TWOU - Earnings call 4 2023

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Operator

Thank you for standing by, and welcome to the 2U, Inc. Fourth Quarter 2023 Earnings Call. I would now like to welcome Steve Virostek, Senior Vice President of Investor Relations to begin the call. Steve, over to you.

Stephen Virostek

Thank you, Mandeep, and good afternoon, everyone. Quarter Conference Fourth XU's to XXXX Call. Earnings Welcome

this Paul Norden, Lalljie, me Financial on Executive are call the Matt Joining Chief afternoon Officer; Officer. Chief and

follow first, We by a remarks our will items. and share few housekeeping questions. like I'd But to cover prepared it

website, be press Relations made today. and available the release of replay earnings presentation are later a Our on this available slide Investor and webcast will

forward-looking described debt, and for These our forward-looking have them. Any and refer anticipated industry management in earnings refinance uncertainties statements report plans are today, university our Commentary reflect made on risk future annual for regarding regulations matters. other the to call financial made update duty risks, trends will statements partners, laws, on release December performance year this statements changes assumptions. for in results, as of the and this the filings. Please and our guidance other of subject analysis and agency and and our to and learners including and include objectives plans ability Exchange XX-K for XX, on call operations, operating the initiatives our our improvement no to or the ended plans and we press SEC with factors and including Form and Commission, documents filed XXXX, to Securities

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

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

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

Paul Lalljie

responsibility. immense of and Thank you, the a CEO afternoon, with into profound everyone. Steve, step role pride good and sense I

Over we past witness the X firsthand how we the privileged power. been with to lives offerings impact years, I've educational

to resilience on time to our financial it's focus mission. our deliver to fundamentals develop sharpen continuing Now while on

X a and the intricacies operations with the Today, of identifying delved last of our broad and through we the some XU opportunities our that remit, new I in a months, for further stages lens are of strengths In observations viewing share recognizing will my early this journey. improvement. acknowledging into I've

by line needs is global the the has partners XU distinctive we we the growth a been top leadership -- ensure been university and a to education no between worked market backed have consistently unmatched. offerings. we've network The reach enjoyed alignment that and position have acumen fluke, industry whose expansive of has in in sector, our robust team past

are most and Now to been strengthen we we quickly. set on model not focus execute in-demand ensure My in business bonds our doing just internal but a to move our delivering the conversations to engaging and focus meaningful external so has to team to partners, with efficiently. new offerings course it refining need immediate

measures business stronger improve is But to into to you we with our and set we're term in margin where today. the EBITDA a leadership full take our to quickly. and from our know started with But achieve support walk will order objectives, get ensure through profitable two to look plan going, before hear flows. date, our us growth. here. accountability, each our which need of in you embraced that maturities We've of accountability. short we thing today the want distinct details, delineating it long first cash We increase the our to I'll to how success we extend transparency we talk up and generate clear shrink-to-grow sense We important XXXX to most before must let's got about long-term revenue to term. at we performance do necessary for a adopt This goal debt and to into Therefore, lines the ourselves need mindset I our we dedicated

we took the make In these of a rate some steps to in XXXX, resulted and improvements initial more strategies cost savings efficient. on reduce run marketing our million Throughout to year, basis. $XX

team. efficiency four offerings, for future are crucial introduced degree process added further to new delivery our lower-price for key and also our reimagine success. management content our These members some We actions

these takeaways In accomplishments, should path XXXX provided many addition to forward. that inform our

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the the plan develop and evolve our over to continue will term long for months. coming We

turn our discuss year. want results for I the Before over things briefly to Matt, to I

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year. expectations outset on and are is it realistic business, However, setting the of the at the we

the points I'd we today. to summarize, emphasize like To discussed important

of We are possible. debt maturity quickly. as challenges to and extend order our We're our to in reduce head bold expenses current committed as in this soon support and journey we're and holders, debt on on. our reset a steps to partners, facing need embarking improve we stakeholders, our taking performance to XX-quarter holders your all And journey. employees, equity enhance To our operations.

the that call quickly, We over to company. turn Matt. and are that, support become stronger a I With will to committed me let we earning that believe

Matthew Norden

good and afternoon, Paul, everyone. Thanks,

XU the the Before walking know through lead he with results, Paul and step to it company that to more sustainable into world-class entire I be. team Paul's honored even am say finance work built. and I'd making to to can on like team closely shoes And the we how resilient the

Paul quarter lot a which is I'm walking profitable do started. in by fix to I'll confident Gap] XXXX our With the of plan that While deliver to future. progressing, begin and ahead let's the growth that and us, mentioned, have up will us sheet get we that, the set balance rapidly operating [Audio through fourth

Operator

difficulties technical experiencing are We will and resume momentarily.

