TWOU - Earnings call transcript Q4 2020

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

Operator

Ladies and gentlemen, thank you for standing by and welcome to the 2U’s 4Q 2020 Earnings Report Call. At this time all participants are in a listen-only mode. [Operator Instructions] I’d now turn the conference over to Mr. Ken Goff, SVP of Investor Relations. Thank you. sir. ahead, go Please

Ken Goff

XU. Good CFO. fourth and call. quarter Vice and Relations Goff, operator. our Chip full and Co-Founder I’m to year Senior CEO at Investor of and XXXX Lalljie President joined afternoon you, by welcome Paucek, our everyone Paul XU’s Ken I’m Thank earnings conference

Following Chip we remarks, prepared will take and Paul’s questions.

no Please our ended quarterly or the analysis as on and assumptions plans documents for forth release such the XXXX for materially those year described this forward-looking to most differ earnings cause simultaneous risks, Our Investor from new earnings webcast operating results. call actual as recent may slide educational uncertainties forward-looking statements a statements. risk our and update refer include XX, we statements webcast this presentation for XX set and to factors and The the that in pandemic, including Report this in and be the and replay Relations website Annual Form financial on days. student duty will on press of Exchange with Securities our These of press COVID-XX demand investor.XU.com assumptions. reflect available risks, report university made Statements XX-K Any today and the XX-Q of regarding statements Form as and release the on has offerings, other made on our this and we December filed to A of have our Commission, continued call. next information call subject uncertainties well and matters. impact call results made to are them.

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

with that, website. disclosures Chip. and comparable including regarding it Investor our earnings to hand these GAAP results me non-GAAP the find our reconciliations With press release let measures, in of on can additional over You page Relations

Chip Paucek

Thanks we my Through fellow the the their never quality XXXX and burden all with beginning for their complexities to team revenue a we important built all performance Drive for That impact. and improvements, business. of on should that all, million. positive business as sustainable. chapter the of margin EBITDA work, at and humor reflected partners, doubted and the is we year be free societal We student and demonstrate toward and was most for us rose again Ken. year you We in across with first of strength well. presented XXXX to four all staying improve other. understand disruptor positive at position another world. XU closed truly in measures strong We the hyper I of it is us focused the call momentum hard for efficiency while revenue growth, key drive operational financial of on expectations and the by We it each of our by and resilience, set all around a a behalf unprecedented the to these and that cash. and outperformed priorities on rest the is challenge enter as grew delivered outcomes of with great We importantly to proof to deliver XX% this company. results want thanking global coming in empathy year. strength students and start XU’s inspiring again stronger better for XXXX the and deliver our we $XX.X clearly made has the operational profitability achieved and and million out financial $XXX

I think each more. many that we quarter, to XXXX add points with it’s provide compelling proof passing clear expect and results

this Paul. You’ll on from more hear

turn and challenges in about higher Earlier seeing talk to facing education. So heard changes I’ll what the now we’re marketplace. this structural you the year, me

is a clear doorstep that be pandemic, conversations transformation common emerging drive now As we’ve with with at imperative. in COVID. and increase An our institutional the existing be institutions and Universities before conversations. the from We that of here for part imperative three digital partners. understand prospective the even seen of their clear strategies grapples a interconnected to their and stay start this Since themes was must broader online pipeline future. to hear

working their careers non-traditional better for non-degree serving lives. looking both are focus degree a and First, and adult learners who across on offerings

changes identify pressure demand happening are business already the career aligning jobs facing and constrains. inescapable to and continue under will market creating themes is colleges third, -- higher in landscape same three and and sustainable these to education and to from pathways. institutions shape streams growing the in in investment long and at demands time Second, focused COVID do We universities budgetary on new upskilling reskilling the a And control. job revenue structural after better government that reflect believe

and see playing our college unmatched has XXX in non-traditional degree of building undergraduate Morehouse iconic legacy Thomas HBCU’s foundational excellence black digital men out You Morehouse some with that them vision partnership offerings represent educating recent College, one the of new a of a and our most year with with vision. new transformation better learners David of already announcements. can adult Take for the online blocks of integrity on in respected the President and focus our character. an serving clear

lives But education doesn’t to to Keep which now in undergrad is positively academically for signed and I mission our know, of announcing It in black don’t comes with impact than Morehouse London President than eye when credits. Morehouse higher is bureau completion degree he’s for will? meaning record the graduate to census will even the Three what of School the to in program Morehouse said of right. we’ve past University, months, and Today of undergrad, according college been back enter over for more If great row neither now are the men an the an million more affordable As took College eliminating end transforming the the a of six time never X market us XU already a to the times undergraduate important scale” US that the than the decade The our with story flexible, a has offerings. more in track out market some nor and “There partnership with there black week XU. the our larger beginning institution online XX unrivaled partnership Economics last the from men. offer and rigorous of give partners. it powered market an Morehouse. Simmons Thomas

more digital As their transformation and part universities of more move embrace online strategies. to as

what schools significant and the school. is face and are to be Getting deciding and financial tight And these they can constrained wrong to reputational challenges result by programs it One will launch. limited decisions. high increasingly investment a of dollars in risk budgets marketplace the can degree in non-degree online where crowded stakes

report, As programs. cost bets bad failing the reflected Burning the in Glass recent of

more right capabilities an is our proprietary investment we well underappreciated important to capital to that now than helps set unmatched beyond data programs about bring is make launch One informed of the which partners ever. the the table just choices

