- Earnings call transcript Q3 2022

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Operator

Good afternoon, everyone, and welcome to 2U Inc.’s Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Stephen Virostek, Senior Vice President, Investor Relations. ahead. go Please

Stephen Virostek

good XXXX and Welcome XU's to Thank conference afternoon, call. quarter earnings third you, everyone.

Joining the Paul Co-Founder and Financial me Paucek, Chief Chip on Officer. Executive call this Officer; and Lalljie, Chief are our afternoon our

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

our matters. partners today to or uncertainties forward-looking press update report for and call well website on December and earnings XXXX refer factors assumptions. the filed our A as to next including transition integration replay Any and available made for including webcast and are our with objectives forward-looking financial them. be duty a university the and may investor of Form and slide as risks on reflect relations learners, operations, other this subject include press of no shortly a the and statements of platform operating to Statements Please made plans remain and described we our on the days. call the has future and and have plan, the XX edX release Securities risk analysis made investor.Xu.com other regarding These statements the Commission, Our live Exchange year documents, SEC strategic filings. available the XX-K and in and company, earnings realignment results, to webcast our release anticipated ended our plans of for presentation, management trends as to call. for we statements will this this XX, and annual of will

uncertainties statements. materially those actual risks, set and forth that assumptions For our differ such may from results in to information cause on

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

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

Chip Paucek

and We're and bottom strong set with line progress to most transitioning XXX% expectations XU happening a report platform what's environment. three Steve. company brand. of internally on the significantly top our strategic all you, reflect results with macro to in winning talked line a under our most exceeding externally edX on is year-over-year. Candidly and expectations pleased of on we adjusted and material this we're EBITDA the the realignment the the seeing last Thank execution in results edX platform line, the activity These successful transition the importantly quarter. growing despite of a about to things

million. by our our First, $XX we reducing rate run organizational completed expense realignment,

reflected the Second, to we implemented QX marketing efficient a framework million $XX.X new QX. reduction marketing in in variable/paid more from spend

experiencing. other strategic in a in our to muscle strong on Google authority challenging the that more Third, university signed position platform, platform, and Cloud. build shifts new and on over and XX These of launched companies increased courses, Total than puts from degree XXX six bucking institutions multiple the professional partners we million. i.e. programs combined brought corporate profitability new including UC unique also partners edX micro us certificates and mass the edX and realities marketing the XX to to domain learners with XXXX, credentials Riverside, are open

a resulting sales by year-over-year in XX%. our versus revenue spend as with marketing marketing expense $XX.X The took the Let percent framework. lead down marketing drove prior of we me and cost per reduced XX% and million by start of the roughly steps approximately year,

you. data Another for point important

this the We material here. XX% will across very As at our the or valuable. We believe to leads strategy free get Organic of and organic XXXX company from play all be today, from XX% generated very organic. typically leads over are of long edX. of to are term students

We Why? demand for alternative their acquisition. learners to lower for shorter, increasing to we lifetime. strategy. a from expensive And improve unit advance less economics First, cost alternative of the expect throughout as credentials this most is credentials expect options as look benefit their to this of careers result

our believe As segment a year. Cred profitable our efficiently the result of transition more execution Alt framework the strategy allows The marketing to dollars us also and next effectively. to be of that, will new and marketing platform deploy we more

owned segment, the was we've we we're of from which still Cred in the the the we happen. of is cost organic continue for our This to down larger reduced organic expensive organic This doubled part to Here's Exec core for only another than essentially of of QX double. XX Education, us overall. XX% an that the and in more line. lead leads one our was Yes, edX channels our product see Ed substituting driving thesis get spend leads with edX And In where spend now Alt type it by platform from example. acquisition Google channels the productive, acquisition Put parts behind we manage down way, our helps free Executive starting currently get of and we but year-over-year, in flow edX of is leads social number organic Ed. than leads months. from activity in for to thanks the less spend Exec alone most

of spend we in revenue a to temporary growth drive better do taking pause business a our productive see more quarter, why last not growth short-term? chose profitability. we the in from Remember, bunch eliminate So to less

nascent in shows are impacts current Degree that strategy business, the XX% enrollments XX% programs our learners. in of While to registered of edX our MBA analysis the are platform our

million have of edX the of today. XU exist to original channels through degrees their the lives careers. this we registered created worth years, and new annually X is when This while acquired It to they on things us original shows for improve over for them those we've leads as content valuable their content we between recent pathways times new more over grow finding new develop the to and We mentioned that short edX.org. stackable to XU better In of X ourselves leads their lifetime more in to X% learners, current from We're continue that learners the will has products up scale. helping leverage courses. position X% XU tells us and convert on become One XU we various programs. offerings, also is detail. are products already historically to portfolio monetize

to doing? There's meaningful into individuals life-times. opportunity XX% edX their other the and convert to a paid engage are XX% what So over those learners

all including those Our meaningful XU that best will be through deliver converting career outcomes. great leads the platform learning finding, high-intent career matching pathways and at of advancers,

