notes. In January 2023, the Company issued 4.50% convertible senior notes due February 1, 2030 (the “2030 Notes”) in an aggregate principal amount of $147.0 million in a private offering. Refer to Note 8 for more information regarding the 2030 Notes. During the first quarter of 2022, the Company adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Pursuant to this ASU, which simplified the accounting for convertible instruments, the Company’s convertible senior notes are accounted for as a single instrument. Refer to the Recent Accounting Pronouncements section below for further information regarding the Company’s adoption of ASU 2020-06. Debt Issuance Costs Debt issuance costs are incurred as a result of entering into certain borrowing transactions and are presented as a reduction from the carrying amount of the debt liability on the Company’s consolidated balance sheets. Debt issuance costs are amortized over the term of the associated debt instrument. The amortization of debt issuance costs is included as a component of interest expense on the Company’s consolidated statements of operations and comprehensive loss. If the Company extinguishes debt prior to the end of the underlying instrument’s full term, some or all of the unamortized debt issuance costs may need to be written off, and a loss on extinguishment may need to be recognized. Refer to Note 8 for further information about the Company’s debt. Recent Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity’s own equity. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. This ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU on a modified retrospective basis in the first quarter of 2022, effective as of January 1, 2022. As a result of the adoption, long-term debt increased $81.7 million, additional paid-in capital decreased $114.6 million, deferred tax liabilities decreased $22.1 million, and the Company recorded a cumulative-effect adjustment to opening accumulated deficit of $32.8 million. Adoption of this ASU requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effective is more dilutive. There was no impact to the number of potentially dilutive shares as a result of the adoption. Adoption of this standard did not have a material impact on the Company’s liquidity or cash flows. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 . This ASU defers the sunset date from December 31, 2022 to December 31, 2024 and is effective immediately. The Company will adopt the standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In March 2022, the FASB issued ASU No 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures . This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13 and enhances the disclosure requirements for certain loan refinancings when borrowers are experiencing financial difficulty. In addition, the ASU requires the disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. This ASU is effective for fiscal years beginning after December 15, 2022. The Company adopted this ASU in the first quarter of 2023. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The following table presents the changes in the carrying amount of goodwill by reportable segment on the Company’s condensed consolidated balance sheets for the periods indicated. Balance as of December 31, 2022 Impairment Charges* Foreign Currency Translation Adjustments Balance as of September 30, 2023 (in thousands) Degree Program Segment Gross goodwill $ 192,459 $ — $ — $ 192,459 Accumulated impairments — — — — Net goodwill 192,459 — — 192,459 Alternative Credential Segment Gross goodwill $ 691,531 $ — $ (5,259) $ 686,272 Accumulated impairments (149,370) (16,717) — (166,087) Net goodwill 542,161 (16,717) (5,259) 520,185 Total Gross goodwill $ 883,990 $ — $ (5,259) $ 878,731 Accumulated impairments (149,370) (16,717) — (166,087) Net goodwill $ 734,620 $ (16,717) $ (5,259) $ 712,644 * Refer to Note 2 for further information about the impairment charges recorded during the second quarter of 2023. The following table presents the components of intangible assets, net on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 Estimated Gross Accumulated Net Gross Accumulated Net (in thousands) Capitalized technology 3-5 $ 241,848 $ (153,473) $ 88,375 $ 226,761 $ (132,621) $ 94,140 Capitalized content development 4-5 252,900 (188,648) 64,252 261,844 (177,154) 84,690 University client relationships 9-10 208,145 (70,119) 138,026 210,138 (55,556) 154,582 Enterprise client relationships 10 14,300 (2,681) 11,619 14,300 (1,609) 12,691 Trade names and domain names* 5-25 284,243 (200,243) 84,000 284,701 (81,049) 203,652 Total intangible assets $ 1,001,436 $ (615,164) $ 386,272 $ 997,744 $ (447,989) $ 549,755 * The Company concluded that due to changes in facts and circumstances, the edX trade name, which was classified as indefinite-lived as of June 30, 2023, is now finite-lived. In the third quarter of 2023, the Company began amortizing the trade name on a straight-line basis over its estimated useful life. The gross carrying amount of the edX trade name was $255.0 million as of both September 30, 2023 and December 31, 2022. Accumulated amortization and impairments include $176.7 million and $59.3 million of impairment charges related to the edX trade name as of September 30, 2023 and December 31, 2022, respectively. Refer to Note 2 for further information about these impairment charges. The amounts presented in the table above include $48.7 million and $53.9 million of in-process capitalized technology and content development as of September 30, 2023 and December 31, 2022, respectively. The Company recorded amortization expense related to amortizable intangible assets of $27.0 million and $28.5 million for the three months ended September 30, 2023 and 2022, respectively. The Company recorded amortization expense related to amortizable intangible assets of $78.9 million and $59.9 million for the nine months ended September 30, 2023 and 2022, respectively. The following table presents the estimated future amortization expense of the Company’s amortizable intangible assets placed in service as of September 30, 2023. Future Amortization Expense (in thousands) Remainder of 2023 $ 21,499 2024 73,695 2025 53,294 2026 37,685 2027 28,479 Thereafter 122,881 Total $ 337,533 |
Other Balance Sheet Details
Other Balance Sheet Details | 9 Months Ended |
Sep. 30, 2023 | |
Payables and Accruals [Abstract] | |
Other Balance Sheet Details | Other Balance Sheet Details Prepaid Expenses and Other Assets As of September 30, 2023 and December 31, 2022, the Company had balances of $23.9 million and $20.5 million, respectively, of prepaid assets within prepaid expenses and other assets on the condensed consolidated balance sheets. Other Assets, Non-current As of September 30, 2023 and December 31, 2022, the Company had balances of $12.6 million and $9.3 million, respectively, of deferred expenses incurred to integrate the software associated with its cloud computing arrangements, within other assets, non-current on the condensed consolidated balance sheets. Such expenses are subject to amortization over the remaining contractual term of the associated cloud computing arrangement, with a useful life of between three Accounts Payable and Accrued Expenses The following table presents the components of accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 (in thousands) Accrued university and instructional staff compensation $ 28,893 $ 30,807 Accrued marketing expenses 18,793 15,988 Accrued compensation and related benefits 25,747 16,213 Accounts payable and other accrued expenses 54,883 47,012 Total accounts payable and accrued expenses $ 128,316 $ 110,020 Other Current Liabilities As of September 30, 2023 and December 31, 2022, the Company had balances of $8.9 million and $14.7 million, respectively, within other current liabilities on the condensed consolidated balance sheets, which represent proceeds received from students enrolled in certain of the Company’s alternative credential offerings that are payable to an associated university client. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Contingencies The Company is involved in various claims and legal proceedings arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. While the Company does not expect that the ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely), individually or in the aggregate, will have a material adverse effect on its financial position, an unfavorable outcome in some or all of these proceedings could have a material adverse impact on the results of operations or cash flows for a particular period. This assessment is based on the Company’s current understanding of relevant facts and circumstances. With respect to current legal proceedings, the Company does not believe it is probable a material loss exceeding amounts already recognized has been incurred as of the date of the balance sheets presented herein. As such, the Company’s view of these matters is subject to inherent uncertainties and may change in the future. Stockholder Derivative Suits On April 30, 2020, Richard Theis filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, and the Company’s board of directors in the United States District Court for the Southern District of New York, with docket number 20-cv-3360. The complaint alleges claims for breaches of fiduciary duty, insider sales and misappropriation of information, unjust enrichment, and violations of Section 14(a) of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On August 21, 2020, Thomas Lucey filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, and the Company’s board of directors in the United States District Court for the District of Maryland, with docket number 1:20-cv-02424-GLR. The complaint alleges claims for breaches of fiduciary duty, insider trading, and contribution for alleged violations of Sections 10(b) and 21D of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On November 30, 2020, Leo Shumacher filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, and the Company’s board of directors in the Court of Chancery of the State of Delaware, with docket number 2020-1019-AGB. The complaint alleges claims for breaches of fiduciary duty and unjust enrichment, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On September 14, 2022, Daniel Sebagh filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, James Kenigsberg, the Company’s former CTO, and the Company’s board of directors in the United States District Court for the District of Delaware, with docket number 1:22-cv-01205-UNA. The complaint alleges claims for breaches of fiduciary duty, unjust enrichment, waste of corporate assets, insider trading and alleged violations of Section 14(a) of the Exchange Act based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On July 6, 2023 the United States District Court for the District of Maryland entered an order preliminarily approving the settlement of these claims. On September 22, 2023, the United States District Court for the District of Maryland entered a final order approving the settlement. The settlement payment is immaterial and is being funded by the Company's insurers. Favell, et al. v. University of Southern California and 2U, Inc. Consumer Class Action On December 20, 2022, Plaintiffs Iola Favell, Sue Zarnowski, and Mariah Cummings filed a putative class action in the Superior Court of the State of California, County of Los Angeles, against the University of Southern California (“USC”) and the Company on behalf of “[a]ll students who were enrolled in an online graduate degree program at USC Rossier, from April 1, 2009 through April 27, 2022.” (“Favell I”) Compl. ¶ 135. Plaintiffs purported to allege violations of California’s False Advertising Law (“FAL”), Cal. Civ. Code § 17500, California’s Unfair Competition Law (“UCL”), Cal. Civ. Code § 17200, California’s Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1770, as well as for unjust enrichment related to the use of USC Rossier’s rankings in certain marketing materials. On February 3, 2023, the Company removed the case to the United States District Court for the Central District of California. Then, on March 8, 2023, the Company filed a motion to dismiss the lawsuit, arguing, among other things, that all of Plaintiffs’ allegations lacked merit and that certain claims for relief could not be brought in federal court in light of other allegations Plaintiffs had made. On March 28, 2023, before the court could rule on that motion, Plaintiffs filed an amended complaint (the “First Amended Complaint”), dropping the challenged claims for relief and instead asserting only a single cause of action under the CLRA. The First Amended Complaint is based on the same factual allegations as the original complaint but seeks declaratory relief, actual damages, incidental damages, consequential damages, compensatory damages, punitive damages, and attorneys’ fees and costs in connection with their CLRA claim. On March 28, 2023, Plaintiffs also filed a separate class action lawsuit in the Superior Court of the State of California, County of Los Angeles, reasserting the FAL, UCL, and CLRA claims they dropped from the federal lawsuit (“Favell II”). The state court lawsuit is based on the same factual allegations as the federal lawsuit. Plaintiffs seek declaratory and injunctive relief, restitution, and attorneys’ fees and costs in connection with the claims in state court. On April 17, 2023, the Company moved to dismiss the First Amended Complaint in Favell I in its entirety, arguing that all of Plaintiffs’ claims lack merit. On May 4, 2023, the Company removed the Favell II lawsuit from state court to the United States District Court for the Central District of California, and Plaintiffs later filed a motion to remand it back to state court. On July 6, 2023, the Court held a hearing on the Company’s motion to dismiss the First Amended Complaint in Favell I and the Plaintiffs’ motion to remand in Favell II, and issued a ruling granting the Company’s motion to dismiss with leave to amend and denying Plaintiffs’ motion to remand. On July 28, 2023, Plaintiffs filed amended complaints in both Favell I and Favell II, adding an additional plaintiff and more detailed allegations but otherwise reasserting the same claims in each case. 2U moved to dismiss the amended complaints on August 31, 2023, and a hearing is scheduled for November 16, 2023. The Company believes that both lawsuits are without merit and intends to vigorously defend against these claims. However, due to the complex nature of the legal and factual issues involved, the outcome of both matters is not presently determinable. 2U, Inc., et al. v. Cardona, et al. On April 4, 2023, the Company filed a lawsuit on behalf of itself and its South African subsidiary, Get Educated International Proprietary Ltd., against the Department of Education (the “Department”) and Secretary of Education Miguel Cardona. The suit challenges a Dear Colleague Letter issued by the Department that would treat the Company and other Online Program Managers (OPMs) as highly regulated “third-party servicers” for purposes of the Higher Education Act (“HEA”). The Company contends that the Department has exceeded its authority by seeking to expand the definition of “third-party servicer” contained in the HEA, 20 U.S.C. § 1088(c), as well as in the Department’s regulations and longstanding guidance documents. The Company also argues that the Department violated both the HEA and the Administrative Procedure Act in issuing its new understanding of third-party servicer without following required rulemaking procedures. The case is now pending in the District of D.C., under case number 1:23-cv-00925. On April 7, 2023, the Company filed a motion for a stay and preliminary injunction to block the new Dear Colleague Letter to take effect as planned on September 1, 2023. On April 11, 2023, the Department announced that it would suspend the September 1, 2023 effective date and consider changes to the Dear Colleague Letter. The Department indicated that when it finalizes an updated version of the Dear Colleague Letter, the updated version will not go into effect for at least six months, to give regulated entities sufficient time to comply. Given these developments, the Company withdrew its motion for a stay and preliminary injunction and the court stayed the litigation pending the release of the finalized Dear Colleague Letter. On October 20, 2023, the parties filed a joint status report to the court, in which the government indicated that it was still in the process of developing an updated guidance, and that it did not anticipate issuing an updated guidance in the next 60 days. The Company believes that it has a meritorious claim and intends to vigorously pursue its challenge against the Department if the Department continues seeking to treat the Company as a third-party servicer. Due to the complex nature of the legal issues involved, the outcome of this matter is not presently determinable. Francis v. 2U, Inc. et al; Privacy Class Action On October 10, 2023, plaintiff Chad Francis filed a putative class action against the Company and edX LLC in the United States District Court for the District of Massachuset ts, alleging violations of the federal Video Privacy Protection Act. The plaintiff, who seeks to represent a class of individuals who viewed a video on edX while they had a Facebook account, alleges that 2U and edX disclosed his personal viewing information to Facebook without his consent. Plaintiff seeks damages of $2,500 for each violation, punitive damages, injunctive relief and attorney fees. The Company intends to vigorously defend against these claims. However, due to the complex nature of the legal and factual issues involved, the outcome of the matter is not presently determinable. Marketing and Sales Commitments Certain agreements entered into between the Company and its university clients in the Degree Program Segment require the Company to commit to meet certain staffing and spending investment thresholds related to marketing and sales activities. In addition, certain agreements in the Degree Program Segment require the Company to invest up to agreed-upon levels in marketing the programs to achieve specified program performance. The Company believes it is currently in compliance with all such commitments. Other Vendor Commitments In September 2023, as part of an effort to consolidate vendors to reduce the cost of launching programs, the Company entered into an agreement with an existing vendor to purchase content development and other services at more favorable pricing, with a total minimum commitment of $30.0 million through December 31, 2026. Future Minimum Payments to University Clients Pursuant to certain of the Company’s contracts in the Degree Program Segment, the Company has made, or is obligated to make, payments to university clients in exchange for contract extensions and various marketing and other rights. The following table presents the estimated future minimum payments due to university clients as of September 30, 2023. Future Minimum Payments (in thousands) Remainder of 2023 $ 325 2024 3,825 2025 3,825 2026 3,825 2027 3,825 Thereafter 4,475 Total future minimum payments to university clients $ 20,100 Contingent Payments The Company has entered into agreements with certain of its university clients in the Degree Program Segment that require the Company to make future minimum payments in the event that certain program metrics are not achieved on an annual basis. The Company recognizes any estimated contingent payments under these agreements as contra revenue over the period to which they relate, and records a liability in other current liabilities on the condensed consolidated balance sheets. |