COVID of employed on of during for to over only and to rapidly demand societal toll I about companies to order before a Even devastating. to their the alternative the rapidly. particularly These and to demand it Only not economic who Even credentials. COVID also were offerings focus based workers and turning The education Paul. before these Finally want pandemic growing critical kinds have few to remain impressive growth furthering in spend credentials skill digital our e-commerce needs. non-degree post-secondary pivot but talking communities has was black embrace segments. minutes are been delivering meeting brown women able for seen alternative survive. career

learn workers stay to new relevant. need to these So skills also

as focused this. leadership short disruptive built portfolio functional technologies growing purpose for Our as and emerging on and is courses skills well

with Institute of credentials the the couldn’t to thrilled Dean David example team We more course for with IMD. and announced up short from Switzerland This alternative strength partnership is latest and business. or reach in Bach, newest Our is Management be Programs IMD growing the earlier week. our this of international and Development of Innovation

eight marketing And our ranked fintech, world’s unparalleled boot top total boot digital project technology reach solve and other of in data timely will bullet students the solving the schools management. silver enrolled support an population. XX,XXX to believe states portfolio we today XXXX courses program. scale subjects; tech universities than career the of different in camps offerings of It’s most for of XX alone, respected no camps short offer coding, we and relevant societies boot power US camps covering But skills chain supply and and gap. XX universities different subjects. clear XU there’s One helping this management, business important more in than role at now based and play in XU network across and product and cybersecurity, UX/UI, we boot more global XX% our In in to skills cybersecurity, workforce powered camps relevant growing analytics,

an providing also services at We’re career industry scale. leading comprehensive

XX,XXX job related months, events seeking XXX workforce supporting XX our job engagement team students. hosted past the has Over more spend than and hours

of $X innovative students launch has over It’s to XX,XXX more over referrals year. that at reached just and provided scale. the foster free skills more scholarship also of that. from offerings June already network isn’t program which X,XXX career gap greater just do opportunity We powering accessible equality our camps to workforce finding job it’s Whether affordable But its than our boot growing creating since employers. and in quality and helping programs X,XXX close we’re about last million students services of also our about ways

partnership announced Netflix breaking Fund. our Washington or ground Access Scholarship with more Norfolk local Maryland and X Our organization A State our collaboration public Education University. Prince recently George workforce University private George’s with Employ and

to and partnership believe communities. kind across Americans the these demand work. between also communities. smart down pathways and creating policy and historical we both and and higher represent need education, business get and into back of paying, kinds rural scalable are women They breaking We’re government well urban for barriers of upskilling to in reskilling sustainable of millions minority solutions jobs We

forward look we to for basis with expansion education as initiatives. new funding to Congress a on the Biden well and higher and as Governors these Administration other of new bipartisan support So working

second about we CFO, as time result the at But the face of realistic off same of on better Paul of deeply Lalljie. XU ongoing a to as the education COVID. have kick impact both to we chose who XXXX, forward future. by all positive the As fine threats about posted a continue over optimistic With a step that, can path people I’m month the difficulties the on to lives their

Paul Lalljie

good and Chip Thanks afternoon, everyone.

and EBITDA we a As you’ve tapping press solid a record return release positive investing start while update an with outlook provide I’ll for a I’d both of on to XXXX. our seen with and for under growth. our year like off sustainable to of the quarter the all Today for conclude revenue year. our Then reported our from sheet discussion performance quarter balance fourth

perspective an from typically performance growth Segment driven enrolled grew improved grew position Credential this million the curriculum includes also to growth increase demand our improved To in offerings graduate. enrollment programs. new our to million learners. in or XX% in totaled $XXX.X future and by at Last Full for XX%. represents Total will approximately came Equivalent of for the this we performance. million our $XXX.X more as this of marketing representing the in Degree or on career due students their Revenue along deliver new Course while to that into XXXX, our reskilling in and and processes take example, enrolled upskilling strong graduate undergraduate the was million XX%. the million $XXX to students driven year, two Segment drive put revenue over efficiency. revenue Degree mature growth students growth for continuum than contributed new $XX.X It’s year meet These sustainable This and Now of Growth Segment and programs increase and invested The courses. in students while the behalf FCE from million us by organic up platform changing complete in XX,XXX. launches XX%. course rates. Revenue future. FCEs year in $XXX.X totaled years student we growth $XX.X which structural was of growth Alternative a delivered to changes In the in of an our segment for revenue new to our On quarter. XX% of Revenue totaled XX% needs higher of Trilogy performance totaled partners, ago. accelerated XX% refined our basis retention turning XX,XXX this XXXX. short This XX%. XXXX