And of more in offerings. will We in platform, drive platform lower coming leads, me we accelerating and the the flexible from more increased which a the our and expect this more we'll effectively result update and a our into at learners revenue expect new flywheel, XU turn more will CAC. as much pipeline on edX edX, result drive brings to revenue acquired to content an which

us not of new also competition. degree new including wins supported bunch apart drive new quarter and set from new courses certificates, content free only platform this pathways, all impact, We by have on but offerings, the that a the side, the

and bundle discussions in active number an our both have as degrees flex to as We continue of out that pipeline on well our we broad July. escalating for full conversations degree new rolled

including XX% bundle model enables new rev for services at bundle offers of and degrees for and our core incremental select share. to placement flexible top a Our content marketing, share of enhanced on rev support, XX% additional elements tech and the development partners

remain. the the to for full continue that driving learners couldn't Flex work model replace model. aggregate That full business. model, simply not will meaningful will quality to us But content offering make this and we in on will Importantly, incremental our high pathways edX.org allow

Let me an you give example.

possible our also George health of be into stack in new Goldman's the as in Dean the the wouldn't pathway. model very existing public and flexible University, will public Milken model. into signed interest to have of a health under full will This oldest Health. full offering. the this public example new development health will offering GW as creating public great just drive in a it a The with full degree power successful new brand doctorate, a masters our the ultimately MicroMasters scale is be a Public health one We Washington new discipline. a stack School in doctorate The Under new which new bundle doctorate partners, we MicroMasters leadership, Lynn of degree of

degree London MicroBachelors its the This Political Science stack The things open of that you exit launched also of the these expanding. in segment meaningful programs, just partners online to listening strategy flexible as School company. offer are more Economics which XU. are and that its and and is undergraduate edX in Overall, momentum by grew growth same will service this see also this of model strategy our this know that into made powered Boot two degree, platform the on the partners to course many will first massive and product we're Original for quality XX% this us the value that quarter. our note of like Enterprise the have and XXXX. we help class A unit get announce a more channel We model, world believe we like in the back It's soon. to XU expect and call we the on part Camps. important we Business and edX Flex overall negotiations enterprise seeing a

critical and significant particular camp product for business. rebranded drive need and has under boot edX, government Our ahead plan a is growth a which line in now global

corresponding huge face was edX XXXX. are a and valued at end engagement and for signs for United Boot development. EBITDA Education UK is they we The on lifelong initiative, to Boot announced It's and Camp good we of in fully All going business worldwide for access of company focus transition success. with the of profitability the with quarter web in X,XXX will to provides career to on area in for platform a comprehensive investing Department participants $XX.X a government's the and a million training. very complex this support. which front margin dynamics, this learning record for federal EBITDA fund of of where have well career Camp Life that's Local growth in seats showing potential governments is skills million. Camp market Boot example, We will one XX%. As think Skills Overall, focused edX’s and online for adjusted profitability network partnership of Kingdom part up skills delivered need GBPX.X and our

in cover increase detail. our XXXX more now results quarterly outlook Our our our away, Paul and strategy which in confidence Take it EBITDA will Paul.

Paul Lalljie

Chip, Thanks, good afternoon, everyone. and

we These by top and at came our for in just our quarter segment enrollments Full cyber Chip X% a strategic quarter. greater masters per in In and a percentage X% compared last decreased revenue of last segment offerings. XX% segment, a quarter when million per adjusted to driven basis, a Camp of was a of increased quarter security to decline $XXX.X XXXX. for in As edX the undergraduate a to in the XX% inclusion strong was for pleased year, particularly I revenue an platform quarter XXXX. a by on $XX.X offerings, line. average edX compared the web revenue third enrollments reflecting average third totaled our for million the enterprise particularly reflecting to FCE the Boot results Alternative positioning X% by revenue our FCE, course Strong per FCE. with of execution over flat Credential our increase cost Degree of while primarily to declined $XX,XXX and XX% a the realignment mentioned, quarter, us and third FCE of the plan. FCEs for strategies lower delivered legacy while programs. of Revenue our decline with driven third X% EBITDA adjusted revenue Credential equivalent record a in reflecting Program the year, XXXX, FCE our year, X% mix. the revenue, us Alternative increase Revenue give development, enrollments compared guidance driven the increase and average year-over-year the X% in decline increase compared quarter confidence Starting or EBITDA strong of in the reflecting growth

business revenue expected, declined more As Ed new Exec and focused Exec from Ed marketing as implemented we our on framework offerings. a profitable our

of Now for a discussion expenses. operating

quarter decline and a This price On our third in evaluation non-cash in $XXX.X last $XX.X totaled million, quarter, year and $XX.X $XX.X a of call, certain on strategy of in triggering our around million we XXXX. increase of accelerating intangible for plans result, includes on operating million expense impairment of capitalization goodwill acquired expense for $XXX.X to and based our million For an as charge which non-cash quarter continued up determined event assets. platform a had related reduction market was operating shared elaborate the write-down million. a we stock occurred. fourth our the of from edX, centered $XX This led third the million edX. impairment a charge assets to quarter million second To the that $XX.X of a impairment our analysis

spend marketing a this part and for a strategy, positive bar seeing quarter. this began paid on of we implemented As impact higher return

a decrease percent as by quarter. came and at at items basis of marketing a the costs. points decline decrease more stock-based than revenue marketing quarter, million sales percent in Without paid This $XX.X a for as a non-cash and in came year-over-year for of on as was sales XX.X% the a marketing such largely and revenue driven in X,XXX XX% example, D&A, of basis. For compensation

