2U, Inc. Reports Results for Third Quarter 2020

LANHAM, Md., Oct. 27, 2020 /PRNewswire/ -- 2U, Inc. (Nasdaq: TWOU), a global leader in education technology, today reported financial and operating results for the third quarter ended September 30, 2020.

Results for Third Quarter 2020 Compared to Third Quarter 2019

    --  Revenue increased 31% to $201.1 million
    --  Graduate Program Segment revenue increased 18% to $122.0 million
    --  Alternative Credential Segment revenue increased 57% to $79.1 million
    --  Net loss decreased $88.6 million to $52.6 million, or $0.77 per share
    --  Total cash balance increased to $499.6 million

Non-GAAP Results for Third Quarter 2020 Compared to Third Quarter 2019

    --  Adjusted net loss improved by $9.7 million to $16.6 million, or $0.24
        per share
    --  Adjusted EBITDA improved by $14.4 million to $3.7 million

"2U's evolution over the past few years puts us in an excellent position to meet the needs of lifelong learners," Co-Founder and Chief Executive Officer, Christopher "Chip" Paucek said. "Today, we are a digital enabler bringing product strategy, technology capabilities, data analysis, marketing expertise, and student and faculty support to the best non-profit universities in the world. We are operating at the nexus of the future of education and the future of work, and the impact of accelerating demand is becoming increasingly evident in our operating results across the portfolio."

"Our results for the quarter reflect the strong leading indicators we discussed in our last two earnings reports," said Chief Financial Officer, Paul Lalljie. "Organic revenue accelerated, we continued to make progress on our profitability and free cash flow goals, and we have enhanced our liquidity position. With better visibility into the remainder of the year and continued confidence in the fundamentals of our business, we are pleased to reintroduce annual guidance."

Discussion of Third Quarter 2020 Results

Revenue totaled $201.1 million, a 31% increase from $153.8 million in the third quarter of 2019. Graduate Program Segment revenue grew 18% to $122.0 million, primarily driven by a 17% increase in full course equivalent ("FCE") enrollments. Alternative Credential Segment revenue grew 57% to $79.1 million, driven by a 57% increase in FCE enrollments.

Costs and expenses totaled $247.0 million, a 13% increase from $218.4 million in the third quarter of 2019 (excluding the impact of a $70.4 million impairment charge in the third quarter of 2019). The increase in costs was primarily driven by higher personnel and personnel-related expenses, curriculum and teaching costs, and depreciation and amortization expense. These increases were partially offset by savings related to efficiency initiatives and COVID-19 related savings, particularly from travel and related expense.

As of September 30, 2020, the company's cash, cash equivalents and restricted cash totaled $499.6 million, an increase of $309.7 million from $189.9 million as of December 31, 2019. The cash balance as of September 30, 2020 reflects net proceeds from the August 2020 offering of the company's common stock.

Business Outlook for Fiscal Year 2020

While recognizing that the COVID-19 pandemic continues to evolve, the company believes that increasing student and university demand for high-quality online education will continue. The company expects it will continue to drive growth in this dynamic environment, as evidenced by its strong performance in the third quarter of 2020 and its momentum entering the fourth quarter. With 2U's increased visibility into the balance of fiscal year 2020, the company is providing annual guidance. Going forward, the company expects to provide annual guidance, updated quarterly, if necessary.

For the full year of 2020, the company expects:

    --  Revenue to range from $760.0 million to $775.0 million, or growth of 32%
        to 35%
    --  Net loss to range from $225.0 million to $210.0 million
    --  Adjusted EBITDA to range from $7.0 million to $14.0 million

Non-GAAP Measures

To provide investors and others with additional information regarding 2U's results, the company has disclosed the following non-GAAP financial measures: adjusted EBITDA (loss), unlevered free cash flow, adjusted net income (loss), and adjusted net income (loss) per share. The company has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. The company defines adjusted EBITDA (loss) as net income or net loss, as applicable, before net interest income (expense), foreign currency gains or losses, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. The company defines unlevered free cash flow as net cash provided by (used in) operating activities, less capital expenditures, payments to university clients, certain non-ordinary cash payments, and cash interest payments on debt. The company defines adjusted net income (loss) as net income or net loss, as applicable, before foreign currency gains or losses, acquisition-related gains or losses, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. Adjusted net income (loss) per share is calculated as adjusted net income (loss) divided by diluted weighted-average shares of common stock outstanding for periods that result in adjusted net income, and basic weighted-average shares outstanding for periods that result in an adjusted net loss. Some of the adjustments described in the definitions of adjusted EBITDA (loss), unlevered free cash flow, and adjusted net income (loss) may not be applicable in any given reporting period and they may vary from period to period. For example, in this quarter the company is excluding certain litigation-related costs, consisting of fees for certain litigation and other proceedings.