showing tend a Now due quarter expenses. in substantial point growth. decline This On the let’s to compares revenue the and growth when year-over-year reduce of cost to growth seasonally sales. marketing Operating basis spend take sales an and marketing fourth leverage we a expense holiday X% sequential a it’s look XX% sequential basis and to $XXX.X of at million, lower less XX% one quarter revenue expenses to spend. In the for marketing expense our particular, and On totaled relative in the grew increase decreased season year efficient. XX%. from a last operating percentage quarter for

year For a full growth decreased points expense million of XXXX. operating in sales XX% $XXX.X nine of percent and the Marketing revenue was XXXX. versus as

year While compared Net for loss EBITDA a an puts there are million in adjusted the growth $XX.X million $XX.X expense. the prior driven fourth $XX.X of On and $XX.X number quarter EBITDA and to full takes totaled basis of scaling Adjusted and and by infrastructure XXXX. marketing year revenue the $XX.X this marketing more from lower interest million demonstrates direct efficient overall totaled million. quarter increase spend. totaled million of

a integrated significantly from strength goals over and going and Degree will nine offerings. XX% for by invested that infrastructure profitability confident scaling profitability. exceeded mature marketing support points margin XXXX in negative forward. main to strong the in growth of the as the expansion last improved our revenue in The we’re programs seven EBITDA and One We year, Segment the was of margin it and XX% reach year point to new our Trilogy Credential we was of margin XXXX Segment improvement Alternative segment efficiency. relevant launch driven market profitability for

sheet. we the a million the $XX.X benefit the XX-month a million, with increase balance This cash basis in year from improvement flow the partially $XX.X by cash Now quarter of $X.X significant an and million XXXX. of improvement flow primarily adjusted $XX was million was in benefits million $X.X top Improving progress priority a EBITDA capital leverage third capital discussion of We for million million balance million, expenditures. driven of million, flow capital. free working capital flow cash seasonal compared to were of usage a the a On a quarter. a is from net by and cash made a the by net for increase EBITDA offset in XXXX $XX.X $XX management throughout adjusted improvement in cash and $X working These September decrease The was in driven ended in $XXX.X typical operating quarter. increase with expenditures.

We But a line. expected worth XXXX. that straight expect noting not continued to improvement in be it’s cash this is flow in

we deferred quarter in For and to of receivables million notes in outstanding end we seasonal Off of $XX.X $XXX.X million of accrued had from is example, fourth principally This the capital. and is increase convertible XXXX. offset expenses net the receivables a the debt up our revenue. expense typical note, year, balance accounts increase accounts $XX.X in end the accounts of current. million see payable $XX.X April by first in a and receivables long-term At related quarter, last XX% should million Accounts of $XX this million working year. increase was in

on XXXX our Now guidance. for thoughts some

been three seeing. Over we the strong quarters, repeatedly discussed demand the we’ve have past

see and to our the students university our clients. continuing across strength enterprise our partners, We’re

in past As you’ve slowly few degrees have stability particularly our growth older quarters, our programs seen up in been new undergraduate. in our in driven by launches the built momentum and

for in more good degree the student We because typically signs stay program program. years. the when in also have visibility segment two They a than up

fact need Our and well duration, reskilling shorter up. upskilling opportunities. will believe camps offerings we good sustainable offering, revenue for growth visibility near rate the as give that faster have comes pick to much launch relevant us new term to short And course of We drive for that the continue their a relevant in our content boot as growing confidence growth. and and from and these market ability our offerings

and our We made and expect we margins business investment balance to growth, sustainable we ROIC. a operate the progress in basis. to to XXXX Making will be portfolio continue the in positions

for from the We to of revenue expect XXXX $XXX growth $XXX at to range million midpoint. XX% million

who of to of X% year-over-year XXXX of very and substantial we reported revenue more in at anyone is EBITDA does than to range will a midpoints of growth half for half XXXX the the show Adjusted comparisons and million, strong the the As the first adjusted from you’ve for $XX the seen math, second. in revenue EBITDA $XX margin expected million second revenue.

In we and XX capital be about outstanding weighted shares. average expect to approximately million expenditures million $XX shares be to addition,

to one on Before I to XXXX. moving the give piece of conclusion, wanted context last

With the goal shareholders timely our with communications business. and about providing informative of

no our business were. representative We’re providing new longer they programs enrollment. longer are cohort as metrics the margins, no once of Those as top by

revenue EBITDA We too know, substantially these and EBITDA offerings. generated first and of positive that in than consolidated and operate that portfolio you expect margins metrics. XXXX Credentials Segment we continue. Degree in our we business to entire our accounts double-digit we XXXX Today, adjusted continue. business Alternative expect generate the Segment The As to the third since for to provided changed more of has our optimize

improved has examples and of international some graduate, what over XXXX. by In be ability We call we program are to strong. short our in flow. progress with our while momentum Today how free undergraduate reflected used bottom to as new financial have give including The demonstrates scale cash programs liquidity to We position. undergraduate continues DGP sign unlevered line successfully. revenue much largest and launched towards and our and make strong program XXXX than alternative to cash improved offering. programs a measured our LSE larger positive conclusion, We XXXX progress also credentials cash domestic XX% and growing we over This become have EBITDA business the enrollment flow we performance you changed. in To flow our is expect with continued to guidance adjusted exited XXX momentum free EBITDA and our the that courses even and significantly. in free