Restructuring Charges
Restructuring Charges | 9 Months Ended |
Sep. 30, 2023 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Charges | Restructuring Charges 2022 Strategic Realignment Plan During the second quarter of 2022, the Company accelerated its planned transition to a platform company (the “2022 Strategic Realignment Plan”). The plan was designed to reorient the Company around a single platform allowing it to pursue a portfolio-based marketing strategy that drives traffic to the edX marketplace. As part of the plan, the Company simplified its executive structure, reduced employee headcount, rationalized its real estate footprint and implemented steps to optimize marketing spend. During the third quarter of 2022, the Company completed the planned headcount reductions and consolidated its in-person operations to its offices in Lanham, Maryland and Cape Town, South Africa. In furtherance of the 2022 Strategic Realignment Plan, the Company reduced employee headcount during the third quarter of 2023. The Company anticipates that it will incur aggregate restructuring charges associated with the 2022 Strategic Realignment Plan of approximately $70 million to $75 million. The Company recorded $13.8 million and $11.3 million in restructuring charges related to the 2022 Strategic Realignment Plan for the three months ended September 30, 2023 and 2022, respectively. The Company recorded $21.5 million and $27.0 million in restructuring charges related to the 2022 Strategic Realignment Plan for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the aggregate restructuring charges associated with the plan were $52.2 million. The majority of the estimated remaining restructuring charges relate to leased facilities and will be recognized as expense over the remaining lease terms, ranging from 1 to 9 years. The following table presents restructuring charges by reportable segment on the Company’s condensed consolidated statements of operations for the periods indicated. Three Months Ended Three Months Ended Degree Program Segment Alternative Credential Segment Degree Program Segment Alternative Credential Segment 2022 Strategic Realignment Plan Severance and severance-related costs $ 9,956 $ 110 $ — $ — Lease and lease-related charges 2,815 629 8,972 298 Professional and other fees relating to restructuring activities 230 — 961 20 Other 14 — — 1,008 13,015 739 9,933 1,326 Other restructuring charges* $ 385 $ (54) $ 362 $ 11 Total restructuring charges $ 13,400 $ 685 $ 10,295 $ 1,337 * Includes severance and severance-related costs and lease-related charges. Nine Months Ended Nine Months Ended Degree Program Segment Alternative Credential Segment Degree Program Segment Alternative Credential Segment 2022 Strategic Realignment Plan Severance and severance-related costs $ 11,187 $ 114 $ 8,772 $ 6,431 Lease and lease-related charges 7,087 2,066 8,972 298 Professional and other fees relating to restructuring activities 974 — 1,515 20 Other 40 — — 1,008 19,288 2,180 19,259 7,757 Other restructuring charges* $ 1,138 $ (24) $ 1,977 $ 179 Total restructuring charges $ 20,426 $ 2,156 $ 21,236 $ 7,936 * Includes severance and severance-related costs and lease-related charges. Summary of Accrued Restructuring Liability The following table presents the additions and adjustments to the accrued restructuring liability on the Company’s condensed consolidated balance sheets for the periods indicated. Balance as of December 31, 2022 Additional Costs Cash Payments Balance as of September 30, 2023 (in thousands) 2022 Strategic Realignment Plan Severance and severance-related costs $ 5,225 $ 11,237 $ (5,972) $ 10,490 Professional and other fees relating to restructuring activities 923 1,060 (1,391) 592 Lease and lease-related charges 83 9,773 (9,829) 27 Other severance and severance-related costs 461 512 (631) 342 Total restructuring $ 6,692 $ 22,582 $ (17,823) $ 11,451 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2023 | |
Leases [Abstract] | |
Leases | Leases The Company leases facilities under non-cancellable operating leases primarily in the United States, South Africa, and the United Kingdom. The Company’s operating leases have remaining lease terms of between less than one The following table presents the components of lease expense on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Operating lease expense $ 4,372 $ 5,099 $ 13,175 $ 16,471 Short-term lease expense 46 139 115 407 Variable lease expense 1,672 1,811 4,941 5,180 Sublease income (535) (427) (1,443) (883) Total lease expense $ 5,555 $ 6,622 $ 16,788 $ 21,175 As of September 30, 2023, for the Company’s operating leases, the weighted-average remaining lease term was 6.3 years and the weighted-average discount rate was 10.7%. For the nine months ended September 30, 2023 and 2022, cash paid for amounts included in the measurement of operating lease liabilities was $18.2 million and $18.8 million, respectively. There were no lease liabilities arising from obtaining right-of-use assets for the nine months ended September 30, 2023. For the nine months ended September 30, 2022, lease liabilities arising from obtaining right-of use assets were $15.5 million. The following table presents the maturities of the Company’s operating lease liabilities as of the date indicated, and excludes the impact of future sublease income totaling $4.1 million in aggregate. September 30, 2023 (in thousands) Remainder of 2023 $ 6,102 2024 24,214 2025 20,433 2026 20,983 2027 21,556 Thereafter 49,305 Total lease payments 142,593 Less: imputed interest (41,106) Total lease liability $ 101,487 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Debt | Debt The following table presents the components of outstanding long-term debt on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 (in thousands) Term loan facilities $ 377,150 $ 566,622 Revolving facility 20,000 — Convertible senior notes 527,000 380,000 Deferred government grant obligations 3,500 3,500 Other borrowings 2,118 3,688 Less: unamortized debt discount and issuance costs (46,678) (17,666) Total debt 883,090 936,144 Less: current portion of long-term debt (4,966) (7,580) Total long-term debt $ 878,124 $ 928,564 The Company believes the carrying value of its long-term debt approximates the fair value of the debt as the terms and interest rates approximate the market rates, other than the 2025 Notes, which had an estimated fair value of $226.9 million and $241.6 million as of September 30, 2023 and December 31, 2022, respectively, and the 2030 Notes, which had an estimated fair value of $73.2 million as of September 30, 2023. The 2030 Notes, described below, were issued in January 2023. Each of the Company’s long-term debt instruments were classified as Level 2 within the fair value hierarchy. Term Loan Credit and Guaranty Agreement On January 9, 2023, the Company entered into an Extension Amendment, Second Amendment and First Incremental Agreement to Credit and Guaranty Agreement, dated as of January 9, 2023 (the “Second Amended Credit Agreement”), which amended the Company’s existing term loan facilities, previously referred to as the Amended Term Loan Facilities. The provisions of the Second Amended Credit Agreement became effective upon the satisfaction of certain conditions set for therein, including, without limitation, the funding of the 2030 Notes referenced below and the prepayment of certain existing term loans to reduce the outstanding principal amount of term loans outstanding under the Amended Term Loan Facilities from $567 million to $380 million. Pursuant to the Second Amended Credit Agreement, the lenders thereunder agreed to, among other amendments, extend the maturity date of the term loans thereunder from December 28, 2024 to December 28, 2026 (or, if more than $40 million of the Company’s 2025 Notes remain outstanding on January 30, 2025, January 30, 2025) and to provide a senior secured first lien revolving loan facility to the Company in the principal amount of $40 million (the “Revolving Loan Facility”). The termination date for such revolving loans will be June 28, 2026 (or, if more than $50 million of the Company’s 2025 Notes remain outstanding on January 1, 2025, January 1, 2025). If the Company does not refinance or raise capital to reduce its debt in the short term, and in the event that the maturity date of the outstanding term loan balance of $372.4 million springs forward to January 30, 2025, the Company’s liquidity may not be sufficient to pay off the balance on the accelerated maturity date if the Company does not otherwise sufficiently increase revenues, realize additional operating efficiencies and reduce its expenses. As of September 30, 2023, outstanding borrowings under the Revolving Loan Facility were $20 million and available borrowings under the same facility were $20 million. Loans under the Second Amended Credit Agreement will bear interest at a per annum rate equal to (i) with respect to term loans, a base rate or the Term SOFR (as defined in the Second Amended Credit Agreement) rate, as applicable, plus a margin of 5.50% in the case of the base rate loans and 6.50% in the case of Term SOFR loans and (ii) with respect to revolving loans, a base rate or the Term SOFR rate, as applicable, plus a margin of 4.50% in the case of the base rate loans and 5.50% in the case of Term SOFR loans. If the term loans under the Second Amended Credit Agreement are prepaid or amended prior to the six month anniversary of the Second Amended Credit Agreement in connection with a Repricing Event (as defined in the Second Amended Credit Agreement), the Company shall pay a prepayment premium of 1.0% of the amount of the loans so prepaid. Prior to the amendment, loans under the Amended Term Loan Facilities bore interest at a per annum rate equal to a base rate or adjusted Eurodollar rate, as applicable, plus the applicable margin of 4.75% in the case of the base rate loans and 5.75% in the case of the Eurodollar loans. The Company is required to make quarterly principal repayments equal to 0.25% of the aggregate principal amount. The obligations under the Second Amended Credit Agreement are guaranteed by certain of the Company’s subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”). The obligations under the Second Amended Credit Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a perfected security interest in all tangible and intangible assets of the Credit Parties, except for certain customary excluded assets. The Second Amended Credit Agreement contains customary affirmative covenants, including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters. The Second Amended Credit Agreement contains customary negative covenants, including, among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchases of equity interests in the Company and entering into affiliate transactions and asset sales. The Second Amended Credit Agreement contains (i) a financial covenant for the benefit of the lenders that requires the Company to maintain minimum Recurring Revenues (as defined in the Second Amended Credit Agreement) as of the last day of any period of four consecutive fiscal quarters of the Company commencing with fiscal quarter ending September 30, 2021 through the maturity date and (ii) three financial covenants solely for the benefit of the revolving lenders, in respect of a maximum consolidated senior secured net leverage ratio, a maximum consolidated total net leverage ratio, and a minimum consolidated fixed charge coverage ratio. The Second Amended Credit Agreement also provides for customary events of default, including, among others: non-payment of obligations; bankruptcy or insolvency event; failure to comply with covenants; breach of representations or warranties; defaults on other material indebtedness; impairment of any lien on any material portion of the Collateral (as defined in the Second Amended Credit Agreement); failure of any material provision of the Second Amended Credit Agreement or any guaranty to remain in full force and effect; a change of control of the Company; and material judgment defaults. The occurrence of an event of default could result in the acceleration of obligations under the Second Amended Credit Agreement. As of both September 30, 2023 and December 31, 2022, the Company was in compliance with the covenants under the Second Amended Credit Agreement. If an event of default under the Second Amended Credit Agreement occurs and is continuing, then, at the request (or with the consent) of the lenders holding the applicable requisite amount of commitments and loans under the Second Amended Credit Agreement, upon notice by the administrative agent to the borrowers, the obligations under the Second Amended Credit Agreement shall become immediately due and payable. In addition, if the Credit Parties become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Second Amended Credit Agreement will automatically become immediately due and payable. As of September 30, 2023 and December 31, 2022, the balance of unamortized debt discount and issuance costs related to the term loan under the Second Amended Credit Agreement was $23.5 million and $12.8 million, respectively. For the three months ended September 30, 2023 and 2022, the associated effective interest rate for the term loan under the Second Amended Credit Agreement was approximately 14.3% and 9.0%, respectively. For the nine months ended September 30, 2023 and 2022, the associated effective interest rate for the term loan under the Second Amended Credit Agreement was approximately 14.2% and 9.0%, respectively. For the three and nine months ended September 30, 2023 the associated interest rate for the revolving loan under the Second Amended Credit Agreement was approximately 10.8% and 10.6%, respectively. For the three months ended September 30, 2023 and 2022, the associated interest expense for these facilities was approximately $14.0 million and $13.2 million, respectively. For the nine months ended September 30, 2023 and 2022, the associated interest expense for these facilities was approximately $40.5 million and $35.4 million, respectively. Convertible Senior Notes 2025 Notes In April 2020, the Company issued the 2025 Notes in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional 2025 Notes, in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. The net proceeds from the offering of the 2025 Notes were approximately $369.6 million after deducting the initial purchasers’ discounts, commissions and offering expenses payable by the Company. The 2025 Notes are governed by an indenture (the “2025 Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The 2025 Notes bear interest at a rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020. The 2025 Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted. The 2025 Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s senior unsecured indebtedness, senior in right of payment to the Company’s indebtedness that is expressly subordinated to the 2025 Notes, effectively subordinated to the Company’s senior secured indebtedness (including indebtedness under the Second Amended Credit Agreement), to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The net carrying amount of the 2025 Notes consists of the following as of each of the dates indicated: September 30, 2023 December 31, 2022 (in thousands) Principal $ 380,000 $ 380,000 Unamortized issuance costs (3,331) (4,898) Net carrying amount $ 376,669 $ 375,102 Issuance costs are being amortized to interest expense over the contractual term of the 2025 Notes. Subsequent to the adoption of ASU 2020-06, the effective interest rate used to amortize the issuance costs was 2.9%. The interest expense related to the 2025 Notes for the three months ended September 30, 2023 and 2022 was $2.7 million and $2.7 million, respectively. The interest expense related to the 2025 Notes for the nine months ended September 30, 2023 and 2022 was $8.0 million and $8.0 million, respectively. Holders may convert their 2025 Notes at their option in the following circumstances: • during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock, par value $0.001 per share (“Common Stock”), exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; • during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Common Stock on such trading day and the conversion rate on such trading day; • upon the occurrence of certain corporate events or distributions on the Common Stock, as provided in the 2025 Indenture; • if the Company calls such 2025 Notes for redemption; and • at any time from, and including, November 1, 2024 until the close of business on the second scheduled trading day immediately before the maturity date. The initial conversion rate for the 2025 Notes is 35.3773 shares of the Common Stock per $1,000 principal amount of 2025 Notes, which represents an initial conversion price of approximately $28.27 per share of the Common Stock, and is subject to adjustment upon the occurrence of certain specified events as set forth in the 2025 Indenture. Upon conversion, the Company will pay or deliver, as applicable, cash, shares of the Common Stock or a combination of cash and shares of the Common Stock, at the Company’s election. In the event of the Company calling the 2025 Notes for redemption or the holders of the 2025 Notes electing to convert their 2025 Notes, the Company will determine whether to settle in cash, Common Stock or a combination thereof. Upon the occurrence of a “make-whole fundamental change” (as defined in the 2025 Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. In addition, upon the occurrence of a “fundamental change” (as defined in the 2025 Indenture), holders of the 2025 Notes may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any. The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 5, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Common Stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a “make-whole fundamental change” with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if such Note is converted after it is called for redemption. No sinking fund is provided for the Notes. As of September 30, 2023, the conditions allowing holders of the 2025 Notes to convert had not been met and the Company has the right under the 2025 Indenture to determine the method of settlement at the time of conversion. Therefore, the 2025 Notes are classified as non-current on the condensed consolidated balance sheets. In connection with the 2025 Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain counterparties. The Capped Call Transactions are generally expected to reduce potential dilution to the Common Stock upon any conversion of 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $44.34 per share. The cost of the Capped Call Transactions was approximately $50.5 million. In April 2020, the Company used a portion of the proceeds from the sale of the 2025 Notes to repay in full all amounts outstanding, and discharge all obligations in respect of, the $250 million senior secured term loan facility. The Company intends to use the remaining net proceeds from the sale of the 2025 Notes for working capital or other general corporate purposes, which may include capital expenditures, potential acquisitions and strategic transactions. 