$X.X During million charges recorded These of associated million million year-to-date a quarter real we $X.X the year. we $XX.X included with of to On million basis, third charges. up restructuring the recorded quarter, $XX.X charges, restructuring of consolidation. estate last compared

And Two, that last this marketing restructuring our last million expense, be estimates we quarter, quarter, efficient in in let more cost expect I we outlined quarter. three expense to $XX Before of three, discussed actions of within total basis. we quarter operating annual an XX% expenses, savings the highlight expect are we takeout off costs we we and on our of sales XX% to revenue in things. move which the completed versus me third quarter. result last One,

a our compared to to million $XX.X Turning measures. when or Adjusted increased of $XX.X for quarter third million, the year. to EBITDA profitability the last quarter improvement XXX%

X,XXX compared quarter platform margin. Degree increased Our sustainable the Segment with Programs segment prior points. basis adjusted to XX%, XX.X% XX% the strategic of $XX.X margin EBITDA the adjusted XXX the profitability profitability the or by of benefits shows early for segment EBITDA to improvement was our increased This million, compared increased When by strategy realignment. points basis last and year. year, a while the last margin

For improved in to Segment at segment third loss of the came negative profitability a margin quarter $X.X Credential XXXX. XXX improvement to million, EBITDA our or segment, Alternative million $XX.X adjusted XX% basis points the compared by compared XXXX. quarter of third of

payables. a and a $XX.X lower ended and interest, higher balance the decrease equivalents of quarter sequential is and cash primarily CapEx $XX.X and flow of statement. XXXX the decline from largely variance end of We sheet while The million, receivables discussion cash and with for Now million reflects million year-to-date to the the sequentially. due of $XXX.X cash

XX balance the and of payable receivable from term the maturity in December the June mature has decreased million $XX.X convertible accounts a notes. accounts May notes balance trailing These matches the XX, million million debt months $XXX gross We a convertible of our of of $XXX XXXX. as term reflects trends which payments million cash date for $XX.X the $XXX.X of networking of XXXX. partners, capital quarter senior from Our use million expenses ended loan university XXXX, with the from the seasonal million free ended Fluctuations flow of million quarter. secured in calendar. in XX with often million in while $X.X June XX The the $XX.X compared academic timing and consisting our accrued $XX.X unlevered receivable June of million from Accounts $XXX.X drove loan increased quarter. will

we are On to evaluating term the of opportunistically debt, loan. refinance topic actively options our

the because and are and coming good quarters third forward. ability saw progress expecting the done in quarter We going mainly significant a optimistic in making are are to we EBITDA expansion our the transaction in of we get

of discussion XXXX a for Now guidance.

adjusted improve Our are same: for $XXX cash our Today, three, which rest two, XXXX continue the guidance company. exceed to of flow; a affirming increased we free priorities XXXX, transition the to one, for revenue million. calls platform EBITDA; remain for to and revenue

our range midpoint increasing million, the midpoint are a at which XX% guidance $XXX from is million a EBITDA adjusted guidance higher We $XXX to year-over-year the than prior our basis. on to X% of on increase

rate of cost believe the XXXX, for we've to While Why do run XX% marketing is With edX our target in least coming commitment our not in takeout our achievable? at a marketing spend, early success performance seeing organic strong are platform. $XXX of we million new providing all platform. We're the reducing edX lowering completed we we're quarter, Well, and target from leads, expense. adjusted framework, for the guidance this EBITDA reiterating we're the seeing XXXX. our of from

adjusted capital XXXX, efficient learners I'm the million. be lifetime. three took bold a We to edX market million how over offerings marketing the of and In expenditures increased weighted our to EBITDA of implemented value approximately with outstanding cost, of and in $XX presence framework, addition shares their importantly, new conclude, accomplished for average the And We we're eliminated platform thrilled expanded silos, be and we've that much To more reduced steps. we new months. proud our and most leverage increase $XX last power agility delivering approximately margins. with expect record

and to truly scalable over call delivering with is And more to hand let XU me edX well-positioned a the platform, operator forward, that, the back business. learners Looking for growth content time, drive to revenue questions. the profitable

Operator

Goldman our ahead. first Tong go question comes Sachs. And from Instructions] Please [Operator Thank you. George from

open. is line Your

George Tong

Hi, Good Good thanks. afternoon. morning.