We to have to turn the profitable the sustainable session. investments the operator make financial attractive continue to in to With call flexibility that, over question-and-answer I’d for the growth. Operator? like

Operator

Instructions] first Jeff our [Operator Meuler and from question Baird. with comes

Jeff Meuler

curious are first old as any your program the not ask methodology launches much but margins fewer being is As what that? the of about are just timers margin in with cohort by being is stable. Obviously roughly scaled overly two how perspective it, on driven three one the of to concerning years XXXX to you’re just that Like wanted improvement there profitability your change. changing

Paul Lalljie

Paul here. is This

efficiency me that. the marketing managed or start think anything we here. probably I spend. guided business things it things are like differently. like We Let spend spend we is we of and that out on across whether by with investments When think ROIC, data the objective this very portfolio one like Look the of

at portfolio margin to management cohort time basis. that of programs that that cohort purpose. when very methodology, portfolio then At a on later. defeats margin profile we certain launching in type comprehensive meant very, focused get applicable overall the that a same would margin Given therefore managing the were was looking It

XXXX we the year-over-year in substantiating segment the say based you’ve margins somewhat XXX consolidated Today to points time, business what delivering as $XX are that for more were to would XXXX. basis the seen, the a great I margin continue. on of we profile have and basis time. the trying Segment a XX improved from at million we’ve point than And So business and on million is to of same Degree that we project $XX.X double-digit here we in at plus margins expect midpoint

really two of two, mean? like launched all much about all programs. the So a what the that recent for numbers all and lower If If we a next we ways we about the in or ways have we one, seen expecting does better found Studio talked the basis in look better and were than cohort I look the at at the that that it factors. other that actual years cheaper. you’re would and cohort, And XXXX, number Number But has think see the past better targets Analysts we cheaper long-term various we XXX margins performed that we found contributing in to of is points launching one cohort most at this that we we programs and last launching are things interested is we cohort. Box our number that than the year programs better with in past mature Day there in year. provided

the we can that color is is have as indicator believe we top that. Where Chip, that consolidated line you’d I cash don’t want analysis the and What is focus So the that business of not the an we focus the XXXX. growth there’s do the provide to cohort and The the on anything relevant and essentially adjusted of and of trajectory add it know flow on is profile EBITDA numbers context overall for well health. says, margin. overall to the for we the margin if on

Chip Paucek

the them, they good say. and whole. look fellow old right I give they to guess transformed Jeff three business wanted aren’t investors you Paul’s the to years last completely helpful timer. in I we’ve and in as need the would judge to I the and business understanding on a But

Jeff Meuler

looks whole the good. and enough Fair

more of of and an be if curious some program outsized guessing enrollment. having profitability cost view Just I’m the ramping FCE. to and you per particularly revenue expected comments additional the its any commentary largest But that’s driven Segment FCE mix the potential LSE the programs? by per impact, how revenue maybe Degree lower on any is on

Paul Lalljie

we We of probably to LSE we growth to and the Chip a Jeff for Simmons. main of the chime growth we that profile spend in. same get program. it into of the view the profile types the graduate And of the both the steady ROIC the and these right. factor marketing the are in again can use Grad same of off think in analysis will if that it. contributor things know think well, component undergraduate FCE the we of couple as I’ll program When ROIC but think key it undergraduate Segment When in margin. we believe the undergraduate, programs. benchmark long-term I So there kick of is duration is you mean we state and overall very the matters, marketing spend for of that

You cheaper, time faster We’ve a and longer for go than programs programs. way launch the different a cost the the factor, a and those obviously are ways graduate of student. that of we’ll also – are program period and better, is do the They then, through. for we’ll managed then acquire this of continuous two stay those course it improvement that we third found we programs and that a to the in the are things those

Chip Paucek

seen as a started add ago, a so I it We what Yes The would company. week it really ever has marketing of is, that we’ve and even haven’t far. start fastest we we Jeff and Morehouse the like really what program. see paid interest announced

where feel leader shift. today, right and education about is and shopping. here like now Paul into clear do see one one largest digital see really think LSE will we’re the online you to it market We to They’re online year. it’s this we you fundamental So what segment. remarks. is, that the very mentioned when what be in and There’s going going and enrollment, prepared of his overtime, program entering largest imperative says doubt the calendar a go. will by our we’re that this going real no transformation like as they that’s ways I’m shopping just tapping No we

pleased and very opportunity our now right company. with we the So the have undergrad like for

Jeff Meuler

XU’s. I all hear Thanks. you. both Congrats and you the to of of

Operator

And Stephen our next Blair. question Sheldon with from William comes

Q –Stephen Sheldon

Morehouse. But about the making outcomes like they’re could conversations these and universities with curious announcement. how on It when announcement you congrats First or what those more decisions. sounds undergrad undergraduate with thinking are expect factors going

Chip Paucek

somebody might So mind muting.