The company's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, to understand cash that is generated by or available for operational expenses and investment in the business after capital expenditures, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate the company's financial performance. Management believes these non-GAAP financial measures reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in the company's business as they exclude expenses that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the company's operating results and prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

The use of adjusted EBITDA (loss), unlevered free cash flow, adjusted net income (loss), and adjusted net income (loss) per share measures has certain limitations, as they do not reflect all items of income and expense that affect the company's operations. The company compensates for these limitations by reconciling the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review the company's financial information in its entirety and not rely on a single financial measure.

Conference Call Information



     What:        2U, Inc.'s third quarter 2020 financial
                    results conference call



     When:      
     Tuesday, October 27, 2020



     Time:      
     4:30 p.m. ET



     Live Call: 
     (877) 359-9508



     Webcast:   
     investor.2U.com

About 2U, Inc. (Nasdaq: TWOU)

Eliminating the back row in higher education is not just a metaphor--it's our mission. For more than a decade, 2U, Inc., a global leader in education technology, has been a trusted partner and brand steward of great universities. We build, deliver, and support more than 475 digital and in-person educational offerings, including undergraduate and graduate degrees, professional certificates, Trilogy-powered boot camps, and GetSmarter short courses. Together with our partners, 2U has positively transformed the lives of more than 275,000 students and lifelong learners. To learn more, visit 2U.com. #NoBackRow

Cautionary Language Concerning Forward-Looking Statements

This press release contains forward-looking statements regarding 2U, Inc.'s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this press release, including statements regarding future results of operations and financial position of 2U, including financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. 2U has based these forward-looking statements largely on its estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this press release. The company undertakes no obligation to update these statements as a result of new information or future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from the results predicted, including, but not limited to:

    --  trends in the higher education market and the market for online
        education, and expectations for growth in those markets;
    --  the acceptance, adoption and growth of online learning by colleges and
        universities, faculty, students, employers, accreditors and state and
        federal licensing bodies;
    --  the impact of competition on the company's industry and innovations by
        competitors;
    --  the company's ability to comply with evolving regulations and legal
        obligations related to data privacy, data protection and information
        security;
    --  the company's expectations about the potential benefits of its
        cloud-based software-as-a-service technology and technology-enabled
        services to university clients and students;
    --  the company's dependence on third parties to provide certain
        technological services or components used in its platform;
    --  the company's expectations about the predictability, visibility and
        recurring nature of its business model;
    --  the company's ability to meet the anticipated launch dates of its degree
        programs, short courses and boot camps;
    --  the company's ability to acquire new university clients and expand its
        degree programs, short courses and boot camps with existing university
        clients;
    --  the company's ability to successfully integrate the operations of its
        acquisitions, including Trilogy, to achieve the expected benefits of its
        acquisitions and manage, expand and grow the combined company;
    --  the company's ability to refinance its indebtedness on attractive terms,
        if at all, to better align with its focus on profitability;
    --  the company's ability to service its substantial indebtedness and comply
        with the covenants and conversion obligations contained in the indenture
        governing its convertible senior notes and the credit agreement
        governing its revolving credit facility;
    --  the company's ability to generate sufficient future operating cash flows
        from recent acquisitions to ensure related goodwill is not impaired;
    --  the company's ability to execute its growth strategy in the
        international, undergraduate and non-degree alternative markets;
    --  the company's ability to continue to recruit prospective students for
        its offerings;
    --  the company's ability to maintain or increase student retention rates in
        its degree programs;
    --  the company's ability to attract, hire and retain qualified employees;
    --  the company's expectations about the scalability of its cloud-based
        platform;
    --  potential changes in regulations applicable to the company or its
        university clients;
    --  the company's expectations regarding the amount of time its cash
        balances and other available financial resources will be sufficient to
        fund its operations;
    --  the impact and cost of stockholder activism;
    --  the impact of any natural disasters or public health emergencies, such
        as the coronavirus disease 2019 ("COVID-19") pandemic;
    --  the company's expectations regarding the effect of the capped call
        transactions and regarding actions of the option counterparties and/or
        their respective affiliates; and
    --  other factors beyond the company's control.