line bottom the own on against your beat you expectations. So

restructuring reduction and saw out you of took expenses more in because marketing, the efficient effectively quarter-over-quarter spend. on of $XX variable marketing You and million paid

in business the to about its you areas in forward in surprise carrying trying understand cost the And the to come So that which in -- where surprised efficiency? that view upside of your specific profitability upside would of sustainability? think you how from, terms

Paul Lalljie

off So Chip will as me little George, this. and here through start let augment a go bit we

I and an on of of think, personnel related cost the the that is First of the we expense equation. all, saw areas personnel one side improvement

the in two the Alternative quarter XX.% Adjusted EBITDA a year-over-year something significant basis. area as terms have then an that and segment, of efficiencies to (ph) basis for spend, should in was We're segment, definitely And with see that We're a we're segments, such margin variable look terms we're three But improvement Credential general also infrastructure in the the on an in see at leveraging improvement. In personnel, this and the quarter. going expense. Degree is we in two go first forward. margin and related in real EBITDA the there paid or to of drove -- organization. that areas as areas going areas. you on estate see it the are to personnel marketing we going for in in it overall areas forward, see going operating sequential cost as If EBITDA the it going expect we to totality main

Chip Paucek

Ed and lead to even production the add the for would that is platform I that's non-trivial. what organic off Camp coming George, business business our our Boot for is, Exec

of is lot we'll do get growth think XXXX. in opportunity. next Camp a there a We Boot year growth So huge

Boot all to we edX. Camps transitioned the noticed You might have

another the lead of and across So that coming us platform have a understand. door. we're our of percentage comes that of That's that basis, to variety And one have off about scale we've before, think ultimately, good a when our history the it's single they things to able experience And something offering including the at clear do don't the not convert for point think we edX. a we to investors historically, changing it's allows It's bunch of most it's the do each a were Credentials a it. that's solution very an thing and individual Alternative in that thing. off that something about to large side else. really into us power in XU important to and and don't the On ultimately going that's been platform recruited of edX leads that people people entire they a didn't something, When will they life enroll, enroll platform. into because of over

a platform those have convert to we Now people.

We we to percentage that going So costs. how is is platform Investor next is something lead a the have like about talk lot Day, get over as more lot to a that our planned we'll we'll scale a down what feel organic to K. working about after we March finish the talk year. be to our And of benefit now to drive the

Alt when Alt everyone that You mention Cred. got lot heard more it lot it me you'll see lower a in first will a it's Cred, like CAC.

George Tong

you're your pushing makes would with a forward drive expected. a to and you're When to respect now That And than help coming right with sense. lot seeing Yes. to so growth. revenue that marketing in create you of then, platform efficiencies organic the reaccelerating leads stronger expect strategy, flywheel are your

now to of back flywheel in shift space optimizing margins. that to So When sort acceleration the spin? where story once growth will start you're a this you're

Chip Paucek

very of and I where which our the taking And quarter. seeing get taking period improve stock to in from mean time framework the of where this we're doing moment focus a given like reorganizing a is order complicated that Clearly, entire market given into bunch clear announced that growth seeing we you profitability, example do something starting where pause in the at do overall into Last an get the single a the start to clearly so of we the prudent digit of a that as we a world, think I'll really pause marketing entire had market of that on now. odds proper like, standpoint call, from the creates notion of from growth pathway, do. thing growth. was we're and flywheel substantial thought is the impact that next We company the we was really small in and to be and year George a it things stage. matching a to benefit in and changing this growth, the people should produce give able it's whole company,

a edX geo-pricing, GetSmarter -- the of started Exec variety courses, the courses, as we sorry, Ed might known And that fabulously. courses. short As it original you the have worked

has So conversion markets better geo-pricing the amount large we edX for a those start that traffic. substantially as in very to reality could courses is international And were those of found able business line, do got we we it. in

one that's have execute across So bunch on think is and we one that certainly of the just levers a example. business we There's them. of that to

was in The growth cared would now XX% And it ultimately, into be our we the the getting number. model meaningful now reduced in growth, a to get gives small year additional non-trivial, pretty a quarter right? growth be flexible but say, we And degree on where to growth a us number overall. us XXXX. be getting it pieces business some revenue in able was final spend. big pause it of the ago, opportunity a as lever, to we're nobody great A improve degree get to because enterprise It's high take and So we non-trivial. as should Degree I it's

means. the So what we team we've like entire that focused got on it and do

at largest announced a candidly, think and Department UK, And is UK the really we scale. in with have Boot for worldwide need. what about upskilling We Camp think nobody reskilling Education is the on we government, We are. planet. business the the the doing you If it

transition think that opportunity local a we to with a a helps enterprises product deal. role is new ultimately people big fully with work and that governments So into

George Tong

Great. Very Thank helpful. you.

Operator

comes next Josh question Morgan ahead. go from Baer from Our Please Stanley.

line Your is open.