Sheldon This Chip. would is So appreciate I say go question. the ahead.

Q –Stephen Sheldon

it, as the I’m they they that scale just potentially and the to enrollment years. curios from consider share perspective kind and think two one growth think over offerings, then tuition gaining quality expanding, potentially higher down XU’s increasing about then next of what driving, about drivers of really bigger the would cost drive using this

Chip Paucek

where is is a post seen Yes, a it must have. This place we definitely a change COVID.

of setting You and transform being program have to long-term align been and XU careful opportunities really we’re sure behind and to need doing a the and great make ahead Morehouse a the undergrad both we’re we XX for David now black that’s transform to company up themselves. opportunity Thomas choice think of in that are years. and Morehouse, high at is that for universities themselves it. quality we number of men couple They goals color. the program over you of college conversations non-profit pretty for men, critical look up institutions the We line of for partner work for I of the good have surprised the really for the next transforming world if that

and say think me and and the completed We Dr. men and those can the credit went heard program have unfortunately associated has quality an years and black is XXX think with it Martin Morehouse haven’t I there. really it’s incredible not college we college credit an those and some more You move we debt Morehouse record. X some just dial. have just and important to for for many the business importantly track mean the of its Luther opportunity King individuals million

you. proud our we’ve very overstatement. first tell announcement potential This I of for prospects incredible them know by to just the just if and in stories an from I been what important that’s response were was Morehouse will have means ever our really counselors overwhelmed had. we’re giving So and might relationship who that most the I week. don’t employees. of the Both

the weekend – and to we across spent over prospects the employees volunteer our queue be reach given folks entire of to interested. of counselors immediately that the work unexpected getting the just So were organization for to through to that initial we response so past XX the asked high something was response able out on and volunteers the weekend the order had

you, operations like about here. great ago something to in time an leader completion grad approach XU has marketplace. and of first I us the well market high more long rate components So launch really did with program really But Online strong for a think online undergrad We for touch, quality additional called mental Semester we’re our set high set degree exception a to up to you’ll for I tell do really a to health high with run really education our as incredibly feel big and the do undergrad will set long the students. here the well up did us that undergrad. hear a groundbreaking we continue it time stage have take program

excited about pretty So it.

Q –Stephen Sheldon

of you’re in through as some Maybe and margin and it it Clearly and show the the great the starting here characteristics follow-up appreciate the see detail. in seems positive for That’s Paul. model a guidance. really quarter both your to

the way you’ve like the bit and over the between about talked side. more you Studio program degree a prior initiatives a last moving to the talk maturing the maybe XXXX – in of of frame to curios relative could in I efficiency if year. launch some And the some just Box little pieces including but in the particular think and of guidance on if things before there’s program investments So in marketing assumed a qualitatively year you within roughly

think So I in guess just factors three the qualitatively as you those about guidance.

Paul Lalljie

couple things. a efficiently? we of organic of our So spend about When marketing. marketing think it’s mature that programs the we how or marketing dollars is direct can Whether

students. organic the comes been way our basis. that on the it in When is market doing overall to us of an engine is One serve we we’ve more things efficient developing helping that the becoming been and

Our students facing organization.

serve one see comes think see into a in we’re call that has and where way. less Box because programs every commit when finding objective manner. continuing of can if and that we this ways us appropriately some The the two used program say one is launch in than launched sophisticated it and in year and can schematic last some recall all And way. half we quarters of XXXX. less of our revenue things To of The delighting the the XXXX Studio in target? business one relevant development we And in launch so and cost launching sure to organized off that and number managing to by to we’re we’re [indiscernible] to of we’re student. We the total more overall makes do of you student I these the new to ensure EBITDA with a of going to that efficiently to led And the we can going think programs. then which a overall or first then a of and all Which beginning very EBITDA is falls three programs that started are overall margins. we’re benefits learning try cadence program, it that. things or to ours dollars and launch. to our the it I step continuing We making doing

I scale We’re develop scaling. not more XXXX, have just and an that engine then way, the efficient is to saying we mean a we business. delivering time dollar in amount muscle memory by more the in That we and get and that

the looking at around we’re So which framework this. that overall is

Q –Stephen Sheldon

it. a lot the of Congrats Got results. sense. Makes on

Operator

from with question Ryan comes next Needham. MacDonald our And

Q –Ryan MacDonald

we Thanks. it then looks? But with Simmons of things the undergrad about undergrad at what and market How cadence XXXX? sort as and sort quickly took you you enrolled. to it announcement launch array look about think into should With that getting opportunity. Can How the a time we for of in of bit we the was of opportunity XXXX space think more we an think of cadence from about rapid your going. for talk students your was unusual fall. get to needed first terms unfolding to lead for launch that time LSE, As in sort about go should ready – sort the fire,