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Paul Lalljie

Yes.

Matthew Norden

we Where drop? did

Operator

seconds XX your... about Roughly as you're beginning to just XX

Matthew Norden

having this if were duplicative start technical is difficulties, going some Apparently, anybody. I'm Apologies over. so we for to

afternoon, good and Paul, Thanks, everyone.

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recorded restructuring charges. During the quarter, also million we in $XX.X

refinement and a our goodwill. of result a of the our we of determined impairment in as to assessment performance necessary. an charge, evaluation stock was led impairment $XX.X million the price This that long-term Regarding quarter reduction projections, financial interim

expense, impairment decrease of charges, full year, excluding or over a XX% million, XXXX. the $XXX.X operating was For noncash $XXX.X million

is EBITDA for our operating Turning to previously. expense fourth $XX.X profitability totaled revenue and of for $XX.X the earlier, benefit of to quarter $XXX.X to activities by seasonal now EBITDA $XX.X measures. our quarter executed million year improvement XX%. the our Adjusted I a benefited from compared million year. million XXXX. million, for totaled typical portfolio of over in for mostly the XX% adjusted XXXX. to was spend, loss drivers management million also for in optimization $XXX.X owing to the million, largely the and the in And Fourth of Net compared revenue XXXX, year the an that This a mentioned business. driven pattern throughout I was mentioned line quarter Net cost loss the the XX% bottom and increased million, $XX.X of marketing EBITDA same quarter factors decline the which the adjusted reflecting $XXX.X margin

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on We resolve addressing maturities the our our confident that and as near forward updates to in debt can look We balance providing laser-focused appropriate. are are term. sheet we

Now financial we quarter Please are guidance year our guidance turning first our outlook. that to practices for adjusting XXXX. the to and note full give

million. range to first quarter Our the for for to $XXX $XXX million from calls revenue guidance

revenue to $XXX to expect we million year, the $XXX For range million. from

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success. To action company conclude, taking position laser-focused on we to are long-term the for

that, even We an financial future and with approaching the build to hand business well the of will the that the into back call Q&A to renewed operator session. deliver future all with the me begin stakeholders. let our to discipline to thrive are value stronger And

Operator

The your Instructions] line of first now comes Ryan for open Our [Operator question is with questions. from Needham. the floor MacDonald

Ryan MacDonald

of appreciate color and I organization the cash and on Paul, strategy. I appreciate sort outlined the product the focus there.

these about potential should business. think to on you're the what sort As an have of from of quantification or line profitability? sort then the new included all it's initiatives think know about guidance, initiatives? of generated evaluating for level process at the some we . that can you to in the we the the what think to savings of -- not but these of with of these be cost you And of I time impact newer start and magnitude changes of how speak in can sort potential focus the

Paul Lalljie

our choppy on pretty that was end. Ryan,

trouble Apologies. to the Let talk going on. to here not -- us we minute We're a operator had give see us to what's hearing.

Operator

question first Needham. from comes the line Ryan MacDonald with of Our

Paul Lalljie

give a can't Operator hear we could us second, you you.

Operator

experiencing Ladies difficulties and and technical we momentarily. gentlemen, currently resume will are

Ryan MacDonald

hear me? you can here, I'm

Paul Lalljie

us, good the to repeat that. you dial connection. again apologize for Could Yes. to a We question in for we had get

Ryan MacDonald

Yes. worries Yes. no no, at No, all.

extent of of have you're guidance. and to not of in kind of was you do at Paul, the included right profitability. sort fruition give maybe you're here product EBITDA and of initiatives understand benefits through while more quantify And changes and you cash evaluating some sort flow. organization which terms generating I increased initiatives kind of a of to hoping appreciate more some And appreciate the for frame maybe point, as of on of going maybe now could cash on the kind of in the So us I these focus of evaluating and now. I all can come this that And time the start and new to sort what sense cash. at some these it the I generating can could it's can

Paul Lalljie

All right. you, Ryan. Thank

couple a of So things.

and foremost, shrink forward is First our path grow to a strategy.