Matt Saltzman

the Saltzman for Thanks This Josh Hey, for is taking guys. Baer question. tonight. Matt on

those to clear. So with strategic to I the to a are attracting forward. the I ways partners some domains platform. specific think the have question around to on reorg are content Difficulty] that going the [Technical operational the just guys Are new and create there learners regard broader very help edX, of kind just that's you bring of platform, efficiencies going new new

hear momentum? it's about great to leads are to organic I going that the are just you coming guys how through, but think curious continue I'm that

Chip Paucek

since Well, open acquired edX, courses. online we new over we've massive released XXX

the university committed talking You're new lot both starts a want with courses. edX partners We community that that make content. partners free and lot full we of and how the new continue growing corporate partners, to all about sure are platform of to know content, great a to

seen without the in we're also bunch a Like, corporate curve business. Foundation, Degree you've model the content and WebX a that of content. We whole working new the Google accelerate degrees great sets, of over new see like degree different on us historically Cloud, of we on the partners professional there's a our whole you'll bunch different partners, announced that flex the side allows think variety to J new aggregate year. like And do really next

get a So we're not of to doing that making an include clear going large there degree it not side, and if marketing, by the scale. model everything's paid full marketing. to you'll we see And have scale. for schools will some acceleration full want of because Number out to but big got -- couple about degree you're on includes degrees. scale. every We've really meant still a it's really paid don't one, And think program those launches we're got two, that number

out students to incredibly international with our and here well new of gate. to have to more degrees the University the offer for So in us it's is relationship opportunity great more like, markets doing both a of Sydney

along need technology and the continue in steps degree pathway. people notion all the we're on infrastructure just develop having their to free to on So match just the and What do right the to is of to we way. right

And variety changing voice high of on and places. new all that pages, really rapidly pretty are new learning disciplines machine of itself folks. in a it production like things with course The You focused is large a web. amount on that value edx.org pages share can of learn drives greater the of see website to just of pages, new

So mass we of higher before, tell will educational has had Internet that the the XU's you, traffic. monetizing team the muscle edX single I I ed in think, on best have, never kind but at

to show. really to starting that's but combination. really a took a for It it So to it's nice show, start while

Matt Saltzman

Thank answer. it. the Got Appreciate you. thorough

Operator

Our MacDonald Ryan Needham from Please from ahead. next & Company. question go comes

open. is line Your

Ryan MacDonald

Hi, Chip on this taking great the and Paul. you've congrats made Thanks my question and all quarter. progress for

Chip Paucek

Thanks, Ryan.

Ryan MacDonald

to are of fall think of new you pipeline declining. tough programs enrollments. in or about translating seeing the the you're sort you're I'd is Speakers] coming whether [Multiple curious enrollment talking seeing a activity hear XXXX in Maybe of that enrollments given grad of tailwind the applications the all? what new I'd curious, to as about numbers Obviously, on, we're But a be be not sort into cohorts and at terms macro lot

Chip Paucek

Yeah.

So the Ryan, across really declined. business entire it's interesting, everybody's industry degree

that degree the exiting space the of that. degree of is is for And not the economy The little world, hardest that general, as a we're the disciplines resilient bit resilient. sense. disciplines for than did gets waters is tougher, tough get is has the degree the and history likely have In do the licensure Ed market we demand more to a business. as the job makes our for rougher if root the overall. think waters pretty heading in reality one tend a for resiliency. or to of Ours definitively we're but enhance half part. layoffs degree. good those macro We probably is to for focused helping Higher world, in worse, pretty environments but on bit the but clearer really little business of decline, probably history see think long More into for business, of starts We

flip the get we're side do now does is, So programs seeing boost think really the in Boot typically the on of particular front the job that where And that definitely end, first. actually side, historically focused is cooking. Camp

will cash don't is is programs think is that voice As burn won't meaningful and the platform. now model meaningful, you can profitable, the the do large, of paid that they different. do The And launching those think the course they on we they flex because we because mentioned, achieve as with of associated we we while curve J of is on also the university kind side this think be Google be share marketing the profitable. build nicely have of many

a strategy So grow we business back than means in grow, tough just But to faster not here. to of just XXXX. We we're XXXX, be clear, growth have getting business, this direction reality the the to the degree a is really businesses going like In bit and enterprise. what parts degree tape that like grew for all in going been do of we are to the of year.

So good we thought ours was the given pretty circumstances.