Chip Paucek

vestige Ryan. serve can past just who gotten getting and the and That Operating them a our about Lee that’s succeeding this that year standpoint been of a better faster, Thanks Morehouse higher was. the Degree in of expectation focus our and it. if launches students I our including trying It’s the we’re This students. cadence. calendar we folks Mark the of better an in the though The get better Officer team is, of and from quality business that and at faster of improving the for our you to that’s key announced see DGP our thinking programs Ebony is think even from broader Chief we case actually away a for rolling can focus schools, a keep in reason is, for same Chip. key We’ve Chernis, driving reason runs has and point,

undergrad is exciting about thing the and is. So It an opportunity.

will now right and from in LSE. including LSE undergraduate that. point well took price world LSE affordable program in more is that enough every a degree data the from from that but demand at to and School has science it one You degree of went Economics portfolio its that seeing an the for like It London Economics base we’re see

thinking broader company we’re activity portfolio getting the passed consolidated career And more for we’re kind as students less Those of basis. actual to results product it’s continuum of fitting that the point a on across more a about the across passedXX our just ups So into more you, a curriculum million needs and across scale. sign cadence a and are our drives history them XXX,XXX We students company. programs. and and total set, is other over one that data about see to

we’ve the seeing the three excited So the last business today. where done sits hard do years and company really we’re just about think some transform to over I the work pretty fruits that. of

Q –Ryan MacDonald

we from with a application of guess what platform the fall. about into online you’re terms in of we about Excellent XXXX knock think in and year? then cohorts. as Obviously shift growth to see enrollment can some growth and saw of on grad programs starting last here on the the the health the you Is talk existing that effect But spring get increased the the for really enrollments I spring of we’ve sort when we sort there still some seen over already.

Chip Paucek

a of product was COVID now the people’s of that set all believe say, guidance so provided that need not people’s economic you’re small is clearly to benefit impact want the across to $X to continues strong way some before, everybody part in will on year, approaching think and rescale in clear and consideration do we themselves for for in when I We that our it’s and three way world, upscale online no the sets. billion us that’s and that midpoint level every we’ve XX% this of number. at revenue, emphasize in a some

programs continue an we’re forward strong. newer this and we the that results will some really continue the to to So excited that in go to of for will continue we feel of segment acceleration drive and programs get seeing throughout There’s some oldest positive that programs, adoption. just year pipeline see be super and of seeing us XXXX. as in like into like anticipate the grad the our we’re We calendar undergrad

Q –Ryan MacDonald

again. Congrats Excellent.

Operator

with next comes Capital. question Berenberg our And Brett from Knoblauch

Q –Brett Knoblauch

the for Chip. one Maybe first

Can were you that? better across mentioned a detail seeing on go into offerings. bit you more a maybe retention your You

Chip Paucek

and we’ve students with we that under sort that’s impact on years student aligned the the inside teams engagement huge leadership. a of working a actually in team a directly over two Adams we the one So the did things of house, we had Brad got way last performance our

in We it one XU that our retention. seen it’s it’s it system. goes improvement up rules revenue graduate, of all. good It’s for for we it’s drives world. really them good the good for kind and importantly that obviously the most an the because When through see number who have Students society

we point, a look if really retention meaningful for is semester us. which up per about full at it’s second So degree number a

personal of a to all So regard during did this credit team. time with to our strain They COVID.

so we all during the of drivers to see COVID’s improve me kind As been time makes know incredibly us proud. these world hard on and this

Q –Brett Knoblauch

on then steady for you is one on margin. and Got margin the maybe of the profile Paul

Should that’s there was the year-over-year kind expect improvement degree guess year segment QX the of we quarter I implying margin you’re of in XXXX? margin implying If for was XX%. segment of every XX% that north

Paul Lalljie

there’s generally QX than keep is seasonal not things, a in about it efficient spend greater the XX%. XX% impact. was of indeed season. mind that couple in and So huge was holiday But Marketing

marketing generally a spend a holiday the particularly in has cut we So season that back so seasonal impact. in

including you what seasonal sequential expect think you can is I see impact. that, should increase

X.X% look it quarter So trends quarter. X% and third XXXX, that think the if the you the to we at in in second had X% in I close then was

a generally sequential basis. see uplift You some should in

XX%. look XXXX to into from off at you sequential trend What you’re not that a of If XXXX. trending see going

Q –Brett Knoblauch

that. But one I implying wasn’t I add and Yes, thanks then more. maybe if could

you is that obviously a environment to so [indiscernible] more are a back launch is to people ability overall what macro of more and get bit It to you quickly about extent can talked that degree. is function their a education to could than quickly You how before and announce the program? going factoring countercyclical

Chip Paucek

No, Brett. we’re really not there talking about macro

We time We’re about us. the growing over long a period of talking company.