I deliver how synchronous think we student efficient do our somewhat cycle to offering. of focus it we offerings efficiently, an an and is the an asynchronous is more launch have from all perspective, from the it offer alternative whether credential, of whether on a more entire perspective. service we provide way and way The life automated from we

quicker appropriate us focus it to decisions first from fashion a more allows of point efficient student alternative I the that the the structure. It a product us We've have all focus data market lines businesses. manner. the McCall us a underlying is credential that business responsibilities. provides let business. more changes, But respond of that for foremost where into degree ], of business organization [ to across leading [ full objective And we Hermelin and Andrew this the journey drive two us So organizational business view. to ] in Aaron and that on each the allows think is delineated customized to use to the of allows and leading in

that where or pre-enrollment improve can increasing very of proud service. looking to ensure we that that rates equation, to software provide and from to it side using the When we're that we perspective, to technology time, of. on add and we're the at process the pre-enrollment completion we're conversion post-enrollment process what think from of we ensure doing same better a student at a maintain are a the we're or technology

industry-leading have rates. completion We

trying want is to of align redundancies can The be repeatable next be journey to deliver we way able quarters. few What the we we're costs, it's this probably have find will we that of two, into this And that against. plan. the all to where plan that we then organization, it we a a good end me we'll that of does When the in very for over month automate we're the that viewing then some journey means get -- focus mean on and reset a The processes the able to the against will the have. way and we first we XX-quarter of the that or at be day? able to able execute as middle that to be

a to the maturities sheet that we we to ensure quarter, we that the provide bit. the something next have, making in support that be details back it's the to putting that more have the guidance position is example. know this don't of I we a to the end be on we grow materially can this, of get But will something so plan step at negotiate resilient to to Quantifying add in anything -- And context -- at that I we providing that if and end it can we company time change have, believe it extend day, not missed the size upcoming and able should be balance that you financially and mature that. the it a would we that point be going can forward. so I we a By to that Matt, a have that. day, at responsible for the would today, time. think the -- that we're can need the little to We shrink

Matthew Norden

longer-term I I generally are plan, certainly there's I mean that's $XX about when of, benefit XXXX. and progress there's realize the and of full think then get savings million already that in going some items think certainly through those to more more XXXX, the I bit implement to time of No, right? We've we as take benefit implemented right. think the we'll and some cost low-hanging a fruit

I think initiatives off script, capital already. that I my in kicked mentioned working and we've lot of a

board, both what's So a payables but an we look business in go. with labor for efficient towards at the and third-party want to receivables hard also on the we're an across managing way critical to eye nonlabor that's based where all really obviously example, taking and spend

And of so longer-term see in whereas I think through. you'll some term, the the some much the closer initiatives of those in puts take shorter time results to flow will

Ryan MacDonald

the you're Makes just steps follow-up. sheet sort there. improved share a you But color balance going up sense. liquidity. concern. and of the of the appreciate to I sort mentioned Obviously, taking Maybe

sort Just near-term your of needs balance how curious the sort you're trying sustainability. and like you the how of with you're working stability sort sort longer sort about longer-term of as clients to ensure despite term partners you're of in for concern? of of of Can going university talk sort across them to with messaging portfolio sort this

Matthew Norden

Yes.

we to really quality to along the But and that And going most of them, expect We us QX. to strong of Hermelin they've have cash working ], level I -- think concern President the the who relatively frequent going right, have And us. with at the them, strong our come forward in our contact partners, and capital and give foundation new in liquidity also what Andrew relationships we I items $XX.X operate receivables us. to them he understand only is they services a give think factoring with with high Degree, you great of just in. the we engaged end at underway level, that million business reiterate the that know, position, those means the initiatives not given [ importantly for from

Operator

Tong question Goldman of Sachs. the comes George next with from Our line

Keen Fai Tong

these a expect cost actions, Talked bit in performance out actions. undertaking cost savings of you would some elaborate expect them would come you improvement more actions controls? of? comprehensive you control And some how Where to including these generate? to on little about much Can

Paul Lalljie

Yes.

