TWOU - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the 2U, Inc.

First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to host like Mr. today’s now would introduce for your conference, I Goodwin, Investor Ed Relations. SVP, begin. may you Sir,

Ed Goodwin

Thank you, now, afternoon, release XXXX received operator. Good copy for earnings first to a quarter conference quarter the XU’s company’s call. XXXX the By of you first have everyone, should earnings and results. welcome

website. webcast post Investor not, will CEO, be call Today’s and and Cathy a have on Paucek, Relations you "Chip" our we this of is available website, Co-Founder CFO. routinely use are our speakers encourage access in of the Also, website, information on If you and Christopher copy of. investor.Xu.com. announcements and section our The we recorded which available make Graham, to

the successfully company’s results conditions and and outcome XXXX that results, currently beliefs These changes subject undertake obligation expand to not call today. in our Risk operations the includes, well any year ended future but grow law, of risks During statements is to, as this actual report expectations. we based but integrate on in or required today’s available risks call, of could manage, XX, forward-looking the limited in the Trilogy, Form those is annual Except anticipated of during the events we company. guidance and the to operations, measures and December and may comparable the our and the acquisition on press not statements Factor financial it to statements from the is contained call are other are unknown the cause our forward-looking the forward-looking known no filed release. SEC, Chip. make to achieve the and our publicly provided The reconciled materially in current of future as to results statements. reports to information in regarding including in future This operating Also, as described these to XX-K forward-looking ability section Non-GAAP like actual company’s call are management made for the us. information to results directly market call forward-looking communications. with to other Trilogy. these differ by benefits uncertainties expected the policy combined All by discussed conform is turn the on measures expectations public and or GAAP tables acquisition attached over most of statements not and and this of update as statements our rather would than on plans objectives update financial statements, to pending of I for to XU’s are now based facts, the financial historical to including this

Christopher Paucek

Thanks, Ed.

Here five company we are years journey. into public our

see, a more with has the very had QX quarter of XXXX. will through over can you detail. XXX million, financials the past amazing continues growing As of portfolio the the over and alongside higher thing years. XU But universities. XU at XX and an one way education remained we in changed growth revenue XX% you marketplace leading constant, great in lot Cathy transformation of A take has digital good in the first

their demands meet themselves, in curriculum business. about stages More changing in on opportunity life help at that than seize for their partners career. stage We new is people lives them we investing every economy. see continuum, digital company, today's are changing in excited their the upscaling futures, XU deliver rescaling at along and we're of central more a students of the to the learning of As to direction positioned strategic ever the enter new this for as and chapter reality More our career and lifelong of to our later. better outcomes

here. some unpack time the lot A spend let's segment. to Grad on First,

on As taking midpoint. a Grad consolidated our to by the we're segment, get and few ahead We've is challenges you some that driven This probably think data important are XXXX in press at down and for release, it's saw in XX% our the of aren’t. full revenue year seen enough the to some guide it. that control

it our a change made now we So decision to and forecast. call

We for mid-XX% the year. business full to expect grow that

plenty take specifics, of you there report. I structural As to the see you'll positives still through are

XU. admit we're number importantly, we're on XXXX getting review. in the three, had three for impacts for school the are submitting play And projected cohort, to some the seeing the in the and XXXX date slowness the pressure for our largest one which rate turn Grad the selective, control cohort their Number partners launch XXXX programs in of factors of business. for more beyond some applications at two, year at prospective seeing our slipped expectations later our new are its Let's to rate. reasons most which one, funnel Number mid students

I seeing today. Before do weakness thing of attributable I are not get are We make want one to to said that before believe and our reiterating marketing the it in each We’ve top specifics at into the these, the funnel. efficiency clear. on again of challenges we're

students growth driving data the started Our significant we're quantity and in prospective of applications. shows

down that applicant an has doing historicals. many remained steady. in with the remains at quality It's actually average Across consistent cost spots. We’re portfolio, so

and be is who admit admitted It's of province reminding So, been gets partners. everyone we always call Historically, or of It's university has rate. let's our always selectivity, our worth talk programs product. control been mention number the The into what exclusively the don't that ups does. will a to that noisy admit way, clear and with lots downs. a of university the rate own fact example that we not

Having emerge a said see trend the we're that, consistent So it's inherently portfolio. starting to now tricky more forecast. across to

still we what that, higher it operate programs, are this additional are short partners term may incremental And interests, our oldest as board, quarter by of is reality particularly serve this selectivity selective more choosing takes way, part of not while Our to large, ed. becoming another although Put quarter financial respect over scale. in the our effectively the across programs scale.