2030 Notes On January 11, 2023, the Company issued the 2030 Notes in an aggregate principal amount of $147.0 million. The 2030 Notes are governed by an indenture (the “2030 Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The 2030 Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2023. The 2030 Notes mature on February 1, 2030, unless earlier redeemed or repurchased by the Company or converted. The net proceeds from the issuance of the 2030 Notes was $127.1 million. The 2030 Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s senior indebtedness, senior in right of payment to the Company’s indebtedness that is expressly subordinated to the 2030 Notes, effectively subordinated to the Company’s senior secured indebtedness, to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The net carrying amount of the 2030 Notes consist of the following as of the date indicated: September 30, 2023 (in thousands) Principal $ 147,000 Unamortized debt discount and issuance costs (19,867) Net carrying amount $ 127,133 Issuance costs are being amortized to interest expense over the contractual term of the 2030 Notes. The effective interest rate used to amortize the issuance costs was 7.5% and 7.4% for three and nine months ended September 30, 2023, respectively. The interest expense related to the 2030 Notes for the three and nine months ended September 30, 2023 was $2.4 million and $6.7 million, respectively. Holders may convert their 2030 Notes at their option in the following circumstances: • at any time from, and after January 11, 2023 until the close of business on the second scheduled trading day immediately before the maturity date; • upon the occurrence of certain corporate events or distributions on the Common Stock as provided in the Indenture; • if the Company calls such 2030 Notes for redemption; subject to the right of certain holders to elect a delayed conversion period for any such 2030 Notes called for redemption that would cause such holders to beneficially own shares of Common Stock, in excess of the Ownership Cap (as defined below), over which threshold a settlement of such conversion could be made in cash; and • upon the occurrence of a default with regard to the Company’s financial covenants under the Indenture. The initial conversion rate for the 2030 Notes is 111.1111 shares of Common Stock per $1,000 principal amount of 2030 Notes, which represents an initial conversion price of approximately $9.00 per share, and is subject to adjustment upon the occurrence of certain specified events as set forth in the 2030 Indenture. Upon conversion, the Company will pay or deliver, as applicable, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election (subject to aforementioned Ownership Cap). Upon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 2030 Indenture) the Company will in certain circumstances increase the conversion rate for a specified period of time. In addition, upon the occurrence of a “Fundamental Change” (as defined in the 2030 Indenture), holders of the 2030 Notes may require the Company to repurchase their 2030 Notes at a cash repurchase price equal to the principal amount of the 2030 Notes to be repurchased, plus accrued and unpaid interest, if any. The 2030 Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, subject to limited exceptions with respect to 2030 Notes that cannot be immediately physically settled due to the Ownership Cap, on or after January 11, 2026 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of Common Stock exceeds 130% of the conversion price on each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if such Note is converted after it is called for redemption. No sinking fund is provided for the 2030 Notes. The Company used cash on hand and the proceeds from the offering of the 2030 Notes to repay a portion of the amounts outstanding under the Amended Term Loan Facilities. The Company has the right under the 2030 Indenture to determine the method of settlement at the time of conversion. Therefore, the 2030 Notes are classified as non-current on the condensed consolidated balance sheets. Deferred Government Grant Obligations Government grants awarded to the Company in the form of forgivable loans are recorded within long-term debt on the Company’s condensed consolidated balance sheets until all contingencies are resolved and the grants are determined to be realized. The Company has a total of two outstanding conditional loan agreements with Prince George’s County, Maryland and the State of Maryland for an aggregate amount of $3.5 million, each bearing an interest rate of 3% per annum. These agreements are conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters. The conditional loan with Prince George’s County has a maturity date of June 22, 2027 and the conditional loan agreement with the State of Maryland has a maturity date of June 30, 2028. The interest expense related to these loans for the three and nine months ended September 30, 2023 and 2022 was immaterial. As of September 30, 2023 and December 31, 2022, the Company’s combined accrued interest balance associated with the deferred government grant obligations was $0.7 million and $0.6 million, respectively. Letters of Credit Certain of the Company’s operating lease agreements entered into require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of September 30, 2023, the Company has entered into standby letters of credit totaling $12.1 million as security deposits for the applicable leased facilities and in connection with the deferred government grant obligations. The Company maintains restricted cash as collateral for standby letters of credit for the Company’s leased facilities and in connection with the deferred government grant obligations. Future Principal Payments Future principal payments for the term loans under the Second Amended Credit Agreement, the 2025 Notes, the 2030 Notes, and the government grants, as of the date indicated are as follows: September 30, 2023 (in thousands) Remainder of 2023 $ 950 2024 3,800 2025 383,800 2026 368,600 2027* 1,500 Thereafter* 149,000 Total future principal payments $ 907,650 * Amounts due in 2027 and thereafter include $1.5 million and $2.0 million, respectively, of conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters. Debt Refinancing Costs |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s income tax provisions for all periods consist of federal, state and foreign income taxes. The income tax provision for the three and nine months ended September 30, 2023 and 2022 were based on estimated full-year effective tax rates, including the mix of income for the period between higher-taxed and lower-taxed jurisdictions, after giving effect to significant items related specifically to the interim periods, and loss-making entities for which it is not more likely than not that a tax benefit will be realized. The Company’s effective tax rate for each of the three and nine months ended September 30, 2023 and 2022 was less than 1%. For the three months ended September 30, 2023, the Company’s income tax expense was $0.1 million. For the three months ended September 30, 2022, the Company’s income tax benefit was $0.1 million. For the nine months ended September 30, 2023, the Company’s income tax expense was $0.4 million. For the nine months ended September 30, 2022, the Company’s income tax benefit was $0.5 million. To date, the Company has not been required to pay U.S. federal income taxes because of current and accumulated net operating losses. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Common Stock As of September 30, 2023, 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. As of September 30, 2023, there were 81,630,808 shares of common stock outstanding, and the Company had reserved a total of 49,302,290 of its authorized shares of common stock for future issuance as follows: Shares Reserved for Future Issuance Outstanding restricted stock units 5,498,359 Outstanding performance restricted stock units 1,946,407 Outstanding stock options 4,744,465 Reserved for convertible senior notes 37,113,059 Total shares of common stock reserved for future issuance 49,302,290 Stock-Based Compensation The Company maintains two stock-based compensation plans: the Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the 2008 Stock Incentive Plan (the “2008 Plan” and together with the 2014 Plan, the “Stock Plans”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards. The shares available for future issuance under the 2014 Plan increased by 3,916,733 and 3,782,719 on January 1, 2023 and 2022, respectively, pursuant to the automatic share reserve increase provision in the 2014 Plan. The Company also has a 2017 Employee Stock Purchase Plan (the “ESPP”). During the second quarter of 2023, shares available for purchase under the ESPP increased by 2,000,000 shares, pursuant to an amendment to the Company’s ESPP to increase the number of authorized shares available under such plan. As of September 30, 2023, 1,917,341 shares remained available for purchase under the ESPP. The following table presents stock-based compensation expense related to the Stock Plans and the ESPP, contained on the following line items on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Curriculum and teaching $ 37 $ 59 $ 128 $ 155 Servicing and support 2,257 3,061 7,773 11,741 Technology and content development 737 1,288 4,354 7,785 Marketing and sales 1,436 1,013 3,959 4,861 General and administrative 5,973 10,546 19,772 38,198 Total stock-based compensation expense $ 10,440 $ 15,967 $ 35,986 $ 62,740 Restricted Stock Units The 2014 Plan provides for the issuance of restricted stock units (“RSUs”) to eligible participants. RSUs generally vest over a three Number of Weighted- Outstanding balance as of December 31, 2022 4,739,861 $ 14.24 Granted* 4,080,159 6.45 Vested (2,684,619) 14.74 Forfeited (637,042) 10.69 Outstanding balance as of September 30, 2023 5,498,359 $ 8.62 * Includes 215,054 RSUs issued pursuant to an inducement award outside of the 2014 Plan. The total fair value of RSUs vested during the three months ended September 30, 2023 and 2022 was $2.8 million and $6.7 million, respectively. The total fair value of RSUs vested during the nine months ended September 30, 2023 and 2022 was $15.9 million and $23.9 million, respectively. The total compensation expense related to the unvested RSUs not yet recognized as of September 30, 2023 was $37.6 million, and will be recognized over a weighted-average period of approximately 1.9 years. Performance Restricted Stock Units The 2014 Plan provides for the issuance of performance restricted stock units (“PRSUs”) to eligible participants. PRSUs generally include both service conditions and market conditions related to total shareholder return targets relative to that of companies comprising the Russell 3000 Index and/or conditions based on the Company’s internal financial performance achieving predetermined targets. The terms of the performance restricted stock unit grants under the 2014 Plan, including the vesting periods, are determined by the Company’s board of directors or the compensation committee thereof. During the first quarter of 2023, as part of its annual equity award cycle, the Company awarded 1.4 million PRSUs with an aggregate intrinsic value of $12.2 million. The PRSU award agreements provide that the quantity of units subject to vesting may range from 150% to 0% of the granted quantities. For the first performance period, which began on January 1, 2023 and ends on December 31, 2023, the quantity of units eligible to be earned ranges from 130% to 0% depending on the achievement of internal financial performance-based targets, which are established annually. Additionally, the actual number of PRSUs earned may be adjusted upward or downward by 20% based upon the Company’s total shareholder return (“TSR”) performance compared to the Russell 3000 Index’s TSR performance over the same period. If the Company’s absolute TSR is negative, the TSR multiplier cannot exceed 0% and the achievement percentage based up on the internal financial performance-based targets is capped at 125%. The grant date fair value of the PRSUs granted in the first quarter of 2023 includes the fair value of the TSR-performance component of the award, which was determined using a Monte Carlo valuation model, and was $0.39 per share. The following tables present a summary of (i) for the nine months ended September 30, 2023, the assumptions used for estimating the fair value of the TSR-performance component of the PRSUs, (ii) for the nine months ended September 30, 2022, the assumptions used for estimating the fair values of the PRSUs subject to market-based vesting conditions and (iii) the Company’s PRSU activity for the period indicated. As of September 30, 2023 and December 31, 2022, there were 1.3 million and 1.0 million outstanding PRSUs for which the performance metrics had not been defined as of each respective date. Accordingly, such awards are not considered granted for accounting purposes as of September 30, 2023 and December 31, 2022, and have been excluded from the tables below. No PRSUs were granted during each of the three months ended September 30, 2023 and 2022. Nine Months Ended September 30, 2023 Risk-free interest rate 4.68% Expected term (years) 1.00 Expected volatility 108% Dividend yield 0% Weighted-average grant date fair value of the TSR-performance component $0.39 Nine Months Ended September 30, 2022 Risk-free interest rate 0.39% – 1.88% Expected term (years) 1.00 – 3.00 Expected volatility 49% – 97% Dividend yield 0% Weighted-average grant date fair value per share $18.67 Number of Weighted- Outstanding balance as of December 31, 2022 1,651,864 $ 22.74 Granted 1,176,077 9.55 Vested — — Forfeited (881,534) 19.33 Outstanding balance as of September 30, 2023 1,946,407 $ 16.04 The total compensation expense related to the unvested PRSUs not yet recognized as of September 30, 2023 was $4.9 million, and will be recognized over a weighted-average period of approximately 1.2 years. Stock Options The Stock Plans provide for the issuance of stock options to eligible participants. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed 10 years and generally vest over a three The following tables summarize the assumptions used for estimating the fair values of the stock options granted for the periods presented. No stock options were granted during the three months ended September 30, 2023. Three Months Ended Risk-free interest rate 3.0% Expected term (years) 5.78 Expected volatility 79% Dividend yield 0% Weighted-average grant date fair value per share $7.78 Nine Months Ended 2023 2022 Risk-free interest rate 3.6% 1.9% – 3.0% Expected term (years) 5.69 5.63 – 5.78 Expected volatility 87% 75% – 79% Dividend yield 0% 0% Weighted-average grant date fair value per share $4.93 $7.02 The following table presents a summary of the Company’s stock option activity for the period indicated. Number of Weighted-Average Weighted-Average Aggregate Outstanding balance as of December 31, 2022 5,195,538 $ 25.28 5.88 $ 78 Granted 66,910 6.76 8.50 Exercised (17,166) 6.38 0.65 Forfeited (169,427) 10.80 Expired (331,390) 19.55 Outstanding balance as of September 30, 2023 4,744,465 26.01 4.75 — Exercisable as of September 30, 2023 3,511,374 $ 30.56 3.79 $ — The aggregate intrinsic value of options exercised during the nine months ended September 30, 2023 and 2022 was $0.1 million and $3.2 million, respectively. The total compensation expense related to the unvested options not yet recognized as of September 30, 2023 was $8.6 million, and will be recognized over a weighted-average period of approximately 1.4 years. |