These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended and supplemented by risks and uncertainties under the heading "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and other SEC filings. Moreover, 2U operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for 2U management to predict all risks, nor can 2U assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements 2U may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated.

Investor Relations Contact: Ken Goff, 2U, Inc., investorinfo@2U.com
Media Contact: Glenda Felden, 2U, Inc., media@2U.com


                                                          
             
                2U, Inc.


                                                 
          
              Condensed Consolidated Balance Sheets


                                          
              
          (in thousands, except share and per share amounts)




                                                                       September 30,                                      December 31,
                                                                                2020                               2019

                                                                                                                   ---

                                                                        (unaudited)



     
                Assets



     
                Current assets


      Cash and cash equivalents                                                          $
              481,329                             $
        170,593



     Restricted cash                                                         18,235                               19,276


      Accounts receivable, net                                                95,756                               33,655


      Prepaid expenses and other
       assets                                                                 40,270                               37,424




     Total current assets                                                   635,590                              260,948


                   Property and equipment, net                                53,603                               57,643


                   Right-of-use assets                                        53,453                               43,401


                   Goodwill                                                  407,860                              418,350


                   Amortizable intangible assets,
                    net                                                      316,405                              333,075


                   Other assets, non-current                                  85,867                               73,413



                   Total assets                                                        $
              1,552,778                           $
        1,186,830



                   Liabilities and stockholders' equity



     
                Current liabilities


      Accounts payable and accrued
       expenses                                                                           $
              84,404                              $
        65,381


      Accrued compensation and
       related benefits                                                       44,484                               21,885



     Deferred revenue                                                        91,783                               48,833



     Lease liability                                                          9,185                                7,320


      Other current liabilities                                               17,100                               12,535



      Total current liabilities                                              246,956                              155,954


                   Long-term debt                                            268,224                              246,620


                   Deferred tax liabilities, net                               2,134                                5,133


                   Lease liability, non-current                               75,621                               66,974


                   Other liabilities, non-current                              8,270                                  899



                   Total liabilities                                         601,205                              475,580




     
                Stockholders' equity


      Preferred stock, $0.001 par
       value, 5,000,000 shares
       authorized, none issued                                                     -


      Common stock, $0.001 par value,
       200,000,000 shares authorized,
       71,294,706 shares issued and
       outstanding as of September
       30, 2020; 63,569,109 shares
       issued and outstanding as of
       December 31, 2019                                                          71                                   63


      Additional paid-in capital                                           1,629,565                            1,197,379



     Accumulated deficit                                                  (658,215)                           (479,388)


      Accumulated other comprehensive
       loss                                                                 (19,848)                             (6,804)



                   Total stockholders' equity                                951,573                              711,250



                   Total liabilities and
                    stockholders' equity                                               $
              1,552,778                           $
        1,186,830


                                                                                             
              
                2U, Inc.


                                                                
            
                Condensed Consolidated Statements of Operations and Comprehensive Loss


                                                                        
              
                (in thousands, except share and per share amounts)




                                                                      Three Months Ended                                                   Nine Months Ended
                                                            
           September 30,                                          
                September 30,

                                                                                                                                       ---

                                                      2020                                    2019                                  2020                      2019

                                                                                                                                                            ---

                                                                             
              
                (unaudited)


                   Revenue                                  $
         201,073                                            $
              153,798                              $
         559,239       $
          411,493



     
                Costs and expenses


      Curriculum and teaching                       30,153                                    21,336                                             76,887                         41,345


      Servicing and support                         32,536                                    27,351                                             93,363                         71,518


      Technology and content
       development                                  40,223                                    34,132                                            113,040                         79,969


      Marketing and sales                          100,068                                    93,521                                            297,624                        260,231


      General and administrative                    44,000                                    42,040                                            127,207                         93,471


      Impairment charge                                  -                                   70,379                                                                           70,379



                   Total costs and expenses        246,980                                   288,759                                            708,121                        616,913



                   Loss from operations           (45,907)                                (134,961)                                         (148,882)                     (205,420)



     Interest income                                  713                                       924                                              1,380                          5,087


      Interest expense                             (7,564)                                  (5,651)                                          (19,575)                       (8,130)


      Loss on debt
       extinguishment                                    -                                                                                   (11,671)


      Other income (expense),
       net                                              42                                     (710)                                           (1,659)                       (1,093)