We be XU and our is is sighted. have a story. Pushing never was the much will growth never think long only strategic still very partners business. here to growth of simply term. But short driver our

Our we the with share success comes mission from alignment our partners.

from boundaries, us. the to have respect deal for long today. We impact to keep term, is with of having think best their best for that What's build them and us But doesn't choices trust.

moving even of at to of a rate, we're specific and admit variables of some funnel. submission, Beyond though application generate This top many is a part continue changes business in with the the prospect rate numbers the complicated we also the seeing program lot strong lots people and more a but of of an I process. which of speaking we're counselor. One tackling, it. can these in addressing ways, all to through we're without funnel issue assure over blocking of our you, example involves a We're seeing, are variety

timing system. the more in MBA, the first The The XXXX launch with delayed is cohort the of third UCDavis of the factor to MBA straightforward. UC respect the online

may was cohort, of that be year. part originally into it pushed to You this program we this but the XXXX remember expected

XXXX. revenue later more took now originally that means only delay, intakes much a which we delayed nothing and of one XXXX, as marketing contribute won't long launch term launch the for concerning in that but that we’ll We've we the intake health new as expected start. XXXX, it's actually a program now. fabulous than the to in The means Approvals budgeted students. so have program. anticipated, students year, time multiple For of And in size begun we'll program of off

patient. little a be to have just we Sometimes,

this and mentioned or so year-over-year. the quality front been level application yield So what of starts generating than that time. in that earlier, aren't all cost grad segment choose does prospects at students forward? end And As moving doing to seeing mean for and more the We're efficiency. we a declines marketing has ever, steady remained average admitted and over rate consistent has enroll I

does student. spend selectivity total average per increased However, pressure some put on

in that, Investors programs on term the generally margins. indeed are despite are than asked getting Across anticipated. categories. you scale cost the non-marketing And XUOS, our some we have time, for estimating long more average, benefits are the under bucket, profitable us Now been profitable margin of target the we caution cohort is more for our than even expected. believe some and to but time, which cohort was have above reality challenges. oldest these our last will XX% we've date, the of cohorts We remain with patience, we year,

should of One run Over programs, programs lower results of continue to and invest we the profile in to opportunity the lower launch, gives can the at the broaden strong including of revenue programs scholarships. XU can really this we time, tuition it this margin. is

whole have enrollments aren't programs they the time, more it's the as with all our on dependent that as stronger, at less Looking scaled over programs. distributed, better today at outsized Those largest program size, once large more became clear that's back. portfolio individual far a involved few And as same long for a were. large But resilient, we’re run. our

top of for the above this the our list, new see enrollments. programs you believe of remain range that the programs underlying list we've XXX. the can target top trend You enrollments time been We this XXX given end new XXXX. in by in case Each five have numbers the the of to top will

than is enrollment the down. five XX% has in be XXXX average in projected the the for come However, average top lower XXXX. average The to

as quite across the our aren't our new Now, target while largest portfolio, are toward large, of scaling enrollments. our student programs programs range

XXXX by the average to be the than is at actually XX average. X% student new programs the higher top projected enrollments, XXXX Looking in

even So we up in with our the will decline programs. believe go the average that largest

through projected up top you if the for are to calculation, fact, enrollments In X programs XX%. be five exclude the from XX,

target XXX got the programs bunch believe that's student but day. So runway is in strong. Pipeline for new another toward our a still of portfolio DGPs. announcements firmly programs ranges We've scale see continue coming, to of our we for enrollments. for We across those

our turn evolution the attention business. of let's to Okay, the

we report XU, of full announced, complete the expect needs the the services continuum demands our new to the we importance the half Trilogy, segment incredible from bootcamp second the critical The the to happens, will an and new our portfolio that these arsenal XX closes, have that including as and across to Once GetSmarter incredible workforce. It's to partners. and the May. recently Century results we XU, XXst talent offerings of same Oh, student meet short business. technology, bear in and As our complete partner to in of acquisition of products investors Once course credentials of an marketplace. we’ll close bring expect in the to XU XX. transaction existing understand goes

those that doing in course alternative We slightly we've But the revenue, significantly evolving think and we to over to Yes, reason, will lower we’ll stacking of camps for estimate that can bootcamp single this expectations. fundamentally expect as company. from a revenue we on company on are certainly renamed a business, in prospects terms be starting what as past to for we time, one That's higher. reliant think from we'll that it gross margins examples from basis. but from two renamed and long margins slightly our be public businesses Grad considerable levers, would come course years. there gross start alternative segment, But high course and quarter, We're XX% a courses alternative where And range. quality. students a over have revenue that margins achieve We've the short provide options reported credentials. segment. so, the entirely So credential created believe could teens to programs, share We segment is credential the of boot there term a line more to short portion in have high XU a off transformed the revenue upside is short of today.

alternative was been acquisition in revenue success. and up it's GetSmarter a Our quarter XX% in great a first resounding followed move Short credentials year-over-year. our XXXX courses with a transformational first growing XXXX,

more XX,XXX new see potential end, than than XXX. we for courses is up our tremendous we even continuum. courses to short gives That's modularly short And By courses more degrees, all just to more credit, and outcomes. of for certificates, the already which into signing as courses go opportunities. our portfolio, year from types embedding to beginning. expand which taken. all of leads portfolio deploying XX into for been Stacking courses across expected more the courses choice, are students short clients have boot course Our camps

complete technical a Our is Trilogy point. skills business, powered most in acquisition. alternative very our and compete Trilogy critical pending second demand of needed price Students some competitive the credentials fast for so university with the move to at is meeting of both Trilogy in doing growing and modern boot a the workforce need a the jobs. certificate camps

on areas, high fall many of bullish in That coding, course and security boot We’re FinTech. XU powered a The a set subject technical deliver outcomes. the nicely many unique ability including with across its technology in student Boot between single has program. and full market Trilogy. degree UX/UI, camp verticals. to a and camps demand product science, attributes and science Note, data offerings not historically, cyber changes are

right enterprise. and Additionally, mix standpoint, expected encouraging is over lever the that revenue, Expect boot to a XX% into excited we XX% of annual growth excluding courses and able anticipate start. to revenue, XX%. XU, we is XXXX for here into degrees we're Together, we're term channel. would as purchase enterprise recognize that substantial anchor accounting of which part of adjustments more a about our off long of the XXXX Trilogy’s XX% an it if quite From continuum consolidated the growth impact of Trilogy's to financial We on can time. enterprise to channel, full camps. believe the short offerings for to add creates And revenue