Net Loss per Share
Net Loss per Share | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Net Loss per Share | Net Loss per ShareDiluted 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 each of the periods indicated. Three and Nine Months Ended 2023 2022 Stock options 4,744,465 5,428,679 Restricted stock units 5,498,359 4,594,782 Performance restricted stock units 1,946,407 2,248,104 Shares related to convertible senior notes 29,776,706 13,443,374 Total antidilutive securities 41,965,937 25,714,939 The following table presents the calculation of the Company’s basic and diluted net loss per share for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 Numerator (in thousands): Net loss $ (47,443) $ (121,676) $ (275,159) $ (310,308) Denominator: Weighted-average shares of common stock outstanding, basic and diluted 81,515,246 77,692,911 80,470,221 77,013,180 Net loss per share, basic and diluted $ (0.58) $ (1.57) $ (3.42) $ (4.03) |
Segment and Geographic Informat
Segment and Geographic Information | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment. The Company’s reportable segments are determined based on (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions. The Company’s Degree Program Segment includes the technology and services provided to nonprofit colleges and universities to enable the online delivery of degree programs. The Company’s Alternative Credential Segment includes the premium online executive education programs and technical skills-based boot camps provided through relationships with nonprofit colleges, universities, and other leading organizations. Significant Customers For the three months ended September 30, 2023, one university client in the Degree Program Segment accounted for 10% or more of the Company’s consolidated revenue, contributing $29.8 million, or approximately 13.0% of the Company’s consolidated revenue. Of the $29.8 million of revenue from this university client, $25.8 million related to portfolio management activities. For the three months ended September 30, 2022, no university clients accounted for 10% or more of the Company’s consolidated revenue. For the nine months ended September 30, 2023 and September 30, 2022, no university clients accounted for 10% or more of the Company’s consolidated revenue. As of September 30, 2023, two university clients in the Degree Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $15.9 million and $12.7 million, or approximately 14.1% and 11.2% of the Company’s consolidated accounts receivable, net balance, respectively. As of December 31, 2022, one university client in the Degree Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $7.3 million, or approximately 12% of the Company’s consolidated accounts receivable, net balance. Segment Performance The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (dollars in thousands) Revenue by segment* Degree Program Segment $ 137,604 $ 137,242 $ 397,578 $ 434,499 Alternative Credential Segment 92,095 94,996 292,714 292,532 Total revenue $ 229,699 $ 232,238 $ 690,292 $ 727,031 Segment profitability** Degree Program Segment $ 43,647 $ 44,907 $ 123,962 $ 120,264 Alternative Credential Segment (15,018) (12,389) (43,350) (53,564) Total segment profitability $ 28,629 $ 32,518 $ 80,612 $ 66,700 Segment profitability margin*** Degree Program Segment 31.7 % 32.7 % 31.2 % 27.7 % Alternative Credential Segment (16.3) (13.0) (14.8) (18.3) Total segment profitability margin 12.5 % 14.0 % 11.7 % 9.2 % * The Company has excluded immaterial amounts of intersegment revenues from each of the three and nine months ended September 30, 2023 and 2022. ** The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, debt modification expense and losses on debt extinguishment, and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. *** The Company defines segment profitability margin as segment profitability as a percentage of the respective segment’s revenue. The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Net loss $ (47,443) $ (121,676) $ (275,159) $ (310,308) Adjustments: Stock-based compensation expense 10,440 15,967 35,986 62,740 Other (income) expense, net 1,585 1,845 751 4,242 Net interest expense 18,804 15,644 53,941 42,942 Income tax expense (benefit) 107 (59) 430 (474) Depreciation and amortization expense 29,498 29,313 86,846 95,070 Impairment charges — 79,509 134,117 138,291 Debt modification expense and loss on debt extinguishment — — 16,735 — Restructuring charges 14,085 11,632 22,582 29,172 Other* 1,553 343 4,383 5,025 Total adjustments 76,072 154,194 355,771 377,008 Total segment profitability $ 28,629 $ 32,518 $ 80,612 $ 66,700 * Includes (i) transaction and integration expense of $0.1 million and $0.0 million for the three months ended September 30, 2023 and 2022, respectively, and $0.3 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively, and (ii) litigation-related expense of $1.5 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $4.1 million and $1.6 million for the nine months ended September 30, 2023 and 2022, respectively. The following table presents the Company’s total assets by segment as of each of the dates indicated. September 30, December 31, (in thousands) Total assets Degree Program Segment $ 380,162 $ 459,252 Alternative Credential Segment 1,157,773 1,351,607 Total assets $ 1,537,935 $ 1,810,859 Geographical Information The Company’s non-U.S. revenue is based on the currency of the country in which the university client primarily operates. The Company’s non-U.S. revenue was $28.1 million and $24.5 million for the three months ended September 30, 2023 and 2022, respectively. The Company’s non-U.S. revenue was $87.6 million and $79.8 million for the nine months ended September 30, 2023 and 2022, respectively. Substantially all of the Company’s non-U.S. revenue for each of the aforementioned periods was sourced from the Alternative Credential Segment’s operations outside of the U.S. The Company’s long-lived tangible assets in non-U.S. countries as of September 30, 2023 and December 31, 2022 totaled approximately $3.7 million and $4.5 million, respectively. |
Receivables and Contract Liabil
Receivables and Contract Liabilities | 9 Months Ended |
Sep. 30, 2023 | |
Receivables And Contract Liabilities Disclosure [Abstract] | |
Receivables and Contract Liabilities | Receivables and Contract Liabilities Trade Accounts Receivable The Company’s trade accounts receivable balances relate to amounts due from students or customers occurring in the normal course of business. Trade accounts receivable balances have a term of less than one year and are included in accounts receivable, net on the Company’s condensed consolidated balance sheets. The following table presents the Company’s trade accounts receivable in each segment as of each of the dates indicated. September 30, December 31, (in thousands) Degree Program Segment accounts receivable $ 38,730 $ 14,212 Degree Program Segment unbilled revenue 42,161 14,896 Alternative Credential Segment accounts receivable 39,294 51,360 Total 120,185 80,468 Less: Provision for credit losses (6,983) (17,642) Trade accounts receivable, net $ 113,202 $ 62,826 The Company regularly reviews its portfolio of offerings for alignment with its business objectives, including cost to operate, expected enrollments, and other factors, and from time to time, the Company has entered into, and may in the future enter into, agreements to strategically exit certain programs. As of September 30, 2023 and December 31, 2022, the Company had balances of $23.4 million and $6.4 million, respectively, of unbilled revenue associated with portfolio management activities within accounts receivable, net on the condensed consolidated balance sheets. In addition, as of September 30, 2023 and December 31, 2022, the Company had balances of $18.6 million and $6.3 million, respectively, of non-current accounts receivable associated with portfolio management activities within other assets, non-current on the condensed consolidated balance sheets. These non-current accounts receivable are typically due within 12 to 24 months. The following table presents the change in provision for credit losses for trade accounts receivable on the Company’s condensed consolidated balance sheets for the period indicated. Provision for Credit Losses (in thousands) Balance as of December 31, 2022 $ 17,642 Current period provision 3,393 Amounts written off (14,038) Foreign currency translation adjustments (14) Balance as of September 30, 2023 $ 6,983 Other Receivables The Company’s other receivables are comprised of amounts due under tuition payment plans with extended payment terms from students enrolled in certain of the Company’s alternative credential offerings. These payment plans, which are managed and serviced by third-party providers, are designed to assist students with paying tuition costs after all other student financial assistance and scholarships have been applied. The associated receivables generally have payment terms that range from 12 to 42 months and are recorded net of any implied pricing concessions, which are determined based on collections history, market data and any time value of money component. There are no fees or origination costs included in these receivables. The carrying value of these receivable balances approximate their fair value. The following table presents the components of the Company’s other receivables, net, as of each of the dates indicated. September 30, December 31, (in thousands) Other receivables, amortized cost $ 54,326 $ 52,180 Less: Provision for credit losses (6,742) (3,579) Other receivables, net $ 47,584 $ 48,601 Other receivables, net, current $ 29,196 $ 33,813 Other receivables, net, non-current $ 18,388 $ 14,788 The following table presents the change in provision for credit losses for other receivables on the Company’s condensed consolidated balance sheets for the period indicated. Provision for Credit Losses (in thousands) Balance as of December 31, 2022 $ 3,579 Current period provision 3,163 Balance as of September 30, 2023 $ 6,742 The Company considers receivables to be past due when amounts contractually due under the extended payment plans have not been paid. As of September 30, 2023, 78% of other receivables, net due under extended payment plans were current. At the time of origination, the Company categorizes its other receivables using a credit quality indicator based on the credit tier rankings obtained from the third-party providers that manage and service the payment plans. The third-party providers utilize credit rating agency data to determine the credit tier rankings. The Company monitors the collectability of its other receivables on an ongoing basis. The adequacy of the allowance for credit losses is determined through analysis of multiple factors, including industry trends, portfolio performance, and delinquency rates. The following tables present other receivables, at amortized cost including interest accretion, by credit quality indicator and year of origination, as of the dates indicated. September 30, 2023 Year of Origination 2023 2022 2021 2020 2019 & Prior Total (in thousands) Credit Quality Tier High $ 11,506 $ 3,730 $ 206 $ 837 $ 547 $ 16,826 Mid 12,130 4,935 1,996 1,823 1,753 22,637 Low 5,692 2,942 2,304 1,822 2,103 14,863 Total $ 29,328 $ 11,607 $ 4,506 $ 4,482 $ 4,403 $ 54,326 December 31, 2022 Year of Origination 2022 2021 2020 2019 2018 Total (in thousands) Credit Quality Tier High $ 15,737 $ 2,285 $ 48 $ 18 $ 115 $ 18,203 Mid 14,005 3,773 1,239 1,363 392 20,772 Low 6,160 3,099 1,677 1,939 330 13,205 Total $ 35,902 $ 9,157 $ 2,964 $ 3,320 $ 837 $ 52,180 Contract Liabilities The Company’s deferred revenue represents contract liabilities. The Company generally receives payments from Degree Program Segment university clients early in each academic term and from Alternative Credential Segment students, either in full upon registration for the course or in full before the end of the course based on a payment plan, prior to completion of the service period. These payments are recorded as deferred revenue until the services are delivered or until the Company’s obligations are otherwise met, at which time revenue is recognized. The following table presents the Company’s contract liabilities in each segment as of each of the dates indicated. September 30, December 31, (in thousands) Degree Program Segment deferred revenue $ 24,400 $ 1,245 Alternative Credential Segment deferred revenue 91,876 88,916 Total contract liabilities $ 116,276 $ 90,161 For the Degree Program Segment, revenue recognized related to the deferred revenue balances that existed at the end of each preceding year was insignificant for each of the three months ended September 30, 2023 and 2022. Revenue recognized in this segment during the nine months ended September 30, 2023 and 2022 that was included in the deferred revenue balance that existed at the end of each preceding year was $1.2 million and $1.5 million, respectively. For the Alternative Credential Segment, during the three months ended September 30, 2023 and 2022 the Company recognized $1.4 million and $7.3 million of revenue related to its deferred revenue balances that existed at the end of each preceding year. Revenue recognized in this segment during the nine months ended September 30, 2023 and 2022 that was included in the deferred revenue balance that existed at the end of each preceding year was $72.4 million and $73.8 million, respectively. Contract Acquisition Costs The Degree Program Segment had $0.5 million and $0.5 million of net capitalized contract acquisition costs recorded primarily within other assets, non-current on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. For each of the nine months ended September 30, 2023 and 2022, the Company capitalized an immaterial amount of contract acquisition costs and recorded an immaterial amount of associated amortization expense in the Degree Program Segment. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 9 Months Ended |
Sep. 30, 2023 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Cash Flow Information | Supplemental Cash Flow InformationThe Company’s cash interest payments, net of amounts capitalized, were $44.8 million and $35.2 million for the nine months ended September 30, 2023 and 2022, respectively. The Company’s accrued but unpaid capital expenditures were $3.4 million and $2.8 million for the nine months ended September 30, 2023 and 2022, respectively. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Pay vs Performance Disclosure | ||||||||
Net loss | $ (47,443) | $ (173,654) | $ (54,062) | $ (121,676) | $ (62,852) | $ (125,780) | $ (275,159) | $ (310,308) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Sep. 30, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company 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 Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the 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, 2023 and 2022 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, 2022. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2022 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. |
Use of Estimates | Use of Estimates The preparation of 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 |
Fair Value Measurements | Fair Value Measurements The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability. U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 3 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows: • Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 —Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 —Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. |
Goodwill | Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. During the second quarter of 2023, the Company completed the update of its internal financial reporting structure to better align with the executive structure following the 2022 Strategic Realignment. As a result of this update, the Company’s three reporting units within the Alternative Credential Segment (Executive Education, Boot Camp, and Open Courses) were combined into a single reporting unit (Alternative Credential). The Degree Program Segment continues to have one reporting unit (Degree Program). The Company performed impairment assessments before and after the change in reporting units. Refer to the Interim Impairment Assessments section below for further information regarding the results of these assessments. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach 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 a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit. The Company determines the fair value of a reporting unit by utilizing a weighted combination of income-based and market-based approaches. The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, and forecasts of revenue and margins. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns. In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value. |
Other Indefinite-lived Intangible Assets | Other Indefinite-lived Intangible AssetsIn November 2021, the Company acquired an indefinite-lived intangible asset, which represented the established edX trade name. The Company concluded that due to changes in facts and circumstances, effective July 1, 2023, the edX trade name should no longer have an indefinite useful life. The Company began amortizing the edX trade name on a straight-line basis over its estimated remaining useful life of 25 years. The impact of this change in accounting estimate was immaterial to the Company’s condensed consolidated statements of operations for each of the three and nine months ended September 30, 2023. The Company expects the impact to be immaterial in future quarters. |