We two on now last have driving efficiency. over focus the years

We have absolutely efficient. more gotten

scale. the seeing We’re benefits of

think emphasized the points because brand remarks I scale the our is one we the is in some the behind reasons prepared of people of scenes.

seeing of definitely don’t the of the awareness that. with benefits we’re of XU You people today. And scale see

So we’re just efficient. getting more

quality level. believe programs. these I getting What We’re higher launching is better at

in So not equal doing way something doing or higher a that quality. It’s this about is them is that’s quality. about lower

for the that have actually So students called placements an clinical engage example of Virtual doing a session program programs their something VFX, that in company. virtually like an Number this the a into across to and work that, go improvements first did before Experience social patient, do setting the we actual clinical and clinical can a virtually. with efficiency do driving by Field one for they a you’re setting

the they because in go before with war students program -- get work somebody and into driving You’re with who to returned better industry deal a they with the actors PTSD. innovation from out

the You’re efficiency talking the student good for experience. better world, like just good for for about and

help key can over of So drive level up has and innovation focus the higher programs we quickly us two at been that years. it’s more that kind think a last that quality

Q –Brett Knoblauch

Perfect, thanks appreciate guys. it. much Really so

Operator

question next our And comes Baer from with Stanley. Morgan Josh

Q –Josh Baer

that how like You’ve did outperformance talking to verse business history. the this ability say may quarter. I’m that of a and been just bit more yes wondering look to type of contribute to different the about business business model

Paul Lalljie

Josh, in example. our the if that earnings was was a the second announcement Simmons mean here of think way quarter and the quarter contributor for And look fourth by of coined probably you I full quarterly I That was heels I on the phrase announcement. I year. quarter. it that think fourth at results was the

program Simmons model I same what statement was a think we is structure the the form So hybrid of time. that that It at more applied speaks the is the to and do. the and

in We’re keeping mind.

our using We’re as North Star.

number Our or are to being is when long-term in launch it’s profile not being nature. made short-term These large things a we fill make to do made a particular revenue It not margin these decisions. decisions nature. growth for and our cadence

Chip Paucek

an to these partners I think serving deepening to with yes, say more and relationship It’s credentials. thing the more effectively one having means about is, in opportunities Josh would as them terms their possible. deployments that Yes Whether the Saying add business. of yes at as way having existing students we the partner. alternative the

many three across products have that the We offer distinct board. partners now all

And one cases solution some terms to students degree business all deepening their cases in we’re It’s other and something a we partners the by meaningful We have Alt our in or It’s not Higher to of product campus offering going today. have our deployment across boot the short important type in works up services Cred, either also not like don’t from broader way then note of Simmons potential to a Ed. it’s relationship program think or camp way. two that stepped grad of courses. many like our a

way a in some to trying fruit on the the business to you’re focused drive existing We’re seeing in of and meaningful that. improvements I think

one did we like see Simmons that contribute expect overtime relationship. So Simmons more things to is one continue relationship and I fantastic and you’ll think a that and to grow that

Q –Josh Baer

cohort shape trying than those That’s like like able great products the prior Is in on to more curve newest to like term margins better of same suggesting different type or to thinking and economics a has dollar. J different years about the the with of comments that be partnerships? launch kind a longer

Chip Paucek

as thing interesting we Yes curve call one internally it our J project.

products focused capital trying requirements. J So we’re have absolutely on Different curve. the different do change to

launch the that business is to flexibility of need. have we One that programs things societal really really has a improved that the answer overall

new Northwestern take a unit new Alvin nationally You university. with building different from than the program the a is pretty or short that curve physical program building nursing heavily our It’s Diversity Tillery therapy being with a J very course a who’s with enterprise by extremely well. expert. a university bought and done respected It’s

and able do So a to expect crossover we we’re see pretty cash drive in seeing that J for progress and still that improvements step calendar to this curve the making critical it’s company the flow to on forward to and real be coming we’re year. the free

Q –Josh Baer

Great, thank you.

Operator

And our next Jefferies. question comes from Brent with Thill

Q –Brent Thill

you Chip, many have engines. growth great

said? you you’d priors How commitments those like two that what you If main achieve. XXXX to had for prioritize to two you articulate would from

Chip Paucek

operating our of of career Alt think the across now emphasized reasons and curriculum like the We revenue comes balanced really continuum important from third is one Cred. portfolio. Paul We the

segment country. the an We’re non-profit moot is Alternative of as the Credentials largest example. the providers of any That than large in provider

a and and really we programs is priority enrollments how in Undergrad for we seeing and business So careful is rolling keeping think we’re older from slot new positive about company. and our do important important. the that’s being grad

transformation different Edtech it it GetSmarter business to a been now homerun. of positioned where a Brent multi-trillion say and IPO today. saw drive and the benefits market acquired of last first We been Higher think the was We the even where ahead an going. Ed. don’t we to that question. XU I we has has we’re in the fundamentally three the market at There’s it saw let’s of our than which demand transformed future seeing certainly years. when are market So was candidly looks than of Honestly, going no and over did company really overstatement. dollar stay the that’s

Q –Brent Thill

you. thank Great,

Operator

And our comes Tom Citi. question from next Singlehurst with

Q –Tom Singlehurst

I’m Citi. guys, of Tom the your congrats evening, couple a questions. I from voices, Hearing Good quarter. had here on

mandate. LSE and it forward? know one that that to big I bigger international but obviously the in a reality was much question. you’ve success, well. in I been That I going expansion opportunity undergraduate, the it’s is suppose signal got doesn’t first mean emphasis The LSE international save question in a of fantastic the you see a actually can is opportunity footprint, on don’t going as but first the that