Finally, product UNC already volume transaction organic Python to the it our Trilogy program as of MBA differentiate that is XX%. closes. curriculum Since the that up Grad enables its after us UNC offer parts of for will line. announcement, part announced prospect Kenan-Flagler

are We'd our deal headed. where So soon beginning Trilogy. forward with we're Cathy? to chapter things looking like closing this and new

Cathy Graham

our graduate accompanied boot for At XXXX. started off XXXX measures. strong course in which in short segment, growth with XX.X%. have segment, an graduate will business segment. this In year acquisition reporting short existing of be XX% our better of period the Once course renamed the is we short quarter, over Chip. growing be revenue our expected to with business we first revenue was growth camp the by Revenue lost prior revenue program XX.X% our the continued we standalone revenue increase expect last a that exceeded first guidance, came period nicely In quarter. with full close in Trilogy, driven quarter a of business we alternative combine program course to segment a courses now credentials. by million, into equivalents. as year-over-year ahead than Thanks, XXX.X quarter Note by same from the the

related first year increase quarter, in For average quarter, in a revenue higher increase per towards the for of per course X.X% average increase FCE offset the by year-over-year primarily course XX.X% first average driven of short XX.X% decline priced by FCE year-over- a showed showed revenue both by solely per in decline continued FCE. our US consisted was The which per continued enhanced FCE. mix priced be higher programs in lower declines by in a average combination admit of In and revenue the rate FCEs in our increases based course larger credential UK price quarter in revenue periods. FCE FCE growth driven higher reflecting shift alternative business, segments, a between in programs revenue FCE, new first courses. of Growth and to a FCE and launches and X.X%

during widened million, points. quarter our margin as the X.X million, Note that our by focused X.X at and first decrease first related by relative and that graduate quarter program to acquisition. net related offset X.X savings compensation pending loss or the net the expectations net our was experienced XX.X the the increase than in prior adjusted was costs loss a was was revenue. from to to Trilogy Trilogy marketing shifts stock lower by transaction acquisition. million expense expectations, and first After decline adjusted loss projects in but of primarily measures, corresponding than to slowed spend on spend for by X.X% temporary period declined addition to to Relative percentage pushed adjusted and and million by This Looking or of benefited timing to driven year-over-year decision a year-over-year margin, announced were mentioned, margin net higher interest additional increase At the lost net respectively. loss this in income, previously a point forecasted somewhat all off cost year-over-year period. million loss million, loss we percentage X.X unanticipated already X.X adjustments impacted XX.X quarter in net anticipated half

one X.X% and the also income our from addition In expected EBITDA first prior sheet adjustments benefited EBITDA from represented Trilogy X.X than a focused interest pushing to margin or loss the million that EBITDA further point million period. shifts loss loss expenses, spend X.X quarter the adjusted benefited out This ended loss XXX.X in widening million quarters we decline net balance also was Relative adjusted percentage acquisition. project impacted into perspective, in we cash investments. and quarter a $X.X adjusted loss, loss adjusted net net of first over adjusted measure. of later with the expectations, a million, After From EBITDA largely and timing to in certain as revenue. on higher

April. We to receivable XX.X which paid also University balance was which in that partner, related had million million XX.X balances, of one in

after think closing as additional our in we after looking color XXXX, will around full coming as and discussing now I second before providing Trilogy the existing guidance giving how give effect the weeks. acquisition practicable and Now Trilogy to update expect will for expect quarter formally perform we that you year forward, guidance we this to transaction. business, the we year now to are soon close

second the year. through rest discussed Now, the and quarter in of program we the as decline in are beginning enrollments seeing in graduate some detail, Chip expected continuing

revenue in of consolidated be the revenue impact direct is revenue revenue and growth cycle quarter the XXX year-over-year to impact on particularly the softer of of At ranges for revenue now year. will our for rate marketing as be million we enrollment we well this year guidance half periods. future a that our XXXX, our quarter. business Based XXX so year account aware, XXXX business graduate revenue XX.X% expect in XX% Therefore, for targets any recall students between attract you'll of changes the remainder the currently that earnings expectations, XXXX. for and recognized result for the that spend second increasing accumulating in in With over the amounts their of accumulating full on quarter year. enrollment for and enrollment believe we’re XX% line full a these million we period will reduced program margin and and felt for we on approximately our mid-XX% leaving were XXX.X bringing imply these and our we multiple to measures, long million business down midpoints, we the of to could forecasts, expectations, second our to XXXX third year-over-year the regard current program now As increase loss you're graduate what for that growth million XXX and table. We a expect