Interim Impairment Assessment | Interim Impairment Assessments During both the first and third quarter of 2022, the Company experienced a significant decline in its market capitalization. Management deemed these declines triggering events related to the Company’s goodwill and indefinite-lived intangible asset. The Company performed interim impairment assessments as of March 1, 2022 and September 30, 2022. For the quantitative interim impairment assessment performed as of March 1, 2022, management determined the carrying value of the Open Courses reporting unit and the carrying value of an indefinite-lived intangible asset, both within the Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, the Company recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. For the quantitative interim impairment assessment performed as of September 30, 2022, management determined the carrying value of two of the reporting units and the carrying value of an indefinite-lived intangible asset, each within the Company’s Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, the Company recorded impairment charges of $50.2 million to goodwill, of which $43.0 million related to the Open Courses reporting unit and $7.2 million related to the Executive Education reporting unit, and $29.3 million to the indefinite-lived intangible asset. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. During the second quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill and indefinite-lived intangible asset. In addition, as a result of the change in the Company’s reporting units in the second quarter of 2023, the Company performed interim impairment assessments before and after the change in reporting units. The Company performed these interim impairment assessments as of May 1, 2023. For the interim impairment assessment performed as of May 1, 2023, after the change in reporting units, management determined it was not more likely than not that the fair values of the Degree Program reporting unit and the Alternative Credential reporting unit were less than their respective carrying amounts. As such, the Company concluded that the goodwill relating to those reporting units was not impaired and further quantitative impairment assessment was not necessary. During the third quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of September 30, 2023. The estimated fair value of each of the Company’s reporting units exceeded their respective carrying value by more than 10%. It is possible that future changes in circumstances, such as a decline in our market capitalization, or in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, could require us to record additional impairment charges in the future. For each of the interim impairment assessments, the Company utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and an income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included discount rates, terminal growth rates, royalty rates, and forecasts of revenue and margins based upon each respective reporting unit’s or indefinite-lived intangible asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result. |
Convertible Senior Notes, Debt Issuance Costs | Convertible Senior Notes In April 2020, the Company issued 2.25% convertible senior notes due May 1, 2025 (the “2025 Notes”) in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional 2025 Notes, in a private offering. Refer to Note 8 for more information regarding the 2025 Notes. In January 2023, the Company issued 4.50% convertible senior notes due February 1, 2030 (the “2030 Notes”) in an aggregate principal amount of $147.0 million in a private offering. Refer to Note 8 for more information regarding the 2030 Notes. During the first quarter of 2022, the Company adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Pursuant to this ASU, which simplified the accounting for convertible instruments, the Company’s convertible senior notes are accounted for as a single instrument. Refer to the Recent Accounting Pronouncements section below for further information regarding the Company’s adoption of ASU 2020-06. Debt Issuance Costs Debt issuance costs are incurred as a result of entering into certain borrowing transactions and are presented as a reduction from the carrying amount of the debt liability on the Company’s consolidated balance sheets. Debt issuance costs are amortized over the term of the associated debt instrument. The amortization of debt issuance costs is included as a component of interest expense on the Company’s consolidated statements of operations and comprehensive loss. If the Company extinguishes debt prior to the end of the underlying instrument’s full term, some or all of the unamortized debt issuance costs may need to be written off, and a loss on extinguishment may need to be recognized. Refer to Note 8 for further information about the Company’s debt. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity’s own equity. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. This ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU on a modified retrospective basis in the first quarter of 2022, effective as of January 1, 2022. As a result of the adoption, long-term debt increased $81.7 million, additional paid-in capital decreased $114.6 million, deferred tax liabilities decreased $22.1 million, and the Company recorded a cumulative-effect adjustment to opening accumulated deficit of $32.8 million. Adoption of this ASU requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effective is more dilutive. There was no impact to the number of potentially dilutive shares as a result of the adoption. Adoption of this standard did not have a material impact on the Company’s liquidity or cash flows. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 . This ASU defers the sunset date from December 31, 2022 to December 31, 2024 and is effective immediately. The Company will adopt the standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In March 2022, the FASB issued ASU No 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures . This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13 and enhances the disclosure requirements for certain loan refinancings when borrowers are experiencing financial difficulty. In addition, the ASU requires the disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. This ASU is effective for fiscal years beginning after December 15, 2022. The Company adopted this ASU in the first quarter of 2023. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The following table presents the changes in the carrying amount of goodwill by reportable segment on the Company’s condensed consolidated balance sheets for the periods indicated. Balance as of December 31, 2022 Impairment Charges* Foreign Currency Translation Adjustments Balance as of September 30, 2023 (in thousands) Degree Program Segment Gross goodwill $ 192,459 $ — $ — $ 192,459 Accumulated impairments — — — — Net goodwill 192,459 — — 192,459 Alternative Credential Segment Gross goodwill $ 691,531 $ — $ (5,259) $ 686,272 Accumulated impairments (149,370) (16,717) — (166,087) Net goodwill 542,161 (16,717) (5,259) 520,185 Total Gross goodwill $ 883,990 $ — $ (5,259) $ 878,731 Accumulated impairments (149,370) (16,717) — (166,087) Net goodwill $ 734,620 $ (16,717) $ (5,259) $ 712,644 * Refer to Note 2 for further information about the impairment charges recorded during the second quarter of 2023. |
Schedule of amortizable intangible assets | The following table presents the components of intangible assets, net on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 Estimated Gross Accumulated Net Gross Accumulated Net (in thousands) Capitalized technology 3-5 $ 241,848 $ (153,473) $ 88,375 $ 226,761 $ (132,621) $ 94,140 Capitalized content development 4-5 252,900 (188,648) 64,252 261,844 (177,154) 84,690 University client relationships 9-10 208,145 (70,119) 138,026 210,138 (55,556) 154,582 Enterprise client relationships 10 14,300 (2,681) 11,619 14,300 (1,609) 12,691 Trade names and domain names* 5-25 284,243 (200,243) 84,000 284,701 (81,049) 203,652 Total intangible assets $ 1,001,436 $ (615,164) $ 386,272 $ 997,744 $ (447,989) $ 549,755 * The Company concluded that due to changes in facts and circumstances, the edX trade name, which was classified as indefinite-lived as of June 30, 2023, is now finite-lived. In the third quarter of 2023, the Company began amortizing the trade name on a straight-line basis over its estimated useful life. The gross carrying amount of the edX trade name was $255.0 million as of both September 30, 2023 and December 31, 2022. Accumulated amortization and impairments include $176.7 million and $59.3 million of impairment charges related to the edX trade name as of September 30, 2023 and December 31, 2022, respectively. Refer to Note 2 for further information about these impairment charges. |
Schedule of estimated future amortization expense for amortizable intangible assets | The following table presents the estimated future amortization expense of the Company’s amortizable intangible assets placed in service as of September 30, 2023. Future Amortization Expense (in thousands) Remainder of 2023 $ 21,499 2024 73,695 2025 53,294 2026 37,685 2027 28,479 Thereafter 122,881 Total $ 337,533 |
Other Balance Sheet Details (Ta
Other Balance Sheet Details (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued expenses | The following table presents the components of accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 (in thousands) Accrued university and instructional staff compensation $ 28,893 $ 30,807 Accrued marketing expenses 18,793 15,988 Accrued compensation and related benefits 25,747 16,213 Accounts payable and other accrued expenses 54,883 47,012 Total accounts payable and accrued expenses $ 128,316 $ 110,020 |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments to university clients | The following table presents the estimated future minimum payments due to university clients as of September 30, 2023. Future Minimum Payments (in thousands) Remainder of 2023 $ 325 2024 3,825 2025 3,825 2026 3,825 2027 3,825 Thereafter 4,475 Total future minimum payments to university clients $ 20,100 |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Restructuring and Related Activities [Abstract] | |
Schedule of restructuring charges by reportable segment | The following table presents restructuring charges by reportable segment on the Company’s condensed consolidated statements of operations for the periods indicated. Three Months Ended Three Months Ended Degree Program Segment Alternative Credential Segment Degree Program Segment Alternative Credential Segment 2022 Strategic Realignment Plan Severance and severance-related costs $ 9,956 $ 110 $ — $ — Lease and lease-related charges 2,815 629 8,972 298 Professional and other fees relating to restructuring activities 230 — 961 20 Other 14 — — 1,008 13,015 739 9,933 1,326 Other restructuring charges* $ 385 $ (54) $ 362 $ 11 Total restructuring charges $ 13,400 $ 685 $ 10,295 $ 1,337 * Includes severance and severance-related costs and lease-related charges. Nine Months Ended Nine Months Ended Degree Program Segment Alternative Credential Segment Degree Program Segment Alternative Credential Segment 2022 Strategic Realignment Plan Severance and severance-related costs $ 11,187 $ 114 $ 8,772 $ 6,431 Lease and lease-related charges 7,087 2,066 8,972 298 Professional and other fees relating to restructuring activities 974 — 1,515 20 Other 40 — — 1,008 19,288 2,180 19,259 7,757 Other restructuring charges* $ 1,138 $ (24) $ 1,977 $ 179 Total restructuring charges $ 20,426 $ 2,156 $ 21,236 $ 7,936 * Includes severance and severance-related costs and lease-related charges. |
Schedule of adjustments to the accrued restructuring liability | The following table presents the additions and adjustments to the accrued restructuring liability on the Company’s condensed consolidated balance sheets for the periods indicated. Balance as of December 31, 2022 Additional Costs Cash Payments Balance as of September 30, 2023 (in thousands) 2022 Strategic Realignment Plan Severance and severance-related costs $ 5,225 $ 11,237 $ (5,972) $ 10,490 Professional and other fees relating to restructuring activities 923 1,060 (1,391) 592 Lease and lease-related charges 83 9,773 (9,829) 27 Other severance and severance-related costs 461 512 (631) 342 Total restructuring $ 6,692 $ 22,582 $ (17,823) $ 11,451 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Leases [Abstract] | |
Schedule of lease cost | The following table presents the components of lease expense on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Operating lease expense $ 4,372 $ 5,099 $ 13,175 $ 16,471 Short-term lease expense 46 139 115 407 Variable lease expense 1,672 1,811 4,941 5,180 Sublease income (535) (427) (1,443) (883) Total lease expense $ 5,555 $ 6,622 $ 16,788 $ 21,175 |
Schedule of maturities of operating lease liabilities | The following table presents the maturities of the Company’s operating lease liabilities as of the date indicated, and excludes the impact of future sublease income totaling $4.1 million in aggregate. September 30, 2023 (in thousands) Remainder of 2023 $ 6,102 2024 24,214 2025 20,433 2026 20,983 2027 21,556 Thereafter 49,305 Total lease payments 142,593 Less: imputed interest (41,106) Total lease liability $ 101,487 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | The following table presents the components of outstanding long-term debt on the Company’s condensed consolidated balance sheets as of each of the dates indicated. September 30, 2023 December 31, 2022 (in thousands) Term loan facilities $ 377,150 $ 566,622 Revolving facility 20,000 — Convertible senior notes 527,000 380,000 Deferred government grant obligations 3,500 3,500 Other borrowings 2,118 3,688 Less: unamortized debt discount and issuance costs (46,678) (17,666) Total debt 883,090 936,144 Less: current portion of long-term debt (4,966) (7,580) Total long-term debt $ 878,124 $ 928,564 The net carrying amount of the 2025 Notes consists of the following as of each of the dates indicated: September 30, 2023 December 31, 2022 (in thousands) Principal $ 380,000 $ 380,000 Unamortized issuance costs (3,331) (4,898) Net carrying amount $ 376,669 $ 375,102 The net carrying amount of the 2030 Notes consist of the following as of the date indicated: September 30, 2023 (in thousands) Principal $ 147,000 Unamortized debt discount and issuance costs (19,867) Net carrying amount $ 127,133 |
Schedule of maturities of long-term debt | Future principal payments for the term loans under the Second Amended Credit Agreement, the 2025 Notes, the 2030 Notes, and the government grants, as of the date indicated are as follows: September 30, 2023 (in thousands) Remainder of 2023 $ 950 2024 3,800 2025 383,800 2026 368,600 2027* 1,500 Thereafter* 149,000 Total future principal payments $ 907,650 * Amounts due in 2027 and thereafter include $1.5 million and $2.0 million, respectively, of conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of shares of common stock reserved for future issuance | As of September 30, 2023, there were 81,630,808 shares of common stock outstanding, and the Company had reserved a total of 49,302,290 of its authorized shares of common stock for future issuance as follows: Shares Reserved for Future Issuance Outstanding restricted stock units 5,498,359 Outstanding performance restricted stock units 1,946,407 Outstanding stock options 4,744,465 Reserved for convertible senior notes 37,113,059 Total shares of common stock reserved for future issuance 49,302,290 |
Schedule of stock-based compensation expense included in the consolidated statements of operations and comprehensive loss | The following table presents stock-based compensation expense related to the Stock Plans and the ESPP, contained on the following line items on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Curriculum and teaching $ 37 $ 59 $ 128 $ 155 Servicing and support 2,257 3,061 7,773 11,741 Technology and content development 737 1,288 4,354 7,785 Marketing and sales 1,436 1,013 3,959 4,861 General and administrative 5,973 10,546 19,772 38,198 Total stock-based compensation expense $ 10,440 $ 15,967 $ 35,986 $ 62,740 |
Schedule of restricted and performance restricted stock unit activity | The following table presents a summary of the Company’s RSU activity for the period indicated. Number of Weighted- Outstanding balance as of December 31, 2022 4,739,861 $ 14.24 Granted* 4,080,159 6.45 Vested (2,684,619) 14.74 Forfeited (637,042) 10.69 Outstanding balance as of September 30, 2023 5,498,359 $ 8.62 * Includes 215,054 RSUs issued pursuant to an inducement award outside of the 2014 Plan. Number of Weighted- Outstanding balance as of December 31, 2022 1,651,864 $ 22.74 Granted 1,176,077 9.55 Vested — — Forfeited (881,534) 19.33 Outstanding balance as of September 30, 2023 1,946,407 $ 16.04 |
Schedule of assumptions used for estimating the fair value of the stock options granted | The following tables present a summary of (i) for the nine months ended September 30, 2023, the assumptions used for estimating the fair value of the TSR-performance component of the PRSUs, (ii) for the nine months ended September 30, 2022, the assumptions used for estimating the fair values of the PRSUs subject to market-based vesting conditions and (iii) the Company’s PRSU activity for the period indicated. As of September 30, 2023 and December 31, 2022, there were 1.3 million and 1.0 million outstanding PRSUs for which the performance metrics had not been defined as of each respective date. Accordingly, such awards are not considered granted for accounting purposes as of September 30, 2023 and December 31, 2022, and have been excluded from the tables below. No PRSUs were granted during each of the three months ended September 30, 2023 and 2022. Nine Months Ended September 30, 2023 Risk-free interest rate 4.68% Expected term (years) 1.00 Expected volatility 108% Dividend yield 0% Weighted-average grant date fair value of the TSR-performance component $0.39 Nine Months Ended September 30, 2022 Risk-free interest rate 0.39% – 1.88% Expected term (years) 1.00 – 3.00 Expected volatility 49% – 97% Dividend yield 0% Weighted-average grant date fair value per share $18.67 Three Months Ended Risk-free interest rate 3.0% Expected term (years) 5.78 Expected volatility 79% Dividend yield 0% Weighted-average grant date fair value per share $7.78 Nine Months Ended 2023 2022 Risk-free interest rate 3.6% 1.9% – 3.0% Expected term (years) 5.69 5.63 – 5.78 Expected volatility 87% 75% – 79% Dividend yield 0% 0% Weighted-average grant date fair value per share $4.93 $7.02 |