Ryan MacDonald

Thanks (ph) much. very

perspective for from the as period any hear flex? and the So program, then contracts? to with existing a it's this we of so, pipeline one strong the And investors curious you're should partners. Flex to I traditional that's conversations the does shift early altering it's how they expect modeling guess great And transitionary side, maybe on about but expansions opportunity helpful. sort create expect the of building, existing Thanks. model I'm an renewals -- on from if should

Chip Paucek

in general, Ryan, So and full coexist. will flex

flex That's full Somebody running to of are having existing mean schools those the program. flex case. all a not a the program, doesn't

The bear got come example partnerships GW place. great and that We've for example can't really the the a partner across something that Our large, a without partners flex is the client. meaningful of paid the good in most get Partners model you table. understand they current where part, the really for to the is XU, are into if that our there if understand, this it's is like does scale board. marketing to stable brings program a

the to the me remarks curve that to been doctorate have that, make you like you not would model. in not prepared that J that would there's a get it's in able work going make financially. just size to properly So the full simply mention to heard function work to it And reason need

Health high-quality four flex GW is that strong one the in of putting degree today love a really reality the model program for a program doctorate So we and in great. has deploying Master the that's that is then Public full a

XXX and quite that we have opportunity might university to perfect XX wants every partner with build whatever they XX or at or but portfolio more. I XX interest bigger for a think want XU bit of students for more group the a or not them faculty is a And that. XX is of and many of see or just and degree might number a Flex to from bigger programs. high-quality XXX every work you'll students, to had scale of We've lot of

think really relevant. So we it's do

mention there's full think launch we because that that me Now great additional us do see will you you programs opportunity. still heard

online. days One the sending whether do should of over. or Clearly, everybody things COVID online you the debating did go of is

that Flex great the a of think -- edX demand way under to XU we So is great capture really some platform. a

Ryan MacDonald

the color. Excellent. I the… on Congrats appreciate

Chip Paucek

I comment periods would we're pretty mention other the far is in away degrees. that from still renewal One

early we bunch through So as of renewing degrees. you know, a went wave a of

kind later. don't XXXX until of So we any renewals have and any

we are we clients. good the So about where feel with existing

Operator

from comes question BMO Silber from Capital ahead. next Our go Jeff Markets. Please

Your line open. is

Jeff Silber

so Thanks much.

segment. follow-up there? focusing to on Do program? go Can you on a this schedule? you the service specifically full bit go to When last market, question, a about to Degree little with Just talk degree your go the you market do with strategy market Flex you the

Chip Paucek

need new the didn't ROI places see. scale it that model, are university many Jeff, we to terms would us deploy because model places the those both. lot many in really full Sure. opportunities really existing or puts -- the gotten do have to at The of is of were programs reality we -- full we that in we've that in We matter base our wouldn't a the that in conversations want to weren't got we for before.

put to $XX going to million the going negative of over the in net to four is you're program big. If years, cash million first $X get really

So broader That working. menu we is the school. show a up really options with for much of

So the of you number programs. escalating used I Flex word noticed

sign some want the And does we next what might interested that but there -- XX get for months. disruptively is really something about a So scale, opportunity are and a can great the programs over we're scale that excited number price means want big. in really, for of or places, to really Jeff, program there's where

the the those of we like Boston be University very program notion MBA, successful So a more do programs. think of degree types there'll of

go side. gives a market us things to with broader to menu on just the degree So much of it

you announced you with Jeff, company, GetSmarter And world. Director it's was the And the LSE might one client, massive what things a headquarters. like serves we these the they Now key Google haven't course host as of -- the for reorg serve, forward is leaders proud need client, had we've was anything company open so first now of activity for we've here across business to we of what I LSC Math today, business, at re-orging bought of the right XU. when done had online siloed. remember, Economics about mean all not London to fast it's We're Cloud an huge math. they in some is do, professional Jeff, Executive really incredible under the the our and so of just a Like like excited the School or announcement. their also the to

is certificate is passed large massive our mass that XU. a somebody don't But the have it why online current and passed typically good MicroBachelors, -- funnel for programs they gives They programs stall it and have stall (ph) course. because revenue does the great what's undergraduate somebody And the the undergraduate be for requirement. that those best drives school very into a which into nine and basically part then that open So XU? could of we in for it

world So the like great at same a that's and time. to drive the how change business

it's just the about So not degrees anymore.

in And bottom profitable Cred of students bring willing be a focused of like say have year. bunch on of we're that today to the next and in very we're a community to lot no tell successful it Alt this things line, will think ultimately, I when outcome that be you there's people more. you, I'll that assured everything should terms the a CAC, right

Jeff Silber

then year. I to right. All you're for question. follow-up And giving That's know not great next my guidance hear.

a You bit little about your talk did goals.

flow. to the I things So was cash last to positive free one get quarter of your know cadence

said there and year you get on think still to then expecting? you run that end continue I Is we should by of a something this XXXX. rate be hope with the

Paul Lalljie

that next million close XX roll that working cash to I payment net assuming a is if capital between quarter, between guidance numbers on that increased year mean about an achieve a if anything, the this up Jeff, flow the $XX at you're delivered looking assuming if at do here easily then is I in if that nicely coming And for go CapEx XXXX. calendar over fall through And use year, look is million through then then million, mean midpoint this -- that. restructuring reconciliations some exiting So an XXX, sets of EBITDA $XX or somewhere XXX. as the that into of $XX basis to and we we you the that year. absolutely. zero number the million, XXX, number we some have anywhere a the we in in and $XX it us of interest full next year year charges somewhere

next real the to about month the together, good as us. feel we confident that activities behind multiply cost the our the over take year, we're XXX bottom Those pieces we crossing and year. are exit to by some if we some the December, importantly, put positive. cash more summer. those cash is done very XX XXX the And still and exit over all aspects is into still line the So are left. estate we've of have the free flow still probably you work, realignment plan foundry we the -- our completed year flow of We've When visibility

Jeff Silber

Thanks right. All much. to That’s so great hear.