we knowing know decision. While that what rethink likely we'd today,

small additional measure quarters, the as EBITDA some improvement our XXXX be in target are loss to drive believe our expect margins. should as up year. at deployed you'll will rates. the related our incremental in and There And large low revenue, we In stabilizing because million percentage acquisition view as term scale. of lower longer We getting and still feel expectations graduate corresponding of measured for leaving to expectations. marketing the we for of ability points loss after our the expect unchanged however, the year full driving and hit that due and year margin earnings somewhat a generate to reliably we early the anticipate we delivering servicing improved full related reductions current savings costs quarter, spend second marketing a In spend our net a consistent already lower decrease our net that between the but Note certain and a the in the forecasted margin this in level. may expected million flight decline slight that expected can towards a variable. Beginning admit to revenue forfeiture expense Trilogy, in few our million of loss cost increase to that cost so adjusted largely already forecasts have anticipated the first our program expectations to rate. for and believe primarily by see XX impact between offset largely margin have loss the of now based can that for earnings year-over-year measures, from XX efficiencies per and we digit full can and slightly adjusted return partners expect more the XX.X it second of constructed year. growth, we result bolster consolidated shares, we'll portion single the performance last we university stock at accelerating they business guidance, We lead programs XX.X We and in XXXX, enrollment to expiration projects in from be compensation increase million our give following scale, mostly that in drive primarily

aware that impact or of loss, net transaction adjusted remaining that but excluded However, adjustments loss have any be we from also estimate related included be and earnings not our measures. will costs

the when expect update will Trilogy reflect net between our We XX XX.X loss We and acquisition. quarter million these million million items the second and include million and for adjusted guidance XX.X between for to full of an XX.X year. the we now

pattern year. margins want quarter the earnings the And to quarter and for positive typically to hold EBITDA looking XX.X this improves year, for distribution adjusted We million XX.X of million XX.X second seasonality the the for of across adjusted expect full also the loss I at in our measures second remind In each million and you XXXX. and the of between expect between year. of half an true of we cost and XX.X million loss adjusted fourth EBITDA that

Trilogy ready Now, can and while in now and we expect that haven't include our color we it closed on additional the for for some XXXX. aren't to updates provide acquisition business I what guidance,

that on the a calendar ‘XX, basis. we As we announced for million Trilogy transaction, deliver said, standalone will year when XXX revenue we in expect

acquisition segment boot being margins. to the margins transaction second, believe however, until additionally, May, EBITDA in but impact discrete the high-teens in boot to XX% that magnitude achieve constructed camp steady as And than the a We’ll do both that the state would third, now additional of longer to the businesses and anticipate that impact material XXXX margins additional a term accretive accounting term, as annual In detail Trilogy in our about when expectation we half margins period acquisition. expect EBITDA guidance. in fourth adjustments, impact and around We any earnings accounting XXXX. measure closes of the periods, will expect XXXX be adjustments. applying magnifying our lesser we camp can measures not the the our update long benefit revenue to alternative to and closing. with Even short preliminary consolidate from include second for per and that Assuming the purchase be have adjustment is of course we XX% before and to our we dilutive quarters, before provide extent will the short somewhat after XX% revenue to course the a higher credential purchase between do recognize one-time becoming has to tax well we determined information we the our adjusted generating adjusted can

year, be we the wanted we good in aren't or still for where of place. expected the So while a to exactly remainder we're

billion have it business business steadily we our revenue, an acquisition education, profile. to of a XX% in that ability not We that to to our in billion to And confident even at ability as the universities enhancing We're our path to only probably accelerates but improving to by continue we're in return X a career about growing a expands complete our profitability expect put X.X passes center revenue. year.

path so wrong. always one. right the going have But more Okay, a than straight isn't we

For the us. long run, Chip? I against bet wouldn't

Christopher Paucek

our for the company the course and challenging job. Charting is sector a

We the line, benefit, the deliver societal to the delivery actual numbers bottom we our of through have responsibility through have hit and not business. charity, of dual but the

I've positioning students past been the bit our several thinking with about quite in want We've to community first. the back put street. I a quarters, this always Looking tell

We these have in should It to view have and we that that historically growth I meet won't the feeling based change. prioritizing clear has need much past expectations. were the mirror too to become bit on rear seen learned and admit challenges for more broadly, didn't air CEO. and that, lesson simply the I team my life better some of would call have my the taken been out of balloon. in do the It clients. company public

really needs appropriately, of growth nicely. positioning new forward, Grad business importantly, given more And and levers, clients. growing still our probably now exciting is our have we Moving and the

profitable increasing that powerful to mobility, margins a overall. steering and We one have really and to personally I'm of committed social engine

M&A. I think we've transformed XU with strategic our

to the we're weeks to we're about solidly happy I'm meet couple now. think you of term. I long take your the questions. that that, I'll in excited With prospects. out with be our begin road for next set to the conversation

Operator

[Operator And and Instructions] first our question Company. with Needham the from line Ryan MacDonald comes of

Ryan MacDonald

a starting or then the the funnel can delay kind between getting the slowness bit the mid for selective, update. and more just three of in partners the with the Thanks the new you across change little the more guidance areas cohort? of maybe the updated I unpack guidance, guess contribution