Schedule of stock option activity | The following table presents a summary of the Company’s stock option activity for the period indicated. Number of Weighted-Average Weighted-Average Aggregate Outstanding balance as of December 31, 2022 5,195,538 $ 25.28 5.88 $ 78 Granted 66,910 6.76 8.50 Exercised (17,166) 6.38 0.65 Forfeited (169,427) 10.80 Expired (331,390) 19.55 Outstanding balance as of September 30, 2023 4,744,465 26.01 4.75 — Exercisable as of September 30, 2023 3,511,374 $ 30.56 3.79 $ — |
Net Loss per Share (Tables)
Net Loss per Share (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of potential dilutive securities that would have been anti-dilutive due to 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 each of the periods indicated. Three and Nine Months Ended 2023 2022 Stock options 4,744,465 5,428,679 Restricted stock units 5,498,359 4,594,782 Performance restricted stock units 1,946,407 2,248,104 Shares related to convertible senior notes 29,776,706 13,443,374 Total antidilutive securities 41,965,937 25,714,939 |
Schedule of calculation of basic and diluted net loss per share | The following table presents the calculation of the Company’s basic and diluted net loss per share for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 Numerator (in thousands): Net loss $ (47,443) $ (121,676) $ (275,159) $ (310,308) Denominator: Weighted-average shares of common stock outstanding, basic and diluted 81,515,246 77,692,911 80,470,221 77,013,180 Net loss per share, basic and diluted $ (0.58) $ (1.57) $ (3.42) $ (4.03) |
Segment and Geographic Inform_2
Segment and Geographic Information (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
Schedule of revenue, segment profitability and segment profitability margin by segment | The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (dollars in thousands) Revenue by segment* Degree Program Segment $ 137,604 $ 137,242 $ 397,578 $ 434,499 Alternative Credential Segment 92,095 94,996 292,714 292,532 Total revenue $ 229,699 $ 232,238 $ 690,292 $ 727,031 Segment profitability** Degree Program Segment $ 43,647 $ 44,907 $ 123,962 $ 120,264 Alternative Credential Segment (15,018) (12,389) (43,350) (53,564) Total segment profitability $ 28,629 $ 32,518 $ 80,612 $ 66,700 Segment profitability margin*** Degree Program Segment 31.7 % 32.7 % 31.2 % 27.7 % Alternative Credential Segment (16.3) (13.0) (14.8) (18.3) Total segment profitability margin 12.5 % 14.0 % 11.7 % 9.2 % * The Company has excluded immaterial amounts of intersegment revenues from each of the three and nine months ended September 30, 2023 and 2022. ** The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, debt modification expense and losses on debt extinguishment, and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. *** The Company defines segment profitability margin as segment profitability as a percentage of the respective segment’s revenue. |
Schedule of reconciliation of net loss to total segment profitability | The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated. Three Months Ended Nine Months Ended 2023 2022 2023 2022 (in thousands) Net loss $ (47,443) $ (121,676) $ (275,159) $ (310,308) Adjustments: Stock-based compensation expense 10,440 15,967 35,986 62,740 Other (income) expense, net 1,585 1,845 751 4,242 Net interest expense 18,804 15,644 53,941 42,942 Income tax expense (benefit) 107 (59) 430 (474) Depreciation and amortization expense 29,498 29,313 86,846 95,070 Impairment charges — 79,509 134,117 138,291 Debt modification expense and loss on debt extinguishment — — 16,735 — Restructuring charges 14,085 11,632 22,582 29,172 Other* 1,553 343 4,383 5,025 Total adjustments 76,072 154,194 355,771 377,008 Total segment profitability $ 28,629 $ 32,518 $ 80,612 $ 66,700 * Includes (i) transaction and integration expense of $0.1 million and $0.0 million for the three months ended September 30, 2023 and 2022, respectively, and $0.3 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively, and (ii) litigation-related expense of $1.5 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $4.1 million and $1.6 million for the nine months ended September 30, 2023 and 2022, respectively. |
Schedule of total assets by segment | The following table presents the Company’s total assets by segment as of each of the dates indicated. September 30, December 31, (in thousands) Total assets Degree Program Segment $ 380,162 $ 459,252 Alternative Credential Segment 1,157,773 1,351,607 Total assets $ 1,537,935 $ 1,810,859 |
Receivables and Contract Liab_2
Receivables and Contract Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Receivables And Contract Liabilities Disclosure [Abstract] | |
Schedule of receivables | The following table presents the Company’s trade accounts receivable in each segment as of each of the dates indicated. September 30, December 31, (in thousands) Degree Program Segment accounts receivable $ 38,730 $ 14,212 Degree Program Segment unbilled revenue 42,161 14,896 Alternative Credential Segment accounts receivable 39,294 51,360 Total 120,185 80,468 Less: Provision for credit losses (6,983) (17,642) Trade accounts receivable, net $ 113,202 $ 62,826 September 30, December 31, (in thousands) Other receivables, amortized cost $ 54,326 $ 52,180 Less: Provision for credit losses (6,742) (3,579) Other receivables, net $ 47,584 $ 48,601 Other receivables, net, current $ 29,196 $ 33,813 Other receivables, net, non-current $ 18,388 $ 14,788 |
Schedule of accounts receivable, allowance for credit loss | The following table presents the change in provision for credit losses for trade accounts receivable on the Company’s condensed consolidated balance sheets for the period indicated. Provision for Credit Losses (in thousands) Balance as of December 31, 2022 $ 17,642 Current period provision 3,393 Amounts written off (14,038) Foreign currency translation adjustments (14) Balance as of September 30, 2023 $ 6,983 |
Schedule of other receivable, allowance for credit loss | The following table presents the change in provision for credit losses for other receivables on the Company’s condensed consolidated balance sheets for the period indicated. Provision for Credit Losses (in thousands) Balance as of December 31, 2022 $ 3,579 Current period provision 3,163 Balance as of September 30, 2023 $ 6,742 |
Schedule of other receivable credit quality indicators | The following tables present other receivables, at amortized cost including interest accretion, by credit quality indicator and year of origination, as of the dates indicated. September 30, 2023 Year of Origination 2023 2022 2021 2020 2019 & Prior Total (in thousands) Credit Quality Tier High $ 11,506 $ 3,730 $ 206 $ 837 $ 547 $ 16,826 Mid 12,130 4,935 1,996 1,823 1,753 22,637 Low 5,692 2,942 2,304 1,822 2,103 14,863 Total $ 29,328 $ 11,607 $ 4,506 $ 4,482 $ 4,403 $ 54,326 December 31, 2022 Year of Origination 2022 2021 2020 2019 2018 Total (in thousands) Credit Quality Tier High $ 15,737 $ 2,285 $ 48 $ 18 $ 115 $ 18,203 Mid 14,005 3,773 1,239 1,363 392 20,772 Low 6,160 3,099 1,677 1,939 330 13,205 Total $ 35,902 $ 9,157 $ 2,964 $ 3,320 $ 837 $ 52,180 |
Schedule of contract liabilities by segment | The following table presents the Company’s contract liabilities in each segment as of each of the dates indicated. September 30, December 31, (in thousands) Degree Program Segment deferred revenue $ 24,400 $ 1,245 Alternative Credential Segment deferred revenue 91,876 88,916 Total contract liabilities $ 116,276 $ 90,161 |
Organization (Details)
Organization (Details) people in Millions | 9 Months Ended |
Sep. 30, 2023 university segment people learningOpportunity | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of registered learners | people | 81 |
Number of universities the company serves | university | 250 |
Number of learning opportunities offered | learningOpportunity | 4,400 |
Number of reportable segments | segment | 2 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) | 3 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2023 USD ($) segment | Jun. 30, 2023 USD ($) segment | Sep. 30, 2022 USD ($) reportingUnit | Mar. 31, 2022 USD ($) | Sep. 30, 2023 USD ($) segment | Jul. 01, 2023 | Jan. 11, 2023 USD ($) | Dec. 31, 2022 USD ($) | Jan. 01, 2022 USD ($) | Apr. 30, 2020 USD ($) | |
Property and Equipment, Net | ||||||||||
Goodwill impairment charge | $ 16,700,000 | $ 50,200,000 | $ 28,800,000 | $ 16,717,000 | ||||||
Impairment of intangible assets, indefinite-lived (excluding goodwill) | $ 117,400,000 | 29,300,000 | $ 30,000,000 | |||||||
Reporting units, percentage of fair value in excess of carrying amount | 10% | 10% | ||||||||
Net carrying amount | $ 883,090,000 | $ 883,090,000 | $ 936,144,000 | |||||||
Additional paid-in capital | (1,738,092,000) | (1,738,092,000) | (1,700,855,000) | |||||||
Deferred tax liabilities, net | (310,000) | (310,000) | (282,000) | |||||||
Accumulated deficit | (1,455,131,000) | (1,455,131,000) | $ (1,179,972,000) | |||||||
Trade names | ||||||||||
Property and Equipment, Net | ||||||||||
Estimated useful life (in years) | 25 years | |||||||||
Cumulative Effect, Period of Adoption, Adjustment | Accounting Standards Update 2020-06 | ||||||||||
Property and Equipment, Net | ||||||||||
Net carrying amount | $ 81,700,000 | |||||||||
Additional paid-in capital | 114,600,000 | |||||||||
Deferred tax liabilities, net | 22,100,000 | |||||||||
Accumulated deficit | $ 32,800,000 | |||||||||
The 2025 Notes | Convertible senior notes | ||||||||||
Property and Equipment, Net | ||||||||||
Interest rate (as a percent) | 2.25% | |||||||||
Principal | $ 380,000,000 | |||||||||
2030 Notes | Convertible senior notes | ||||||||||
Property and Equipment, Net | ||||||||||
Interest rate (as a percent) | 4.50% | |||||||||
Principal | 147,000,000 | 147,000,000 | $ 147,000,000 | |||||||
Net carrying amount | $ 127,133,000 | $ 127,133,000 | ||||||||
Open Courses | ||||||||||
Property and Equipment, Net | ||||||||||
Goodwill impairment charge | 43,000,000 | |||||||||
Executive Education | ||||||||||
Property and Equipment, Net | ||||||||||
Goodwill impairment charge | $ 7,200,000 | |||||||||
Alternative Credential Segment | ||||||||||
Property and Equipment, Net | ||||||||||
Number of reporting units | segment | 1 | 3 | ||||||||
Number of reporting units with negative carrying amount | reportingUnit | 2 | |||||||||
Degree Program Segment | ||||||||||
Property and Equipment, Net | ||||||||||
Number of reporting units | segment | 1 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | |
Goodwill [Roll Forward] | ||||
Goodwill, gross, beginning balance | $ 883,990 | |||
Goodwill, accumulated impairment loss, beginning balance | (149,370) | |||
Goodwill, beginning balance | 734,620 | |||
Goodwill, impairment charge | $ (16,700) | $ (50,200) | $ (28,800) | (16,717) |
Foreign Currency Translation Adjustments | (5,259) | |||
Goodwill, gross, ending balance | 878,731 | |||
Goodwill, accumulated impairment loss, ending balance | (166,087) | |||
Goodwill, ending balance | 712,644 | |||
Degree Program Segment | Operating Segments | ||||
Goodwill [Roll Forward] | ||||
Goodwill, gross, beginning balance | 192,459 | |||
Goodwill, accumulated impairment loss, beginning balance | 0 | |||
Goodwill, beginning balance | 192,459 | |||
Goodwill, impairment charge | 0 | |||
Foreign Currency Translation Adjustments | 0 | |||
Goodwill, gross, ending balance | 192,459 | |||
Goodwill, accumulated impairment loss, ending balance | 0 | |||
Goodwill, ending balance | 192,459 | |||
Alternative Credential Segment | Operating Segments | ||||
Goodwill [Roll Forward] | ||||
Goodwill, gross, beginning balance | 691,531 | |||
Goodwill, accumulated impairment loss, beginning balance | (149,370) | |||
Goodwill, beginning balance | 542,161 | |||
Goodwill, impairment charge | (16,717) | |||
Foreign Currency Translation Adjustments | (5,259) | |||
Goodwill, gross, ending balance | 686,272 | |||
Goodwill, accumulated impairment loss, ending balance | (166,087) | |||
Goodwill, ending balance | $ 520,185 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 1,001,436 | $ 997,744 |
Accumulated Amortization and Impairments | (615,164) | (447,989) |
Net Carrying Amount | 386,272 | 549,755 |
Capitalized technology | ||
Amortizable Intangible Assets | ||
Gross Carrying Amount | 241,848 | 226,761 |
Accumulated Amortization and Impairments | (153,473) | (132,621) |
Net Carrying Amount | $ 88,375 | 94,140 |
Capitalized technology | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 3 years | |
Capitalized technology | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 5 years | |
Capitalized content development | ||
Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 252,900 | 261,844 |
Accumulated Amortization and Impairments | (188,648) | (177,154) |
Net Carrying Amount | $ 64,252 | 84,690 |
Capitalized content development | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 4 years | |
Capitalized content development | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 5 years | |
University client relationships | ||
Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 208,145 | 210,138 |
Accumulated Amortization and Impairments | (70,119) | (55,556) |
Net Carrying Amount | $ 138,026 | 154,582 |
University client relationships | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 9 years | |
University client relationships | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 10 years | |
Enterprise client relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 10 years | |
Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 14,300 | 14,300 |
Accumulated Amortization and Impairments | (2,681) | (1,609) |
Net Carrying Amount | 11,619 | 12,691 |
Trade names and domain names | ||
Amortizable Intangible Assets | ||
Gross Carrying Amount | 284,243 | 284,701 |
Accumulated Amortization and Impairments | (200,243) | (81,049) |
Net Carrying Amount | $ 84,000 | 203,652 |
Trade names and domain names | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 5 years | |
Trade names and domain names | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Average Useful Life (in years) | 25 years | |
Trade names | ||
Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 255,000 | 255,000 |
Accumulated Amortization and Impairments | $ (176,700) | $ (59,300) |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Finite-Lived Intangible Assets [Line Items] | |||||
Net carrying amount | $ 386,272 | $ 386,272 | $ 549,755 | ||
Amortization expense | 27,000 | $ 28,500 | 78,900 | $ 59,900 | |
In Process Capitalized Technology and Content Development | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Net carrying amount | $ 48,700 | $ 48,700 | $ 53,900 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Estimated Future Amortization Expense and License agreement (Details) - Excluding In Process Capitalized Technology And Content Development $ in Thousands | Sep. 30, 2023 USD ($) |
Future Amortization Expense | |
Remainder of 2023 | $ 21,499 |
2024 | 73,695 |
2025 | 53,294 |
2026 | 37,685 |
2027 | 28,479 |
Thereafter | 122,881 |
Net Carrying Amount | $ 337,533 |
Other Balance Sheet Details - N
Other Balance Sheet Details - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Prepaid assets | $ 23,900 | $ 23,900 | $ 20,500 | ||
Deferred expenses incurred to integrate software | 12,600 | 12,600 | 9,300 | ||
Amortization of capitalized software implementation costs | 1,000 | $ 1,200 | 2,800 | $ 1,900 | |
Other current liabilities | 43,485 | 43,485 | 58,210 | ||
Related Party | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Other current liabilities | $ 8,900 | $ 8,900 | $ 14,700 | ||
Minimum | Capitalized technology | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Estimated useful life of intangible assets (in years) | 3 years | 3 years | |||
Maximum | Capitalized technology | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Estimated useful life of intangible assets (in years) | 5 years | 5 years |
Other Balance Sheet Details - A
Other Balance Sheet Details - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Payables and Accruals [Abstract] | ||
Accrued university and instructional staff compensation | $ 28,893 | $ 30,807 |
Accrued marketing expenses | 18,793 | 15,988 |
Accrued compensation and related benefits | 25,747 | 16,213 |
Accounts payable and other accrued expenses | 54,883 | 47,012 |
Total accounts payable and accrued expenses | $ 128,316 | $ 110,020 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) - USD ($) | Oct. 10, 2023 | Sep. 30, 2023 |
Loss Contingencies [Line Items] | ||
Purchase obligation | $ 30,000,000 | |
Subsequent Event | ||
Loss Contingencies [Line Items] | ||
Plaintiff violation damages | $ 2,500 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
Future Minimum Payments | |
Remainder of 2023 | $ 325 |
2024 | 3,825 |
2025 | 3,825 |
2026 | 3,825 |
2027 | 3,825 |
Thereafter | 4,475 |
Total future minimum payments to university clients | $ 20,100 |
Restructuring Charges - Narrati
Restructuring Charges - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 14,085 | $ 11,632 | $ 22,582 | $ 29,172 |
Cumulative charges | 52,200 | 52,200 | ||
2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 13,800 | $ 11,300 | 21,500 | $ 27,000 |
2022 Strategic Realignment Plan | Minimum | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Additional restructuring charges | $ 70,000 | $ 70,000 | ||
Estimated remaining costs (in years) | 1 year | 1 year | ||
2022 Strategic Realignment Plan | Maximum | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Additional restructuring charges | $ 75,000 | $ 75,000 | ||
Estimated remaining costs (in years) | 9 years | 9 years |
Restructuring Charges - Schedul
Restructuring Charges - Schedule of Restructuring Charges by Reportable Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Degree Program Segment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | $ 13,400 | $ 10,295 | $ 20,426 | $ 21,236 |