Operator

Fitzgerald. from Brett Please Cantor go Our next from Knoblauch comes question ahead.

line open. Your is

Brett Knoblauch

question. my Hi, guys. for Thanks taking

guys think that the I with you how do many I term? guess, you you headcount are Speakers] X,XXX at over guess the started reduction, see think trending off employees. year I now? the employees the [Multiple medium And it's table? Where regarding

Chip Paucek

include anywhere you it make did I we be X,XXX say Brett, just sure part-time. FTEs, employees. might so -- near don't want X,XXX have to didn't

Brett Knoblauch

time. part X,XXX time, full X,XXX There's Yeah.

Chip Paucek

Okay. Got it.

Sorry.

decreased So to do personnel we're business instructors as and of by segment. overall than that But for employees come Alt executive Camps in Cred an harder compared on part-time XX% based obviously, out our our to team and and the we nothing feel Boot expenses budget that.

feel are We the proud we're was be could it and a think increasing is And incredible while great we related stand now the the all it. is our the was getting effectively. the and IPO I of We now. I upping has quickly ahead now, company I how getting We efficiency decision to there make company the you important, the But did like reality like it. And making runway did important. those to has happy quickly very cost was decisions savings risk of market the speed, our of with our focusing very where to it. to team. The on time, point greater mean right opportunity positives company really argue of very think again. an at tolerance been like reasonably that feel huge. I increasing I are of we ahead ahead in right we

operating three been over four the effectively really or So months. last I think we've

Brett Knoblauch

that's look out Paul, next maybe on segment year. as we No, And Right. margin the to helpful. then,

close with next year side, expect thinking XX% which seems nice AC like QX, with I year. up about over next On was that going AC the is guidance that right? degree strong it this guessing of your very the or to just quarter. in sets I it be I'm guess be -- we for Am to kind should to breakeven for QX,

Paul Lalljie

couple a things. Brad, So of

is some there the business. Let's that in remember seasonality

And our as quarter. build The a margins. business, the and should we most higher get in of higher So have generally, quarter our you seen first and over year. that's most spend something That's expect quarter, margins particular, seasonally of degree given next into we where show second to the in calendar then do do years. we've fourth

thinking a it you haven't you gone the as way. for So yet, contraction But right expect think you're haven't yet we about calendar in those year. completed into get periods. budgeting some bottoms-up should through the generally XXXX done process next the But as I look, work we in

is see is significant then that course. degree the I biggest segment. change business Credential movement. simply And see you'll you'll the leverage the one or the That think the natural the its in that where see biggest follow Alternative you'll will

XX Alt that Cred margin cohort business profile if know, see on in a from a a from programs at expect the we cohort or be fully it above look you you of have throughout the are loaded year-over-year basis. perspective, a perspective. more through degree the that where our And that in to improvement margin that to combination, the consolidated will year. mature flow significant As should But is we'll one we

Brett Knoblauch

Understood. Appreciate Thanks, it. guys.

Operator

Our next Baird. question Please from Meuler from comes go Jeff ahead.

open. Your line is

Jeff Meuler

able seeing spend part The you. or a lead on and the there you're quality the what lead terms conversions. of efficiently XXXX seeing learning Thank the about paid that revenue are Is that without more at leads or of of in of effectively Yeah. an to commentary marketing impact and I transition. in in and how organic also all and business cut too this is positive is synergies paid negative than quantity point was expecting channel

Chip Paucek

made we that. States a do the doing change, of we ton the analysis I when Jeff, what in it were mean, is I to marketing with team United the from best think

to to on efficiency the it did And bottom pleased why our line, they very we're come that how greater seeing and in good. So we're the know is we we some line. guidance are But efficiency was obviously keep no, which out, revenue can exactly drive all estimates. going was

those or as degree a I than business, hoped. smaller businesses obviously, ours. mentioned, than report lot everybody's time think declines. the a the last lot worked to -- hoped mean degree and it's I had business. for in a we're cycle, Obviously, tricky And out everybody as better that's the So of I are

meaningful. year, next you is enterprise Boot Camp like business, really some our And So things into we is which just do impressive. think getting have going

a the in think of of activity for So what this an entire around is entire government -- meaningful year. means we side the growth both shop arc that enterprise next for there's and place really good

that has to we're Science blank. super the But particular, a of what ultimately people days from that convert. People lot a X fully would come contact on have of done. on the an intent, in those that like only We you appreciate over on and of the very me XU team lead million really that X% project in the is I Master have by I'm web to early there's side the do, And degree are don't leads like edX learner called expansion to about are entire ultimately -- high powerful. into said, proud way. These Jeff, Data like

going something. of opportunity talk other had The that. to. we've to to the historically, the XX are time doing most them we're And about not now And