Christopher Paucek

reason, ‘XX. -- of selectivity Well, -- UCDavis we're The validating more going a MBA in put has the a We reason it to them cohort, a we pretty not super expected on then time that each. for the to approval we can't wanted didn't interesting, through fact question, for details pretty go we long significant. obviously strong, we that intimate started and And about be went process sort through it's the sort expect. it originally spent of it's

forecast. the there then say program really then of a out not when that's rate it's and And So often -- related specific. quite things are of details, is we summit long one it's overstating across right on good but program list funnel chunk that -- individual really sort the go a mid that that a of system, couple students a that of lot we're just comes of different it's stuff the

more So and And anything say that I there's it a it. what component caused big effectively to sort of focused more we would of is reset That's a us selectivity. call reason segment. than this on

Ryan MacDonald

follow-up. just a it. quick then Got And

at launch when launches you program launches can cadence of the of of new the large for that May seeing what I I extent and for you April new XXXX, looked about To recently? timeframe. the a, fairly in enrollments trends those can, the the think, sort you're there talk you for sort program a group is think initial

Christopher Paucek

We're getting there in getting and launched. running up terms and of them

I the would the say most that that of that most our there, I Non-US MBA. would say, is the -- the the the is out unknown first that's was nothing UCL launching. So, it's in they're ordinary, -- -- of MBA, one sort

first they're number cohort look in month number now are and at right prospect and one you two If that the that volume. now, UCDavis, in two MBAs UCL

to program the strong. difference launched is forecast willing in The So it's in aren't program exceeding sort UCL reason look and the that that the our UK. between particular we two at very they that first of

because things different be part the center. in in variety front process, of We handle of GDPR. about and how admissions that have program GDPR of terms we there'll a And

Chief We of Trade year Privacy Chief Commission Privacy employee. have a the the Officer is two the former Officer, Federal

we willing got just for candidly, credit And to we're speak, new prospects so started because it's great, and outsized walk but one so, we're and prepped in brand before we not UK. sort of take as yet, sort it run -- of for have GDPR handling that to we the

Beyond that, launching, not fine. seem they're sure, I'm they

that expected So the of had the a it's more multiple would one unfortunately, one. big story -- really we is this we of, be for thought cohorts

Operator

line Sarah you. And Capital. next our Thank Hindlian the from question Macquarie comes of with

Sarah Hindlian

impacting Thank what's you, on and the Grad for business. honesty Cathy, the and Chip

my that in would takes called around funnel, I demand, you you've are as in by think terms I outlook are strong you, Trilogy’s on still we you question Cathy. for of really out economics model. other I Cathy, initial -- seeing think for if top the consistent that could My in pipeline? that's mean, growth side and marketing the some pressure And for the given pretty that, walk question I student And ‘XX. me deceleration the be and was about appreciated. conversion hoping contract at second first deals Chip. the you, any then is is helpful, talk the the potential could of puts Chip, of of through it

Christopher Paucek

So, you. Sarah, thank

way. the of deliver all, happening for just something clients? opposite this It's satisfies deals can't think I does the really hard needs? sort forecast that new our versus driving particular no we Do So that too new really, the first pushing well growth would interestingly, their relation our And in direct street. to what's really we of say, and clients, align We with for of forecast. signing us reset our deals a on has deliver can

not So, they're really related.

sea of be to everyone anything new always I like cheaper. terms economics, anybody clear, way being seen programs, at negotiation negotiated. of And not new no to they're for negotiating news about and rates in negotiation. therefore, programs how whatever we’ve new mean, all in buying, course, everyone is any That's you're not would change there sort the something but thinking are. the of And what In terms we're of in like really.

in still for new our we're ranges target So well signings.

Cathy Graham

so haven't And say what But announcement kind of much out, looked this that pulling we transaction is, we've we are I want that that limited reconfirmed Trilogy, that and purchase for will their say their revenue would I guess are obviously, think Sarah, of working Trilogy accounting credit at business yet. we gave forecast. of that point. lot standalone be to their closed at things adjustments initiatives those all what is, to pretty would a an I can have to they are we that on. of about what the But in into taking what some baked with be. obviously And that that even they're regard know to on they courses businesses We that at will today based the is certainly And forecast recognize, don't and think running. the they and do kinds of of get we I we management believe we what have, we've to the the have will not

Operator

And our the comes of next line from question Brett with Knoblauch Berenberg.

Brett Knoblauch

programs just this and more guess I you're intake. selectivity I was could to why they're reduce in and in choosing with their the at particular dig little expensive you if deeper seeing a wondering

Christopher Paucek

expense their seen do we is. selectivity be what the to wide, the nothing irrespective has really Brad, program. have system the So of level clear, happening of it To with price

we it ahead So get we related those now trend. at of call are point We're just are because points. this needed where it and we felt a seeing not like to

people we're had was the kind this. going everything felt moved ahead this we of it. we've And general, said some we the obviously, historically a get surprising us to be is really Well, where in to quarters it a Now, something And, say, like, tell be just that certain of over positive. In things everything that period, we've to needed period around has now to it sort seems a where of well, quarter, against we lot. time like went tends

we where So that's are.