Degree Program Segment | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 13,015 | 9,933 | 19,288 | 19,259 |
Degree Program Segment | Severance and severance-related costs | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 9,956 | 0 | 11,187 | 8,772 |
Degree Program Segment | Lease and lease-related charges | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 2,815 | 8,972 | 7,087 | 8,972 |
Degree Program Segment | Professional and other fees relating to restructuring activities | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 230 | 961 | 974 | 1,515 |
Degree Program Segment | Other | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 14 | 0 | 40 | 0 |
Degree Program Segment | Other restructuring charges | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 385 | 362 | 1,138 | 1,977 |
Alternative Credential Segment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 685 | 1,337 | 2,156 | 7,936 |
Alternative Credential Segment | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 739 | 1,326 | 2,180 | 7,757 |
Alternative Credential Segment | Severance and severance-related costs | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 110 | 0 | 114 | 6,431 |
Alternative Credential Segment | Lease and lease-related charges | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 629 | 298 | 2,066 | 298 |
Alternative Credential Segment | Professional and other fees relating to restructuring activities | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 0 | 20 | 0 | 20 |
Alternative Credential Segment | Other | 2022 Strategic Realignment Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | 0 | 1,008 | 0 | 1,008 |
Alternative Credential Segment | Other restructuring charges | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring | $ (54) | $ 11 | $ (24) | $ 179 |
Restructuring Charges - Sched_2
Restructuring Charges - Schedule of Adjustments to the Accrued Restructuring Liability (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2023 USD ($) | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2022 | $ 6,692 |
Additional Costs | 22,582 |
Cash Payments | (17,823) |
Balance as of September 30, 2023 | 11,451 |
Other severance and severance-related costs | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2022 | 461 |
Additional Costs | 512 |
Cash Payments | (631) |
Balance as of September 30, 2023 | 342 |
2022 Strategic Realignment Plan | Severance and severance-related costs | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2022 | 5,225 |
Additional Costs | 11,237 |
Cash Payments | (5,972) |
Balance as of September 30, 2023 | 10,490 |
2022 Strategic Realignment Plan | Professional and other fees relating to restructuring activities | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2022 | 923 |
Additional Costs | 1,060 |
Cash Payments | (1,391) |
Balance as of September 30, 2023 | 592 |
2022 Strategic Realignment Plan | Lease and lease-related charges | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2022 | 83 |
Additional Costs | 9,773 |
Cash Payments | (9,829) |
Balance as of September 30, 2023 | $ 27 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Lessee, Lease, Description [Line Items] | ||
Renewal term (in years) | 5 years | |
Option to terminate, term (in years) | 1 year | |
Weighted average remaining lease term (in years) | 6 years 3 months 18 days | |
Weighted average discount rate (as a percent) | 10.70% | |
Operating lease payments | $ 18.2 | $ 18.8 |
Lease liabilities arising from obtaining right-of-use assets | $ 15.5 | |
Future sublease income expected to be earned | $ 4.1 | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Contract term (in years) | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Contract term (in years) | 11 years |
Leases - Lease Cost (Details)
Leases - Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Leases [Abstract] | ||||
Operating lease expense | $ 4,372 | $ 5,099 | $ 13,175 | $ 16,471 |
Short-term lease expense | 46 | 139 | 115 | 407 |
Variable lease expense | 1,672 | 1,811 | 4,941 | 5,180 |
Sublease income | (535) | (427) | (1,443) | (883) |
Total lease expense | $ 5,555 | $ 6,622 | $ 16,788 | $ 21,175 |
Leases - Maturities of Operatin
Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
Leases [Abstract] | |
Remainder of 2023 | $ 6,102 |
2024 | 24,214 |
2025 | 20,433 |
2026 | 20,983 |
2027 | 21,556 |
Thereafter | 49,305 |
Total lease payments | 142,593 |
Less: imputed interest | (41,106) |
Total lease liability | $ 101,487 |
Debt - Long-Term Debt (Details)
Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Less: unamortized debt discount and issuance costs | $ (46,678) | $ (17,666) |
Total debt | 883,090 | 936,144 |
Less: current portion of long-term debt | (4,966) | (7,580) |
Total long-term debt | 878,124 | 928,564 |
Term loan facilities | ||
Debt Instrument [Line Items] | ||
Net carrying amount | 377,150 | 566,622 |
Revolving facility | ||
Debt Instrument [Line Items] | ||
Net carrying amount | 20,000 | 0 |
Convertible senior notes | ||
Debt Instrument [Line Items] | ||
Net carrying amount | 527,000 | 380,000 |
Deferred government grant obligations | ||
Debt Instrument [Line Items] | ||
Net carrying amount | 3,500 | 3,500 |
Other borrowings | ||
Debt Instrument [Line Items] | ||
Net carrying amount | $ 2,118 | $ 3,688 |
Debt - Narrative (Details)
Debt - Narrative (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||
Jan. 11, 2023 USD ($) day $ / shares | Jan. 09, 2023 USD ($) | Apr. 30, 2020 USD ($) $ / shares | Apr. 30, 2020 USD ($) day $ / shares | Sep. 30, 2023 USD ($) agreement $ / shares | Mar. 31, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) agreement $ / shares | Sep. 30, 2022 USD ($) | Jan. 08, 2023 USD ($) | Dec. 31, 2022 USD ($) $ / shares | |
Debt Instrument [Line Items] | |||||||||||
Net carrying amount | $ 883,090,000 | $ 883,090,000 | $ 936,144,000 | ||||||||
Debt instrument, unamortized debt discount and issuance costs | $ 46,678,000 | 46,678,000 | $ 17,666,000 | ||||||||
Proceeds from debt | $ 309,223,000 | $ 530,000 | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Loss on debt extinguishment | $ 12,100,000 | $ 12,123,000 | $ 0 | ||||||||
Unamortized issuance costs | $ 4,600,000 | ||||||||||
Prince Georges County Maryland | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate (as a percent) | 3% | 3% | |||||||||
Number of contracts (in contracts) | agreement | 2 | 2 | |||||||||
Revolving facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Borrowing capacity terminated | $ 20,000,000 | $ 20,000,000 | |||||||||
Line of credit facility, remaining borrowing capacity | 20,000,000 | 20,000,000 | |||||||||
Standby Letters of Credit | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Borrowing capacity terminated | 12,100,000 | 12,100,000 | |||||||||
Term Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, unamortized debt discount and issuance costs | $ 23,500,000 | $ 23,500,000 | $ 12,800,000 | ||||||||
Debt instrument, effective interest rate (as a percent) | 14.30% | 9% | 14.20% | 9% | |||||||
Revolving Loan Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, effective interest rate (as a percent) | 10.80% | 10.60% | |||||||||
Convertible senior notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Net carrying amount | $ 527,000,000 | $ 527,000,000 | 380,000,000 | ||||||||
Convertible senior notes | 2030 Notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, convertible, conversion ratio | 0.1111111 | ||||||||||
Principal | $ 147,000,000 | 147,000,000 | 147,000,000 | ||||||||
Net carrying amount | 127,133,000 | 127,133,000 | |||||||||
Interest rate (as a percent) | 4.50% | ||||||||||
Proceeds from debt | $ 127,100,000 | ||||||||||
Debt issuance costs | $ 2,400,000 | $ 6,700,000 | |||||||||
Debt instrument, convertible, threshold percentage of stock price trigger (as a percent) | 130% | ||||||||||
Debt instrument, convertible, threshold trading days | day | 20 | ||||||||||
Debt instrument, convertible, threshold consecutive trading days (in days) | day | 30 | ||||||||||
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares | $ 9 | ||||||||||
Interest rate during period | 7.50% | 7.40% | |||||||||
Convertible senior notes | The 2025 Notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Principal | $ 380,000,000 | $ 380,000,000 | |||||||||
Interest rate (as a percent) | 2.25% | 2.25% | |||||||||
Convertible senior notes | The 2025 Notes | Minimum | Debt Instrument, Redemption, Period One from December 28, 2024 to December 28, 2026 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Principal | $ 40,000,000 | ||||||||||
Convertible senior notes | The Notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, convertible, conversion ratio | 0.0353773 | ||||||||||
Net carrying amount | $ 376,669,000 | $ 376,669,000 | 375,102,000 | ||||||||
Principal | $ 380,000,000 | $ 380,000,000 | $ 380,000,000 | $ 380,000,000 | 380,000,000 | ||||||
Interest rate (as a percent) | 2.25% | 2.25% | |||||||||
Proceeds from debt | $ 369,600,000 | ||||||||||
Debt instrument, effective interest rate (as a percent) | 2.90% | 2.90% | |||||||||
Debt issuance costs | $ 2,700,000 | $ 2,700,000 | $ 8,000,000 | $ 8,000,000 | |||||||
Debt instrument, convertible, threshold percentage of stock price trigger (as a percent) | 130% | ||||||||||
Debt instrument, convertible, threshold trading days | day | 20 | ||||||||||
Debt instrument, convertible, threshold consecutive trading days (in days) | day | 30 | ||||||||||
Debt instrument, convertible, threshold consecutive trading days, sale price per share (in days) | day | 5 | ||||||||||
Debt instrument, convertible, measurement period (in days) | day | 10 | ||||||||||
Debt instrument, threshold percentage of sales price per share (as a percent) | 98% | ||||||||||
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares | $ 28.27 | $ 28.27 | |||||||||
Capped call, cap price (in dollars per share) | $ / shares | $ 44.34 | ||||||||||
Cost of capped call transaction | $ 50,500,000 | $ 50,500,000 | |||||||||
Line of Credit | Term Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Net carrying amount | 380,000,000 | $ 567,000,000 | |||||||||
Net carrying amount | $ 372,400,000 | ||||||||||
Debt instrument, prepayment fee | 1% | ||||||||||
Principal repayments (as a percent) | 0.25% | 0.25% | |||||||||
Interest expense | $ 14,000,000 | $ 13,200,000 | $ 40,500,000 | $ 35,400,000 | |||||||
Line of Credit | Term Loan Agreement | Base rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Variable rate, applicable margin (as a percent) | 5.50% | ||||||||||
Interest rate (as a percent) | 4.75% | 4.75% | |||||||||
Line of Credit | Term Loan Agreement | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Variable rate, applicable margin (as a percent) | 6.50% | ||||||||||
Line of Credit | Term Loan Agreement | Eurodollar | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate (as a percent) | 5.75% | 5.75% | |||||||||
Line of Credit | The 2025 Notes | Minimum | Debt Instrument, Redemption, Period Two from June 28 2026 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Long-term debt, average amount outstanding | $ 50,000,000 | ||||||||||
Line of Credit | Revolving Loan Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Principal | $ 40,000,000 | ||||||||||
Line of Credit | Revolving Loan Facility | Base rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Variable rate, applicable margin (as a percent) | 4.50% | ||||||||||
Line of Credit | Revolving Loan Facility | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Variable rate, applicable margin (as a percent) | 5.50% | ||||||||||
Line of Credit | Senior Secured Term Loan Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Senior secured term loan facility | $ 250,000,000 | ||||||||||
Deferred government grant obligations | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Net carrying amount | $ 3,500,000 | $ 3,500,000 | 3,500,000 | ||||||||
Interest payable | 700,000 | 700,000 | 600,000 | ||||||||
Deferred government grant obligations | Prince Georges County Maryland | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Net carrying amount | 3,500,000 | 3,500,000 | |||||||||
Fair Value, Inputs, Level 2 | Convertible senior notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Fair value | 226,900,000 | 226,900,000 | $ 241,600,000 | ||||||||
Fair Value, Inputs, Level 2 | Convertible senior notes | 2030 Notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Fair value | $ 73,200,000 | $ 73,200,000 |
Debt - Net Carrying Amount (Det
Debt - Net Carrying Amount (Details) - USD ($) | Sep. 30, 2023 | Jan. 11, 2023 | Dec. 31, 2022 | Apr. 30, 2020 |
Debt Instrument [Line Items] | ||||
Total debt | $ 883,090,000 | $ 936,144,000 | ||
Convertible senior notes | ||||
Debt Instrument [Line Items] | ||||
Net carrying amount | 527,000,000 | 380,000,000 | ||
The Notes | Convertible senior notes | ||||
Debt Instrument [Line Items] | ||||
Principal | 380,000,000 | 380,000,000 | $ 380,000,000 | |
Unamortized issuance costs | (3,331,000) | (4,898,000) | ||
Net carrying amount | 376,669,000 | $ 375,102,000 | ||
2030 Notes | Convertible senior notes | ||||
Debt Instrument [Line Items] | ||||
Principal | 147,000,000 | $ 147,000,000 | ||
Unamortized issuance costs | (19,867,000) | |||
Total debt | $ 127,133,000 |
Debt - Future Principal Payment
Debt - Future Principal Payments (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
Term Loan Facility, Convertible Notes And Government Grants | |
Debt Instrument [Line Items] | |
Remainder of 2023 | $ 950 |
2024 | 3,800 |
2025 | 383,800 |
2026 | 368,600 |
2027 | 1,500 |
Thereafter | 149,000 |
Net carrying amount | 907,650 |
Conditional Loan Obligations | |
Debt Instrument [Line Items] | |
2027 | 1,500 |
Thereafter | $ 2,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||||
U.S. statutory federal income tax rate (less than ) | 1% | 1% | 1% | 1% |
Income tax expense (benefit) | $ 107 | $ (59) | $ 430 | $ (474) |
Stockholders' Equity - Common S
Stockholders' Equity - Common Stock and Stock-based Compensation (Details) | Sep. 30, 2023 plan shares | Jun. 30, 2023 shares | Jan. 01, 2023 shares | Dec. 31, 2022 shares | Jan. 01, 2022 shares |
Stockholders' Equity | |||||
Authorized shares of capital stock (in shares) | 205,000,000 | ||||
Authorized shares of common stock (in shares) | 200,000,000 | 200,000,000 | |||
Authorized shares of preferred stock (in shares) | 5,000,000 | 5,000,000 | |||
Common stock, issued (in shares) | 81,630,808 | 78,334,666 | |||
Common stock, outstanding (in shares) | 81,630,808 | 78,334,666 | |||
Available shares of common stock reserved for future issuance (in shares) | 49,302,290 | ||||
Number of stock-based compensation plans | plan | 2 | ||||
Outstanding restricted stock units | |||||
Stockholders' Equity | |||||
Available shares of common stock reserved for future issuance (in shares) | 5,498,359 | ||||
Outstanding performance restricted stock units | |||||
Stockholders' Equity | |||||
Available shares of common stock reserved for future issuance (in shares) | 1,946,407 | ||||
Outstanding stock options | |||||
Stockholders' Equity | |||||
Available shares of common stock reserved for future issuance (in shares) | 4,744,465 | ||||
Reserved for convertible senior notes | |||||
Stockholders' Equity | |||||
Available shares of common stock reserved for future issuance (in shares) | 37,113,059 | ||||
Employee Stock | |||||
Stockholders' Equity | |||||
Available shares of common stock reserved for future issuance (in shares) | 1,917,341 | ||||
Equity Incentive Plan 2014 | |||||
Stockholders' Equity | |||||
Increase in shares in available for future issuance (in shares) | 3,916,733 | 3,782,719 | |||
Equity Incentive Plan 2017 | |||||
Stockholders' Equity | |||||
Increase in shares in available for future issuance (in shares) | 2,000,000 |
Stockholders' Equity - Stock-ba
Stockholders' Equity - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | $ 10,440 | $ 15,967 | $ 35,986 | $ 62,740 |
Curriculum and teaching | ||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | 37 | 59 | 128 | 155 |
Servicing and support | ||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | 2,257 | 3,061 | 7,773 | 11,741 |
Technology and content development | ||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | 737 | 1,288 | 4,354 | 7,785 |
Marketing and sales | ||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | 1,436 | 1,013 | 3,959 | 4,861 |
General and administrative | ||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||
Total stock-based compensation expense | $ 5,973 | $ 10,546 | $ 19,772 | $ 38,198 |
Stockholders' Equity - Restrict
Stockholders' Equity - Restricted and Performance Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Monte Carlo Valuation Model | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in dollars per share) | $ 0.39 | ||||
Weighted- Average Grant Date Fair Value per Share | |||||
Granted (in dollars per share) | $ 0.39 | ||||
Restricted stock units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Fair value of options vested | $ 2.8 | $ 6.7 | $ 15.9 | $ 23.9 | |
Total unrecognized compensation cost related to unvested RSUs | $ 37.6 | $ 37.6 | |||
Weighted average period for recognition of compensation cost (in years) | 1 year 10 months 24 days | ||||
Granted (in dollars per share) | $ 6.45 | ||||
Number of awards outstanding (in shares) | 5,498,359 | 5,498,359 | |||
Number of Units | |||||
Beginning balances of the period (in shares) | 4,739,861 | 4,739,861 | |||
Granted (in shares) | 4,080,159 | ||||
Vested (in shares) | (2,684,619) | ||||
Forfeited (in shares) | (637,042) | ||||
Ending balances of the period (in shares) | 5,498,359 | 5,498,359 | |||
Weighted- Average Grant Date Fair Value per Share | |||||
Beginning balances of the period (in dollars per share) | $ 14.24 | $ 14.24 | |||
Granted (in dollars per share) | 6.45 | ||||
Vested (in dollars per share) | 14.74 | ||||
Forfeited (in dollars per share) | 10.69 | ||||
Ending balances of the period (in dollars per share) | $ 8.62 | $ 8.62 | |||
Restricted stock units | Equity Incentive Plan 2017 | |||||
Number of Units | |||||
Granted (in shares) | 215,054 | ||||
Restricted stock units | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 3 years | ||||