couple to at look shrink we had When things. George, grow our programs launch to obvious year. launch that we if for So strategy, we we XXXX, a expecting of refer this the to cadence were

to but I in today, programs. are we've think here And XXXX. those choosing Andrew year calendar signed as XX XX we sit launch XX. programs we of --

some us at more are organizations, to some look We're our be whether that at to we our use marketing As looking can at across efficient, processes. who partners third-party we more technology us help organization, be to places help in spend. it technology We're of the processes, efficient. of we helping looking is can looking

do So at a took fundamental our we contribution or perspective. We're them doing acquire of day, to from have all and efficiently. we're we years that looking looking less the that service. we're But comprehensive the we the cost that back revenue. day, a at the of and at making that. then at at did looking cost We're look we the some offerings, of rates. it's looking hurdle to launches X.X of deliver how sure date And the end talked very we at And the deliver we're service million end are to deliver end gross $XXX that about launches very of fruits, [indiscernible]. That's X.X at low-hanging the the sure margins, least from those XX We're at steady will making margins. at launch. revenue that we appropriate --

those the it But while volumes? development. with do that we I partnering of third-party some increase -- a When team, our automate large We have processes White ]. get with conversion end have can right? the [ But that make content we at smart for we're marketing how leads Kirby improve our on the marketplace, and think think if we of particularly ways Michael to partner see in you of help volumes, his We're day, of how ] offerings at get, an [ we've -- looking more and ways automate cheaper X and we we -- And really people efficient. launching extremely got launches of to those awesome those we on think some with you team.

them can the X think we term quickly. if those material contribution near and I that X or them George, yield in areas, are do And right, so do

Keen Fai Tong

Got maturities. it. That's your And want achieve successfully working also those to conversations, extend what on your helpful. order your with targets debt do you lenders lenders see to extend in maturities? you to and negotiate Based mentioned

Matthew Norden

relationship ongoing plan negotiations detailed really them. get dialogue. are with specific into with discussed and an we'll would can't point George, with around that which we've further lenders. in our this call, constructive more keenly lenders detail the we've discussions that and this they so or open awaiting or engage And at on operating say conversations a I But is Yes, always had we Matt.

to at detail I wouldn't So be this targets think around time. give more any prudent or expectations

Operator

Stanley. the Baer next comes from of Morgan Josh line Our question [Operator Instructions] with

Josh Baer

Great. Wanted couple And as bucket the far organization new a and clarify versus to the congrats as on what's discussed. been new roles. things of savings and cost has what previously

to earlier, anything organizational hires Or and guess, the announcements of the talking the incremental C-suite November making in changes are more January? is some changes you then around structural and about when early changes I the there leadership in So new? new structure, referring the or

Paul Lalljie

times, is we it's together. and continue couple start is optimize we'll our alternative look to methodologies, to basis benefits late refinements $XX to into look run and of we we one one start million delivery -- at the million, early organizational the the we how we probably we of some year, look two October as the go will our So of the at and Whether as see A And 'XX, we mean And it that $XX I we as of $XX some we content is organization, December to do was that we talked in those in on One in frame. how here. that's Both January, at put things we look time we The of bring can a had back as offerings. credential the activities. things. eliminate that this of at place. resulted about how refine cadence Paul our this and see January, was then January the do continue events million referred in of that million, forward. those get the rate $XX expect half whether redundancies. refers we offerings those

So from as resources timely in fashion. to benefit more a

are events up we some have the we them. answer refinements year. question So XX, to to more the your But and will very and specifically, January go the continue of a as through makes that the couple October it's events those in the organization

Josh Baer

clear. degree what that what terminate are with the you thought you there that or you like degree did you programs was that you made I That's guess, what make are termination, the them, but And mentioned go changes those not some then a of profile the And programs some wanted actually to were still couple of running? to through Okay. more profitable?

Matthew Norden

Yes.

a So touch level. on we can at high this

we've to One example. with portfolio reasons partner might debt around would management measures. are thing that for portfolio one trying number have debt been earnings, discussions to a be there management. our cost to lower high said is So begin why we We've a to better respect earnings with portfolio of shift offerings to

and of And with we've them been also one work our working is outcomes. us and to impact example some pro, to partners tuition lower financial the for to us the both but means tuition able to And so the amenable to... explain higher been of that to with results for they've student what of

Operator

Ladies resume and technical difficulties we are momentarily. experiencing gentlemen, will and

Matthew Norden

I'm Can on you the backup phone us? hear here.