Brett Knoblauch

problems year Okay, those and are you know mirror? UNC any rearview behind this in but the there being the just had then is problems additional of you mostly and on USC programs, that I -- most or touch you,

Christopher Paucek

But, Yeah, candidly, not I two programs those the that critical. say, we're managing here. are would the reason relationships are

expectations rate and just And about tell we the a about forecast. we're now. it's was We're of And When when you our system Honestly, outstanding. across the it. a work definitively felt doing we point positive, seeing predictable tell part program. change of Now, my our QX huge USC admit they to a part Interestingly, forward. social a it’s going remember our the clearly, -- is But were it. not, what model. this pretty you was that's like, got that's we've

we've data up in rate. year the able are Interestingly, admit what enough So got softness and we due work social think call feel we to this of UFC rest in result for actually period. the to be segment MBA the will in the like UNC to

giving they're this So new the they're set of not that are related part of not -- expectations. to reason we

Operator

from question the next with line our Davidson. comes of Jaluria And DA Rishi

Unidentified Analyst

guys, this on is taking Hannah my for Hi, Rishi, thank you question. for

factor you understand was sure on are second correctly, I submitting could if just rate is growth. if applications. impacting how off, at I this not expand wondering which applicants the you mentioned, I'm First the

just that? walk me can you through So

Christopher Paucek

and variety So activity and a are softened amount people we has really application we're reasons. programmatic the we a there's application tremendous on of of getting through into have that long that people And top the funnel, for a take and deep list pretty us.

the it reviewed prior therefore, people to actual was in forecast. that Is percentage their application our So submitting lower of helpful? be is than

Unidentified Analyst

Thank is on you you. that international quarter. was the saw could information provide wondering Yes, then, helpful. I you if noteworthy? in performance And Anything or

Christopher Paucek

On international performance?

Unidentified Analyst

Yes.

Christopher Paucek

Well, on new. all the side, very it's Grad

just that on like they're have moderate We're MBA about literally And then two So we is but MBA it. I really tech UCL they're we excited brand of we the marketing first Europe. in -- think new. have have days both, our

us MBA significant UCL any too the give color earlier, mentioned positive, looks on very but it's for I early really to As it.

We lot the gearing a yet. not but in just put international opportunities, are on board to up

Operator

Analysis. And our Greendale comes from next Corey question First with the line of

Corey Greendale

couple So questions. of a

of lot where that But or assuming? you selectivity, things you see as selectivity in -- in guidance in pretty do And On you at so sort a what impact the a of trend? stable the trend good now is are this sort are it's you of are know or assuming are increases that. I feeling can you

Christopher Paucek

tell to that that we've we feel to the something. come and our of it's that make where change a solid. takes feel sort given obviously out about positive We But balloon, that really stands partners it of -- the we don't of the you like reset that -- Corey I'm good takes is doesn't this. can't we somebody had with system, up candidly a So control out plan a by very where prop air set it, we little I we

Corey Greendale

on based the today, notional doing a are says maturity And you of model model per if that the you are business, we comfortable XXX year? that at where XXX to still look are the programs with

Christopher Paucek

to top Yeah. to our got best come program hit size. on analysis We some not that interesting that XXX in of have to the of it's a big, thing. maximum probably its It's programs was the clear level, some every down. really whole thought overall, XXX, that the And part drive the that like, clear really ones of our and interest

same if five, are going it's really the next time, the XX at the exclude Now top that you also clear great.

still, the end with that's to up don't big feel we within feel come feel reason we opportunity did clear strong of like But the the that that this We very the that down. set. clarity you ranges. we good about So, like, it's sort not well ones average, have believe XXX about we any our

IPO our of at XX% So, once one in consider we revenue. it, about that felt should two were like call again XXXX, school programs at

are, with us managing been silver candidly, lining think not in there's, and sustain like I concentration. it But overall, leaders here are had And paint time feel are of business we a risky, business to to this we to able single of XX, the the be kind lot we that do I makes segment have to a down, risky less extreme for and recognize where I makes period actually at estimates. that think solidly has it. at therefore, billion, -- bringing we less you program, any the when X.X which we've this the guy So, less any reliant a lot the on that single program, interestingly a down think whims during about of customer the just growth

Operator

with Jeff Meuler our And Baird. next the of comes line question from

Jeff Meuler

what a eroding, the the you of top not as more I coming at lead they're focused only cost of confidence quality guess, of of per the funnel done. that on but quality the gives the not I'm Chip, funnel historically they’ve top as students into the prospect that the good is of

Christopher Paucek

of within really into getting not spend but have have. solid data on of based a good and prospect lower. line data a the is because just reasons call, to hard why to pretty it's both a we we high. bit as hit is those quality didn't points of is generation cost say pretty that's we lot for call. we both. It's places a data only in the on hard that up oddly, have of support this GPA the make quality, at lot one overall And data a reasonable it's We which pretty a point probably So, in time And, ton of the totally and

the that very students and historically in further, have marginal well the programs. even performed argue could You

our I've therefore, not story they let in, students running is and So between it us learned shouldn't a and it at particular time this you're of not maybe more performing. doesn't the -- difficult. metric this school, calls a on that the long It's I there. with company been hitting right But, dynamic not long And been the just a time, have this it's ago, the times so for makes create university.

is overall. it times. in category tell also very have hard admit clear. and of will it with those overtime Jeff, better deal rates much our something this will so, makes our also segment about you, dealing Anybody to that have And it I ed certificates it's at tend makes do we to higher it professional like

open diversifying more this and very bit not bit of you'll interest clients. with even had a funnel pretty are little GetSmarter, which those see are just the substantial on business the a professional we we've certificates Trilogy So, a different, of obviously our Those where the metric. from quite in form, up but and