So ways, more XU early into powerful going days edX some it's the like than edX But XU. going might in of the to that. be

bullish see So see the so to that's Like point. -- doing the but actually starting about I just is -- I feel it. starting team we're it. we're And to it

really bought it it see now but see can you we point like a believed edX, when You at happening. can it we're happening. We where

years smarter and to harder to on Google So it's 'XX convert might ago harder five, It's and like, like, get to people 'XX getting -- web, look about search. gotten we the also what look start you has way the that's did at this. six that about excited have easy

publish harder matching and opportunities quality from of content that under people is then high changes harder. aggregating edX content find 'XX of into people way that help and the for us many that's pathways into and story SEO-based old of getting something has lives, the their a sort pathway people So so websites, 'XX. entire different like to

Jeff Meuler

a target. have EBITDA X, margin XX% Got like you it. And Slide

billion to for that weaker Just an challenging? that be environment We 'XX, on on there that do protection $XXX degree have much you? business achieve in from how the guess your should a that commentary you're like qualitative able remain revenue revenue for $X qualitatively the of million to growth just EBITDA be perspective. in to say you is how close to I need a targeting being achievable

Paul Lalljie

close provided things, for of take we to $XX out this to If cost that had million the pretty takeout, the And activities I summer. of cost of mean were the XXX. getting assume we year to couple the we a look If of $XX that So guidance Jeff. on reductions, $XXX taken million. we've at that were that January X, one you're million

some to get a ourselves in terms So protected to not getting XXX and line performance we're extent, too there. depending much the of to how on have we top

and in we it's we don't make revenue a for that next on process going as better planning expecting mere confidence on as to order the much year happen. of today, here year-over-year sit some right? matter However, bottom So here dependent the not we on growth we're on depend basis refinements how expect with we give XXXX, through $XXX come feel to will top the that and a a line about number we it the decline are company, to go to our for is that up had the we hitting a certain It is is the line it But fact million, now. number that. growth,

from tremendous very visibility the we've about feel a returning platform performing business, with particularly we well. see And with into Camp Boot portion. we're think a business, performance tremendous a good know of can new significant the degree our particularly framework, that I contracts, there. path program We strategy you and seen into then have next year been we visibility right? particularly that's from the clarity have perspective, And long-term we with students, the kind

we and social, of next together, about it. So those and and good we matter our a It's we then for -- pieces refining have trajectory enterprise year. government and feel put

Chip Paucek

degree what weren't next certainly year when that strength you add We when guess XXX. in that I presuming $XXX Jeff. million. we Yeah, I in think the would about gave segment is we

Boot we've like feel we in got So strength real Camp.

a about that little that today. gets world And We're million, -- for comfortable yay. $XXX that's we're friendly But with $XXX gets less million. good we of not very floor that and and where better feel planning pretty us, are degree so not the on if

Jeff Meuler

moved debt I its Understood. term just rates about improved improvement. you on the actually because duration since benchmark -- when understand an it talking have debt, remaining interest entered get preliminary up Paul, credit to is you that that is extending for last And lot might a conversation able discussions, a or the profitability have with you're you're the loan. rates refi-ing me. then saying the you're about rate there but be some lower

Paul Lalljie

at that that in next mean, line cash at day, perspective, we're whether perceived course, the to extended expecting to types is also ourselves risk from fluctuating and So as year, the is liquidity, We of quality the where cash terms things and next focusing reduced And make strong getting of we whether But a we those help I somewhat be getting maturities it's can by a the we're end liquidity the the from get that and us And -- terms seeing a the is are expansion sure credit time the terms matter with definitely table. of something you looking because are that of interest with hopefully exiting year, -- good and it's exit types of extended a that we we are EBITDA $XXX rates improving cap, looking of the risk on off to production generating business take the the it table, we better to those things that then want all believe will us, of giving bottom want have the quarter we at. the the we're optimism on -- started look, protect year. next it's get that we out. it year. rates just close million

Chip Paucek

love And says about super out -- Jeff, terms earnings in I company I on appreciate pointing think where else Slide you would the today. in plug because a meaningful call, just do the everybody what the of X presentation it it's is for I

slide it's progression now, IPO to. that margin percent marketing IPO we the a of till the should people from from till So think and attention now, sales pay

Paul Lalljie

do is marketing And sales revenue. and We we said to it, we're going of there. XX% were

Chip Paucek

there. We're

Jeff Meuler

for my Thanks All taking questions. right.

Paul Lalljie

Jeff. it, Appreciate

Operator

no call for I'd remarks. have questions over further Steve to like queue. turn to closing in the back We

Stephen Virostek

want to call. today's us I for everyone thank on joining

me to day. reach great a Have If you have Relations. follow-up at questions, out please Investor

Operator

This concludes today's call. conference

2U (TWOUQ) 8 Nov 222022 Q3 Earnings call transcript