Josh Baer

I'm sure. not Yes,

Paul Lalljie

to just were happened talking? We mainline. What the

Operator

We are able sir. to hear you,

continue. please could you If

Matthew Norden

Sure.

out our again. think went mainline I

I'll know yet start how apologies, much but don't So again, from I heard, my Josh, beginning. you the again,

reasons call, engage the of portfolio portfolio management, our or highlighted prior some we So it think was right? I QX management. might the when thinking we in about call

earnings debt-to-earnings We've a much was and to portfolio ratio. programs that are One high programs more right? better a debt steer ratio, portfolio the that of trying towards which cost really have focus with the to been lower

sense programs they the tuition we've up to the what thought debt earnings for the -- so a around able it they with really that willing that partners, and where sides. And and what their standpoint, on have to some align we made were both those ended been thinking call, I from of works mentioned discussions

Josh Baer

more there last -- And Got then it. I'm sorry, or... was

Matthew Norden

hopefully, about could hear say, just that. you to was I No,

Josh Baer

on Last new Yes. with organization and dedicated question the segment of clear. the discussion kind the Yes. No, having leaders. and loud

roof? ask we're the need? changes is ultimately needed the that that decisions Or is look we under like there purpose better, quicker the to highlighting changes those those same of that these if don't need what's wanted out separately and like idea kind this have segments to look, any together of of to be there can run profitability that and drive and is element Just to or we to it going run they make

Paul Lalljie

bottom dollars so organization you perspective, because we we marketing multiple runs on allocate that a that channels. that to we resources, So focus across can sure here. why Josh, is that We you have can portfolio-based do if meaning have, And the still this the be the a line things of horizontal assets so like reasons accountability the have marketing these XX% organization. marketing have think the need success. of demand one in for search think for And coding with At is the is if From that we end accountable a for still Look, what's the leading Aaron at of alternative to end you full is example, way they'll term, been the business, businesses. through going line. organization, these top as a us. the there on across headwind of all the and tremendous we that is portfolio of of day, love Paul has But we a day, make -- coating the credential for coding. it Andrew

the of Coding camp level same demand. may boot not have

accountable level versus segment. across We just can things in do being easily were AI together with multiple are segment Alternative versus because within segments very organization we those type with is we executive pivot the one to autonomy that able and coding related and to what related, the one there So demand one having are benefit Credential those courses courses. or them can allocating from our of person ad for do our into those resources

of we're that not running day, given have it one and So given We is to in at into focus resources profitable different the most a this way is to the that on believe that maniacal or future. the is It's the that the end our we efficient good given one do is business. of the this date, growth demand environment the way bad. delivering one

Operator

Our next question the from comes of ] Stephen Baird. with line Polik [

Unknown Analyst

were that for forward This with actions. programs is to within can receipts move reductions the sort talked guidance. for Can cash Jeff. from [ the enrollments you portfolio that Polik decided originally the Stephen then on of ] management about quantify are a you And or you new what

provide that perspective Just or you kind can far metrics any gives you're seeing, whether from as what that you confidence? as conversion qualitative a demand of

Paul Lalljie

Yes.

me last which management, in this here. So call, million it this did we fourth not But and we enrollment our piece QX portfolio think have were I start jump expecting in in think the on quarter. off in quarter was -- let was it Matt from $XX will of the I

year ] also achieved approximately excludes $XX -- it [ not XXX portfolio So revenue. number portfolio ] management despite fourth the numbers full having the of that of million EBITDA was the said [ And differently, XXX management in quarter.

Matthew Norden

enrollment portfolio in lot it seeing at we've an the is Yes. really And really leading driven by by XX%. key calls. looking from XXXX what said we're about a we script. year-over-year, standpoint, That And of enrollment you're indicators mentioned new current the increase on that's prior

the in that increasing. as that's submit think, And last the we've I leading think to talked a knows, to with period-over-period. And key indicator to key about enrollment, which, up everybody is occasion indicator of volumes a revenue. I submissions continued volume quarter right, submit leading that see we So applicate XX% quarter, that number fourth

So they're across the board, leading the indicators key all trending in really the right across direction.

Paul Lalljie

that go seeing thing that revenue business has few XXXX now as is in now the are probably a eloquently his the described we'll business the our that to Matt, right we script. Matt next cycle, in through basically, And indicators us, on cycle see is to things we are fall unique in we occurring here. the based months. the visible not start degree conversation a expect degree sales is most is which important But leading This and

Operator

Steve now Virostek closing would to call for the turn to like over remarks. I

Stephen Virostek

joining us everybody for I to call. thank on earnings today's just want

so questions, If call you me please or follow-up at Relations. Investor have e-mail Thanks much.

Operator

today's concludes This call.

may now You disconnect.

2U (TWOUQ) 12 Feb 242023 Q4 Earnings call transcript