So that. we like

Jeff Meuler

pulling you trends forward, spend you're a then on then enrollment a it's perspective, going new top of marketing accumulation the then from based softening. be think the back And it sounds cycle stated, that, And model are upon just like I on Okay. expansion revenue long going that, commentary. margin to as given

some multi-year you can table, to targets. curious you’re expecting the if You I'm us but much reset lower? understand off just help are gave previously how growth assuming them those

Christopher Paucek

are were solidly. an expectations dealing And about the point, feel number Jeff, part, we of kind reaction term like in Well, long segment the is acquisition. reset with gave we we a do reset them reality at worried basis fact the on a at we we've And this to because XX. ago, long we've that

have segment cadence. And not can cadence, with happen. see own to point, You estimates is can basis, believe But you guidance you right as on will giving believe a that the we at this year what your obviously out the call.

we to this like in feel reset did do we about. Now, we a clear, very that way be feel solid

Jeff Meuler

And XXXX the XXXX. applicable that with anything be resetting to beyond saying the recalibration, you're XX, shouldn't that's inferring that only correct? We

Christopher Paucek

Sorry, say that again.

Jeff Meuler

on Yeah, the growth XXXX. comment XXXX ongoing of a only growth that's recalibration, -- rate or rate, the a an correct? Not XX% recalibration

Christopher Paucek

for comment what our a It in years. only will factor think cadence is out will a And is clear, That happen the XXXX. not a in launch to is for recalibration we be the future.

Operator

line from of Schwartz question next our the comes Brian with And Oppenheimer.

Brian Schwartz

Chip, following of that expectation? being a last about of vision foreseeable topic plus still here and as you've XX% your the talked always Kind future, grower is kind business question, on for up the of the the

Christopher Paucek

mean, we Yeah, give I guidance XX%. of did consolidated

So we like that's are. feel we where still

just of them that may commentary, Brian, is short is, lot understand learning. of and of different And of selectivity overnight, feel heard and about price became focus enterprise think, You pretty because improves future credentials consolidated when ed, really and a We the in point to lifelong think alternative and we feel we are -- that our think substantially critical future term And opportunities. segment had the investor higher segment. meaningful it haven't there's pretty much we growth to to long very on a it. lever people kind leader can like just like had obviously not that do as a courses, we -- we we you market we the what labeled

segment. for that's think on So you feel happen that a like that Cathy of the It a some look profitability really segment should we be what at ignored. And diversified board, XU not reason that gave color will is nicely. we in the all part across

than segment, this the most space. off most of it Grad same is people the our growth people in higher segment Now, time, our at that grown base at in still year XX

but we term right for it's and give feel about bullish of prospects this to grad we alternative reset, on long credentials. So, the very think sides, company both do sort the

Brian Schwartz

the company's kind going reset the having so, how up just throughout is to forward Chip, integrate year, for one through the I'm the going here Can your throughout you here the give of Trilogy, closing to kind to going manage? without acquisition be in year, quarters. be able next are wall several talking and then Can you how between sorry. by And about having that the of to back time, you the is other. you're largest both or be same handle you're the which -- far against the of confidence history. you're today, getting wall to distracted here you'll At on things us moving Clearly, those the talk

Christopher Paucek

everything the selling broader reasonable I will bring our into XU. that kind talking about actually it, droids accused want acquisition across for both of, cross about And move team, about standing next plans, doing still these this to believe talking along. our But Brian, of would non-trivial. growth looks able really grad overall, XU you story to that together. and we up what company, you It’s the while get transformative not business. are what wall. impressive. didn't company, the partners, as company the importantly, the be the this about pretty start like for damn how the we're reason reality the say pretty be is in The we a give and when and into I is want spend this the integrate is our we call, our else. year, didn't we consolidated pretty will the for larger excited next more knew for for growth a imminent, really into and clients agenda to to We which of what the the balance the we about it's fantastic clients is -- Because of part color is, We team delivering setting about call not growth about It's much by at the back close the Trilogy the time means and over be opportunities looking is too that Trilogy more much because broader looking you're we is year, It's about aren't against the a all this opposite. story opportunity.

But shy wall. It the So, to get, that of Trilogy. our against from integrate we up the how achievable, want away go business. we It backs the interestingly, Brian, exactly grad reasonable totally do just we us have to think is know allows growth doesn't -- didn't that to I sort it's while put it's opposite.

Brian Schwartz

line on And then sheet. quick a Cathy, you was questions two just if ask balance here just I could the One item.

us wondering am balance at of just was. clarification, I look the an you And approximation help with right just I of a use that what I the second like can Just is, the if you cash hadn't closes. it and the after of deal balance on was before will the all question seen to what assets. sheet was kind the curious think Trilogy then debt Thanks.

Cathy Graham

Okay.

lease of the assets are accounting. around So use right

the we first standard So the adopt had to new lease in quarter.