                   Loss before income taxes       (52,716)                                (140,398)                                         (180,407)                     (209,556)


                   Income tax benefit
                    (expense)                          162                                     (714)                                             1,580                         18,918



                   Net loss                                $
         (52,554)                                         $
              (141,112)                           $
         (178,827)    $
          (190,638)



                   Net loss per share, basic
                    and diluted                              $
         (0.77)                                            $
              (2.23)                              $
         (2.69)       $
          (3.14)



                   Weighted-average shares
                    of common stock
                    outstanding, basic and
                    diluted                     68,580,439                                63,358,890                                         66,368,686                     60,690,536



                   Other comprehensive income (loss)


      Foreign currency
       translation adjustments,
       net of tax of $0 for all
       periods presented                             1,667                                   (5,856)                                          (13,044)                       (3,985)



                   Comprehensive loss                      $
         (50,887)                                         $
              (146,968)                           $
         (191,871)    $
          (194,623)


                                                  
              
                2U, Inc.


                              
              
                Condensed Consolidated Statements of Cash Flows


                                               
              
                (in thousands)




                                                                             Nine Months Ended September 30,



                                                           2020                                           2019

                                                                                                          ---

                                                              
              
                (unaudited)


                   Cash flows from operating activities


                   Net loss                                       $
              (178,827)                          $
        (190,638)


      Adjustments to reconcile net loss to net cash
       used in operating activities:


      Non-cash interest expense                          13,161                                              883


      Depreciation and amortization
       expense                                           71,406                                           46,639


      Stock-based compensation
       expense                                           63,962                                           36,086


      Non-cash lease expense                             11,181                                            8,407


      Provision for credit losses                         2,703                                            1,785



     Impairment charge                                       -                                          70,379


      Loss on debt extinguishment                        11,671


      Changes in operating assets and liabilities, net
       of assets and liabilities acquired:


      Accounts receivable, net                         (65,095)                                        (39,743)


      Payments to university clients                      2,171                                         (22,257)


      Prepaid expenses and other
       assets                                          (17,153)                                         (6,760)


      Accounts payable and accrued
       expenses                                          15,281                                           12,712


      Accrued compensation and
       related benefits                                  22,737                                            (109)



     Deferred revenue                                   43,138                                           20,162


      Other liabilities, net                            (5,680)                                        (24,263)



     Other                                               2,486                                            1,056



                   Net cash used in operating
                    activities                          (6,858)                                        (85,661)


                   Cash flows from investing activities


      Purchase of a business, net of
       cash acquired                                      (949)                                       (388,004)


      Additions of amortizable
       intangible assets                               (46,750)                                        (50,950)


      Purchases of property and
       equipment                                        (5,516)                                        (11,306)


      Purchase of investments                                 -                                        (10,000)


      Proceeds from maturities of
       investments                                            -                                          25,000


      Advances made to university
       clients                                                -                                           (100)


      Advances repaid by university
       clients                                              925                                              350



                   Net cash used in investing
                    activities                         (52,290)                                       (435,010)


                   Cash flows from financing activities


      Proceeds from issuance of
       common stock, net of offering
       costs                                            299,796



     Proceeds from debt                                371,681                                          243,726



     Payments on debt                                (250,479)


      Payment of debt issuance costs                    (3,419)                                         (1,953)


      Purchases of capped calls in
       connection with issuance of
       convertible senior notes                        (50,540)


      Prepayment premium on
       extinguishment of senior
       secured term loan facility                       (2,528)


      Proceeds from exercise of
       stock options                                      3,123                                            2,942


      Tax withholding payments
       associated with settlement of
       restricted stock units                             (470)                                         (2,573)


      Proceeds from employee stock
       purchase plan share purchases                      1,771                                            1,895


      Payments for acquisition of
       amortizable intangible assets                          -                                         (1,283)



                   Net cash provided by financing
                    activities                          368,935                                          242,754


                   Effect of exchange rate
                    changes on cash                        (92)                                         (1,025)



                   Net increase (decrease) in
                    cash, cash equivalents and
                    restricted cash                     309,695                                        (278,942)


                   Cash, cash equivalents and
                    restricted cash, beginning of
                    period                              189,869                                          449,772



                   Cash, cash equivalents and
                    restricted cash, end of
                    period                                          $
              499,564                             $
        170,830


                                                                                                
              
                2U, Inc.