Restricted stock units | Maximum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period (in years) | 4 years | ||||
Performance restricted stock units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Total unrecognized compensation cost related to unvested RSUs | $ 4.9 | $ 4.9 | |||
Weighted average period for recognition of compensation cost (in years) | 1 year 2 months 12 days | ||||
Share-based payment award granted (in shares) | 1,400,000 | ||||
Aggregate grant date fair value | $ 12.2 | ||||
Award adjustment based on total shareholder return (as a percent) | 20% | ||||
Total shareholder return multiplier maximum percent (as a percent) | 0% | ||||
Granted (in dollars per share) | $ 9.55 | ||||
Number of awards outstanding (in shares) | 1,946,407 | 1,946,407 | |||
Number of Units | |||||
Beginning balances of the period (in shares) | 1,651,864 | 1,651,864 | |||
Granted (in shares) | 0 | 0 | 1,176,077 | ||
Vested (in shares) | 0 | ||||
Forfeited (in shares) | (881,534) | ||||
Ending balances of the period (in shares) | 1,946,407 | 1,946,407 | |||
Weighted- Average Grant Date Fair Value per Share | |||||
Beginning balances of the period (in dollars per share) | $ 22.74 | $ 22.74 | |||
Granted (in dollars per share) | 9.55 | ||||
Vested (in dollars per share) | 0 | ||||
Forfeited (in dollars per share) | 19.33 | ||||
Ending balances of the period (in dollars per share) | $ 16.04 | $ 16.04 | |||
Performance restricted stock units | Tranche One | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage (as a percent) | 125% | ||||
Performance restricted stock units | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage (as a percent) | 0% | ||||
Award eligible for vesting percentage (as a percent) | 0% | ||||
Performance restricted stock units | Maximum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage (as a percent) | 150% | ||||
Award eligible for vesting percentage (as a percent) | 130% | ||||
Performance Restricted Stock Units, Performance Metrics Not Yet Defined | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of awards outstanding (in shares) | 1,300,000 | 1,300,000 | |||
Number of Units | |||||
Beginning balances of the period (in shares) | 1,000,000 | 1,000,000 | |||
Ending balances of the period (in shares) | 1,300,000 | 1,300,000 |
Stockholders' Equity - Fair Val
Stockholders' Equity - Fair Value Assumptions (Details) - $ / shares | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Fair value assumptions and methodology | |||
Risk-free interest rate minimum | 1.90% | ||
Risk-free interest rate maximum | 3% | ||
Performance restricted stock units | |||
Fair value assumptions and methodology | |||
Risk-free interest rate | 4.68% | ||
Expected term (years) | 1 year | ||
Expected volatility (as a percent) | 108% | ||
Dividend yield | 0% | 0% | |
Weighted average grant date fair value (in dollars per share) | $ 18.67 | $ 0.39 | $ 18.67 |
Risk-free interest rate minimum | 0.39% | ||
Risk-free interest rate maximum | 1.88% | ||
Expected volatility minimum | 49% | ||
Expected volatility maximum | 97% | ||
Performance restricted stock units | Minimum | |||
Fair value assumptions and methodology | |||
Expected term (years) | 1 year | ||
Performance restricted stock units | Maximum | |||
Fair value assumptions and methodology | |||
Expected term (years) | 3 years | ||
Stock options | |||
Fair value assumptions and methodology | |||
Expected term (years) | 5 years 9 months 10 days | 5 years 8 months 8 days | |
Dividend yield | 0% | 0% | 0% |
Risk-free interest rate minimum | 75% | ||
Risk-free interest rate maximum | 3% | 3.60% | 79% |
Expected volatility maximum | 79% | 87% | |
Weighted average grant date fair value (in dollars per share) | $ 7.78 | $ 4.93 | $ 7.02 |
Stock options | Minimum | |||
Fair value assumptions and methodology | |||
Expected term (years) | 5 years 7 months 17 days | ||
Stock options | Maximum | |||
Fair value assumptions and methodology | |||
Expected term (years) | 5 years 9 months 10 days |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
Number of Options | |||
Outstanding balance at the beginning of the period (in shares) | 5,195,538 | ||
Granted (in shares) | 0 | 66,910 | |
Exercised (in shares) | (17,166) | ||
Forfeited (in shares) | (169,427) | ||
Expired (in shares) | (331,390) | ||
Outstanding balance at the end of the period (in shares) | 4,744,465 | 4,744,465 | 5,195,538 |
Exercisable at the end of the period (in shares) | 3,511,374 | 3,511,374 | |
Weighted-Average Exercise Price per Share | |||
Outstanding balance at the beginning of the period (in dollars per share) | $ 25.28 | ||
Granted (in dollars per share) | 6.76 | ||
Exercised (in dollars per share) | 6.38 | ||
Forfeited (in dollars per share) | 10.80 | ||
Expired (in dollars per share) | 19.55 | ||
Outstanding balance at the end of the period (in dollars per share) | $ 26.01 | 26.01 | $ 25.28 |
Exercisable at the end of the period (in dollars per share) | $ 30.56 | $ 30.56 | |
Weighted-Average Remaining Contractual Term (in years) | |||
Outstanding balance (in years) | 4 years 9 months | 5 years 10 months 17 days | |
Granted (in years) | 8 years 6 months | ||
Exercised (in years) | 7 months 24 days | ||
Weighted-average remaining contractual term of options exercisable at the end of the period (in years) | 3 years 9 months 14 days | ||
Aggregate Intrinsic Value (in thousands) | |||
Outstanding balance at the end of the period | $ 0 | $ 0 | $ 78 |
Exercisable at the end of the period | $ 0 | $ 0 |
Stockholders' Equity - Stock _2
Stockholders' Equity - Stock Option Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | |
Stock-Based Compensation | |||
Granted (in shares) | 0 | 66,910 | |
Stock options | |||
Stock-Based Compensation | |||
Expiration period (in years) | 10 years | ||
Intrinsic value of options exercisable at the end of the period | $ 0.1 | $ 3.2 | |
Compensation cost related to the nonvested awards not yet recognized | $ 8.6 | $ 8.6 | |
Weighted average period for recognition of compensation cost (in years) | 1 year 4 months 24 days | ||
Stock options | Minimum | |||
Stock-Based Compensation | |||
Vesting period (in years) | 3 years | ||
Stock options | Maximum | |||
Stock-Based Compensation | |||
Vesting period (in years) | 4 years |
Net Loss per Share (Details)
Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Potential dilutive securities that would have been anti-dilutive | ||||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 41,965,937 | 25,714,939 | ||
Numerator: | ||||
Net loss | $ (47,443) | $ (121,676) | $ (275,159) | $ (310,308) |
Denominator: | ||||
Weighted-average shares of common stock outstanding, basic (in shares) | 81,515,246 | 77,692,911 | 80,470,221 | 77,013,180 |
Weighted-average shares of common stock outstanding, diluted (in shares) | 81,515,246 | 77,692,911 | 80,470,221 | 77,013,180 |
Net loss per share, basic (in dollars per share) | $ (0.58) | $ (1.57) | $ (3.42) | $ (4.03) |
Net loss per share, diluted (in dollars per share) | $ (0.58) | $ (1.57) | $ (3.42) | $ (4.03) |
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) | 4,744,465 | 5,428,679 | ||
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) | 5,498,359 | 4,594,782 | ||
Performance 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) | 1,946,407 | 2,248,104 | ||
Shares related to convertible senior notes | ||||
Potential dilutive securities that would have been anti-dilutive | ||||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 29,776,706 | 13,443,374 |
Segment and Geographic Inform_3
Segment and Geographic Information - Narrative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2023 USD ($) segment | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Segment Reporting Information [Line Items] | |||||
Number of reportable segments | segment | 2 | ||||
Revenue | $ 229,699 | $ 232,238 | $ 690,292 | $ 727,031 | |
Accounts receivable, net | 113,202 | 113,202 | $ 62,826 | ||
Degree Program Segment | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | 137,604 | 137,242 | 397,578 | 434,499 | |
Alternative Credential Segment | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | $ 92,095 | $ 94,996 | $ 292,714 | $ 292,532 | |
University Client 1 | Sales Revenue, Net | Customer concentration risk | Degree Program Segment | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of concentration of credit risk | 13% | ||||
Revenue | $ 29,800 | ||||
University Client 1 | Sales Revenue, Net | Customer concentration risk | Degree Program Segment | Portfolio Management Agreement | |||||
Segment Reporting Information [Line Items] | |||||
Revenue | 25,800 | ||||
University Client 1 | Accounts Receivable, Net | Credit Concentration Risk | Degree Program Segment | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of concentration of credit risk | 14.10% | 12% | |||
Accounts receivable, net | 15,900 | $ 15,900 | $ 7,300 | ||
University Client 2 | Accounts Receivable, Net | Credit Concentration Risk | Degree Program Segment | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of concentration of credit risk | 11.20% | ||||
Accounts receivable, net | $ 12,700 | $ 12,700 |
Segment and Geographic Inform_4
Segment and Geographic Information - Segment Results of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 229,699 | $ 232,238 | $ 690,292 | $ 727,031 |
Total segment profitability | $ 28,629 | $ 32,518 | $ 80,612 | $ 66,700 |
Total segment profitability margin | 12.50% | 14% | 11.70% | 9.20% |
Degree Program Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 137,604 | $ 137,242 | $ 397,578 | $ 434,499 |
Total segment profitability | $ 43,647 | $ 44,907 | $ 123,962 | $ 120,264 |
Total segment profitability margin | 31.70% | 32.70% | 31.20% | 27.70% |
Alternative Credential Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 92,095 | $ 94,996 | $ 292,714 | $ 292,532 |
Total segment profitability | $ (15,018) | $ (12,389) | $ (43,350) | $ (53,564) |
Total segment profitability margin | (16.30%) | (13.00%) | (14.80%) | (18.30%) |
Segment and Geographic Inform_5
Segment and Geographic Information - Reconciliation of Net Loss to Total Segment Profitability (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Segment Reporting [Abstract] | ||||||||
Net loss | $ (47,443) | $ (173,654) | $ (54,062) | $ (121,676) | $ (62,852) | $ (125,780) | $ (275,159) | $ (310,308) |
Adjustments: | ||||||||
Stock-based compensation expense | 10,440 | 15,967 | 35,986 | 62,740 | ||||
Other (income) expense, net | 1,585 | 1,845 | 751 | 4,242 | ||||
Net interest expense | 18,804 | 15,644 | 53,941 | 42,942 | ||||
Income tax expense (benefit) | 107 | (59) | 430 | (474) | ||||
Depreciation and amortization expense | 29,498 | 29,313 | 86,846 | 95,070 | ||||
Impairment charges | 0 | 79,509 | 134,117 | 138,291 | ||||
Debt modification expense and loss on debt extinguishment | 0 | 0 | 16,735 | 0 | ||||
Restructuring charges | 14,085 | 11,632 | 22,582 | 29,172 | ||||
Other | 1,553 | 343 | 4,383 | 5,025 | ||||
Total adjustments | 76,072 | 154,194 | 355,771 | 377,008 | ||||
Total segment profitability | 28,629 | 32,518 | 80,612 | 66,700 | ||||
Transaction and integration costs | 100 | 0 | 300 | 3,400 | ||||
Stockholder activism costs | $ 1,500 | $ 300 | $ 4,100 | $ 1,600 |
Segment and Geographic Inform_6
Segment and Geographic Information - Total Assets by Segment (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Segment Reporting Information [Line Items] | ||
Total assets | $ 1,537,935 | $ 1,810,859 |
Degree Program Segment | ||
Segment Reporting Information [Line Items] | ||
Total assets | 380,162 | 459,252 |
Alternative Credential Segment | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 1,157,773 | $ 1,351,607 |
Segment and Geographic Inform_7
Segment and Geographic Information - Geographical Information Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Geographical Information | |||||
Total revenue | $ 229,699 | $ 232,238 | $ 690,292 | $ 727,031 | |
Assets | 1,537,935 | 1,537,935 | $ 1,810,859 | ||
Alternative Credential Segment | |||||
Geographical Information | |||||
Total revenue | 92,095 | 94,996 | 292,714 | 292,532 | |
Assets | 1,157,773 | 1,157,773 | 1,351,607 | ||
Non-US | |||||
Geographical Information | |||||
Total revenue | 28,100 | $ 24,500 | 87,600 | $ 79,800 | |
Non-US | Alternative Credential Segment | |||||
Geographical Information | |||||
Assets | $ 3,700 | $ 3,700 | $ 4,500 |
Receivables and Contract Liab_3
Receivables and Contract Liabilities - Trade Accounts Receivable and Contract Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Segment Reporting Information [Line Items] | ||
Degree Program Segment and Alternative Credential Segment accounts receivable | $ 120,185 | $ 80,468 |
Less: Provision for credit losses | (6,983) | (17,642) |
Trade accounts receivable, net | 113,202 | 62,826 |
Degree Program Segment | ||
Segment Reporting Information [Line Items] | ||
Degree Program Segment and Alternative Credential Segment accounts receivable | 38,730 | 14,212 |
Degree Program Segment unbilled revenue | 42,161 | 14,896 |
Alternative Credential Segment | ||
Segment Reporting Information [Line Items] | ||
Degree Program Segment and Alternative Credential Segment accounts receivable | $ 39,294 | $ 51,360 |
Receivables and Contract Liab_4
Receivables and Contract Liabilities - Change in Provision for Credit Losses for Trade Receivables (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2023 USD ($) | |
Provision for Credit Losses | |
Beginning balance | $ 17,642 |
Current period provision | 3,393 |
Amounts written off | (14,038) |
Foreign currency translation adjustments | (14) |
Ending balance | $ 6,983 |
Receivables and Contract Liab_5
Receivables and Contract Liabilities - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Segment Reporting Information [Line Items] | |||||
Percentage of other receivables that are current (as a percent) | 78% | 78% | |||
Degree Program Segment | |||||
Segment Reporting Information [Line Items] | |||||
Unbilled revenue | $ 42,161 | $ 42,161 | $ 14,896 | ||
Contract with customer, liability, revenue recognized | 1,200 | $ 1,500 | |||
Capitalized contract cost | 500 | 500 | 500 | ||
Alternative Credential Segment | |||||
Segment Reporting Information [Line Items] | |||||
Contract with customer, liability, revenue recognized | 1,400 | $ 7,300 | $ 72,400 | $ 73,800 | |
Minimum | |||||
Segment Reporting Information [Line Items] | |||||
Term of other receivables | 12 months | ||||
Maximum | |||||
Segment Reporting Information [Line Items] | |||||
Term of other receivables | 42 months | ||||
Portfolio Management Agreement | |||||
Segment Reporting Information [Line Items] | |||||
Unbilled revenue | 23,400 | $ 23,400 | 6,400 | ||
Accounts receivable noncurrent | $ 18,600 | $ 18,600 | $ 6,300 |
Receivables and Contract Liab_6
Receivables and Contract Liabilities - Other Receivables (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Receivables And Contract Liabilities Disclosure [Abstract] | ||
Other receivables, amortized cost | $ 54,326 | $ 52,180 |
Less: Provision for credit losses | (6,742) | (3,579) |
Other receivables, net | 47,584 | 48,601 |
Other receivables, net, current | 29,196 | 33,813 |
Other receivables, net, non-current | $ 18,388 | $ 14,788 |
Receivables and Contract Liab_7
Receivables and Contract Liabilities - Change in Provision for Credit Losses for Other Receivables (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2023 USD ($) | |
Other Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2022 | $ 3,579 |
Current period provision | 3,163 |
Balance as of September 30, 2023 | $ 6,742 |
Receivables and Contract Liab_8
Receivables and Contract Liabilities - Other Receivables Credit Quality Indicators (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Origination year | $ 29,328 | $ 35,902 |
Origination year, one year before current fiscal year | 11,607 | 9,157 |
Origination year, two years before current fiscal year | 4,506 | 2,964 |
Origination year, three years before current fiscal year | 4,482 | 3,320 |
Origination year, four years before current fiscal year | 4,403 | 837 |
Total | 54,326 | 52,180 |
High | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Origination year | 11,506 | 15,737 |
Origination year, one year before current fiscal year | 3,730 | 2,285 |
Origination year, two years before current fiscal year | 206 | 48 |
Origination year, three years before current fiscal year | 837 | 18 |
Origination year, four years before current fiscal year | 547 | 115 |
Total | 16,826 | 18,203 |
Mid | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Origination year | 12,130 | 14,005 |
Origination year, one year before current fiscal year | 4,935 | 3,773 |
Origination year, two years before current fiscal year | 1,996 | 1,239 |
Origination year, three years before current fiscal year | 1,823 | 1,363 |
Origination year, four years before current fiscal year | 1,753 | 392 |
Total | 22,637 | 20,772 |
Low | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Origination year | 5,692 | 6,160 |
Origination year, one year before current fiscal year | 2,942 | 3,099 |
Origination year, two years before current fiscal year | 2,304 | 1,677 |
Origination year, three years before current fiscal year | 1,822 | 1,939 |
Origination year, four years before current fiscal year | 2,103 | 330 |
Total | $ 14,863 | $ 13,205 |
Receivables and Contract Liab_9
Receivables and Contract Liabilities - Contract Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Segment Reporting Information [Line Items] | ||
Total contract liabilities | $ 116,276 | $ 90,161 |
Degree Program Segment | ||
Segment Reporting Information [Line Items] | ||
Total contract liabilities | 24,400 | 1,245 |
Alternative Credential Segment | ||
Segment Reporting Information [Line Items] | ||
Total contract liabilities | $ 91,876 | $ 88,916 |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Supplemental Cash Flow Elements [Abstract] | ||
Cash interest payments | $ 44.8 | $ 35.2 |
Unpaid capital expenditures | $ 3.4 | $ 2.8 |
Uncategorized Items - twou-2023
Label | Element | Value |
Accounting Standards Update [Extensible Enumeration] | us-gaap_AccountingStandardsUpdateExtensibleList | Accounting Standards Update 2020-06 [Member] |