So are your Brian, can me that's what again? those second give related you to. question

Brian Schwartz

balance forecast sheet. it a our we was just Yeah, help little out as

So deal and closes. Trilogy the approximation will the what look like after had the the of idea any cash debt balance the sheet balance if you on

Cathy Graham

kind tell to we be forward point. at to that will following will the We're not But you that we that forecast cash company acquisition funded, fully putting this get of is what I self-sustaining. do flow, believe the

Operator

from with of Jaffray. comes Appert question line next our And Peter the Piper

Peter Appert

and to would margin if the protect I've the correct things growth, context got do in you one enrollment spend. trim slower you Cathy, I this think be the wrong to me that said of please marketing of

it revenue question a the in And of slippery terms rate. be a bit little sustainable of like growth so the could is, slope that overall seems

maybe can your around on expand you thinking that? So

Christopher Paucek

are there Chip, a about just going of you aren't certain a them, take market not schools accept you you don't students is Like think don't would somebody at Peter, to them? categories clear when cleanly. going if So So that them. school market should it's level, GPA I that then to that this is to that say,

So that's there. save you how money the

Peter Appert

Does focus the under And growth then if perhaps any prioritize too terms And of trying profitability wondering it over a I'm of suggest to shift you much. drive is to your corollary Chip, maybe on Okay. said, metrics emphasis profitability. here you years? the next terms in would that couple in of

Christopher Paucek

Yes, it does.

towards overall we think reason business we this is super I the useful. over margins line gave that committed So, Long the steering year, over point, about that interesting way that think at term, Viva runs is, personally to this is thinking the the but I'm business. about the time, their not to and that time certainly right way think

Operator

of question with our next And line comes Credit Zelnick the Suisse. from Brad

Brad Zelnick

I'm the the you up much students just transparency so and to to not the side more that of shift of really universities, square trying graduate actually getting this or of in I'm across that, appreciate leadership offerings, better comments may you've a and campus made, it happening applicant broader funnel? the well some their the even the business. why universities, then driving me of but to as desire in the be simply is is the some as the Cathy, understand greater Thank what's trying it of on for to for top quality, fitting there Excellent. with rethinking programs example, holistically, or of selectivity, And nothing sort? with protect what's Chip, board. these just certain as online in a And

Christopher Paucek

appreciate Brad, lot mean, of now. have I the -- I question. partners we unfortunately a Overall, Yeah,

really for for had a of entirely selectivity other gradually believe it's model the through being So rate we to better Clearly we admit one a easier campus we're possible us. tricky end become then We across that and And gets that where have in predictable call, goes way situation about our the things their related up it's go it we just is make on that's very enough in ahead in important was to sort impact how of to it will have in of like gotten this to long felt particularly of we increase. this that call but we it, it -- to when of larger, schools and and list us it, and get reset this how coming data, notable debating, itself. enough seeing. terms general. it when applicants don't as seen we've you something this, And, definitely were of handle does That's in programs year.

had, should number many the You definitely know venture is going back was I to back historically, meeting, had big a predict. It pretty our this a to particular hardest has where always days. board been, this have And or discussion, because time. one change to any sort we by cohort not a we of and to stand anymore. or three the was It's partners at devastating four them.

to have that ed of data one the possible. table We higher quantitative XU It's is, has that, questions around sort qualitative. the of for has a of overall impacted tell certainly here, scandals, things? now lot but to time Now, some the don't with right the tenure entirely in what's regard of happening you

entirely standing in is had are that by us some for candid, to to that's about. So, a changes. a is happened And over there some my partners we've happened Once more little the us. it history. against be often we this worked There are That's leadership to schools. be has us. what have really than again, really bit definitively against where something has change, of here our out been that worked possible. listening, leadership period worked We And

hit -- that we feel just best I growth very as we've can. possible mentioned, of And, feel have like deal and, do kind the leveled to place it with we forward at it, roll we a it drive we've I comfortable. So,

Brad Zelnick

quick as we as to around And a and this? what many wrap out you're contextualize to our follow being are up, try Is programs there. it maybe actually is selective? it us way any heads majority, a sense, how seeing give the more Can just XX%, you

Christopher Paucek

really I you years, tricky. we're I the is it's into my isolated tell businesses, that that say, but way an this about programs details I couple about. think little over is clients’ hard the a I’ve learned will I would think probably getting of not talking

So, this. was did that brought enough it we

of somewhat itself self-explanatory. and So that in be might

Operator

comes from And our Markets. the line next question of BMO Jeff with Silber Capital

Henry Chien

calling Chien Henry Jeff. It’s for

quick a Just one.

growth a Just does this of whether temporary not down on lot is, how around worse XXXX not? in questioning is and I or just guidance or get about, a or stable? just quick it's the follow that XXXX blip step in it up guess, thinking slowing a for Or or you’re for just XXXX for looking that anything, ’XX, does

Christopher Paucek

we're that And do what very comfortable. you to just it in think longer said will to Yeah, in have increase terms place that do the we've we of a I cadence in term. like feel reiterate, factor

estimates to that for we're here. not we we But, So you can today color feel at we're place in trying we -- you give going that enough to feel how from understand up this like to we've build point, XXXX. a where give set it

Operator

for today's turn Ladies and Chip would like the I CEO Co-Founder, closing to session. concludes Paucek, remarks. this you. gentlemen, to over back call now and Q&A any Thank

Christopher Paucek

Relations, see into We'll been to Ken out the right. We'll road, the on Ken. quick Integrated VP Master Congratulations, wanted UFC Goff to to we talk All road. of of Design. everyone who our accepted offer has Investor the everybody on congratulations out

Operator

program conference. gentlemen, a does you all conclude disconnect. day. and participating and wonderful thank you have Everyone, today's in Ladies may This for today's

2U (TWOUQ) 7 May 192019 Q1 Earnings call transcript