Chip Paucek

think you that Baconey and as think you this is is one something. think a I in We brands both the best [ph] in do of of worldwide LSE and know tell should that the either IMD talking certainly about do two UK story. you’re best brands Europe. we is

course found We also courses way we in into and growth CapEx we think short and provides are are excited lower about business the that significantly we excited to that language growth think, about localize different a of engine that. achieving short

So opportunities more Tom, international you’ll hear and overtime. about more

Q –Tom Singlehurst

for I of more and so then getting that’s broadly perhaps space education especially more the suppose obviously you validation And sort mean and exciting. just focus market better of an is more professional same more indication interest sort question That’s out just so. doing? companies second area Edtech if the that flowing into worry in terms there of very more what or I there you’re do are is we capital investor the and an is, of a the as should capitalized just and about competition question aiming see

Chip Paucek

and strange the really do think for is would to that several haven’t hills here public the in the of the GDP think the Edtech the in out we small We years in Honestly number competitors is coming is good the what’s large of increase unusual a percent certainly education; welcome we for got say, Edtech seen this some over it OPM very we number companies public. It’s that market. what’s goes I and are seen and certainly that these we’ve into significant they’re of lonely that last interesting people in space. other direction it’s

in. that that to We successfully people quite it’s welcome, we’re coming So think to the close good scale we think overall our world think don’t in of I allow anybody XU. non-profit think is us good. in that good we and marketing think our the I for compete and we valuation we university efficiency. for and we’re think it’s will think, to really scale do seeing it’s the market

prove to demand they they’ll excited We’re is in ourselves. they’ll more the But more to one people see seeing the of and and continue have space we leadership welcome pipeline. position to prove our opportunity quality, to and in into as scale do, come prove have the to

Q –Tom Singlehurst

guys again congrats quarter. Thanks the and amazing. That’s on

Operator

Sandler. with Your next Piper question comes Ramnani from Arvind

Q –Arvind Ramnani

you about wanted to you ask as I And two next three or question. level priorities broader a think had your years. the I about

us very business the surprises or the how You certainly at give really many some a had you’re was But you the across in different thinking with good XXXX and, foundation XXXX some unique next Can vectors. years? about about two color over three place. business

Chip Paucek

Yes, Arv.

Valyrian no So couple to the Steel, cash years XX the back year was it in view I driving We of free think than last and Thrones’ out of in of that is on and we the a driving so to of priorities forgive position in I We came of fire for XXXX reference. half. have said critical. molded ago come would Games the is do much company. of the financially question flow terms the There XXXX like stronger out today a a we feel rule over a of balanced clear be that point to say

student options to told careers for Everything time, that quality learner story way and we their the our all wins that’s to the is do, quality drive because in that it’s that the across quarters. at high we to helping and XU but where the able real business. important. meaning high continue and six really the lifetimes expect important. It learner were run and is you really pithy at business. while the the If students driving done universities day, university we end we’ve say of outcomes It’s same wins, wins be our the to Let’s we we to really said, matters behind then student and is the achieve that doing going

and So today. upskilling think opportunity the that significant results our that I think is I seeing do in you’re

degree that in seeing business course as our short lever. legacy business undergrad growth of and our with a You’re course

just be adults that. working to positioned You where able the meet we’re I for and need to drive to is quality student really the high student auctions do and well think,

Q –Arvind Ramnani

Great.

so next Are prevent kind even from to going years? been all the that. like So need You seeing years. have what’s there all growth side you growing look growing to But the thoughtful technology faster pretty how who of over the made side prevent be and of faster? of with sales, from or from gaining that from you next investment a couple any of about either partner you as factors and you couple you’re that at marketing

Chip Paucek

years been to of times on a call. we over Arv, smart the grow I’ve company fast think just not for this and last couple that’s and want focus I a three said the as key

each that the includes privacy from our leadership James operating XU we technology accessibility everything invest includes provide marketing, of We’re Kenigsberg. it. core to starting of in OS CTO, benefits this to of We’ve to to our schools to certainly see system it experience that the to continued power under

social long-term about balanced about. a is what of story sustainable is is this that mobility agenda engine ensuring of So this a creating we’re that

terms we’re of showing So this her marketplace. do prove of the continue think sustainability made to to real excited some we’ve headway I the in in it business.

Q –Arvind Ramnani

you good thank the luck year. and Great, much for very

Operator

back to the would to for now I Paucek Mr. closing Chip like And over conference remarks. turn

Chip Paucek

today. us joining for everyone thank Okay,

a Before to birthday offer go to few would I I folks. like wishes

on Officer, quite Chief guessing First made out and the and of I to Mark Thanks their mater than and it XXXth have birthday everybody. my who one Operating for Washington and Lalljie. George CFO, turned will Chernis We’ll let our alma that Paul hasn’t XX to turned then to all greater fun, XX University you is. see road. our One to

Operator

you does that today’s call. conclude participation. And for Thank your

may disconnect. You now

2U (TWOUQ) 12 Feb 212020 Q4 Earnings call transcript