                                                                                   
              
                Reconciliation of Non-GAAP Measures


                                                                                               
              
                (unaudited)





     The following table presents a reconciliation of net loss to adjusted net loss and adjusted EBITDA (loss), for each of the periods indicated:




                                                                     Three Months Ended                                                   Nine Months Ended
                                                      
                September 30,                                          
                September 30,

                                                                                                                                      ---

                                              2020                                           2019                                  2020                      2019

                                                                                                                                                           ---

                                                        
              
                (in thousands, except share and per share amounts)



     Net loss                                       $
              (52,554)                                         $
              (141,112)                           $
        (178,827)    $
        (190,638)


      Stock-based compensation
       expense                              22,001                                           16,535                                             63,962                        36,086


      Foreign currency (gain)
       loss                                   (42)                                             710                                              1,659                         1,093


      Amortization of acquired
       intangible assets                    10,669                                           11,096                                             32,057                        17,863


      Income tax benefit on
       amortization of acquired
       intangible assets                     (347)                                           (393)                                           (1,057)                      (1,165)


      Acquisition-related
       income tax benefit                        -                                           1,504                                                                        (17,758)


      Loss on debt
       extinguishment                            -                                                                                            11,671


      Impairment charge                          -                                          70,379                                                                          70,379



     Other*                                 3,682                                           15,036                                             10,835                        23,412



      Adjusted net loss                   (16,591)                                        (26,245)                                          (59,700)                     (60,728)



      Net interest expense                   6,851                                            4,727                                             18,195                         3,043


      Income tax expense
       (benefit)                               185                                            (397)                                             (523)                            5


      Depreciation and
       amortization expense                 13,267                                           11,192                                             39,349                        28,776



      Adjusted EBITDA (loss)                            $
              3,712                                           $
              (10,723)                             $
        (2,679)     $
        (28,904)





      Net loss per share, basic
       and diluted                                     $
              (0.77)                                            $
              (2.23)                              $
        (2.69)       $
        (3.14)



      Adjusted net loss per
       share, basic and diluted                        $
              (0.24)                                            $
              (0.41)                              $
        (0.90)       $
        (0.97)



      Weighted-average shares
       of common stock
       outstanding, basic and
       diluted                          68,580,439                                       63,358,890                                         66,368,686                    60,690,536





       Includes (i) transaction and integration costs of $0.4 million
        and $2.5 million in the three months ended September 30, 2020
        and 2019, respectively and $1.5 million and $7.0 million in
        the nine months ended September 30, 2020 and 2019,
        respectively, (ii) restructuring-related costs of $2.7
        million and $6.6 million in the three months ended September
        30, 2020 and 2019, respectively and $3.2 million and $7.2
        million in the nine months ended September 30, 2020 and 2019,
        respectively, (iii) stockholder activism costs of $5.6 million
        in the nine months ended September 30, 2020, (iv) litigation-
        related costs of $0.6 million in each of the three- and nine-
        month periods ended September 30, 2020, and (v) deferred
        revenue fair value adjustments of $5.9 million and $9.3
        million in the three and nine months ended September 30, 2019,
        respectively.


                                                                                                                                              
              
                2U, Inc.


                                                                                                                                 
              
                Reconciliation of Non-GAAP Measures


                                                                                                                                             
              
                (unaudited)





     The following table presents a reconciliation of net cash provided by (used in) operating activities to unlevered free cash flow for each of the twelve-month periods indicated:




                                                                                                                    
              
                Twelve Months Ended



                                                         September 30, 2020                                                 June 30,                                       March 31,                   December 31,
                                                                                                                              2020                                             2020                            2019

                                                                                                                                                                                                                ---

                                                                                                                      
              
                (in thousands)


      Net cash provided
       by (used in)
       operating
       activities                                                              $
              26,829                                                                                       $
        (10,669)                 $
      (29,309)    $
      (51,974)


      Additions to
       amortizable
       intangible assets                                           (60,723)                                                             (64,990)                                                           (67,161)       (64,923)


      Purchases of
       property and
       equipment                                                    (7,627)                                                              (9,536)                                                           (12,693)       (13,421)


      Payments on
       acquisition of
       amortizable
       intangible assets                                              (897)                                                                (897)                                                              (897)        (2,180)


      Payments to
       university clients                                             4,100                                                                 7,500                                                              14,925          26,100


      Non-ordinary cash
       payments*                                                     17,153                                                                17,874                                                              19,544          13,989



      Free cash flow                                               (21,165)                                                             (60,718)                                                           (75,591)       (92,409)


      Cash interest
       payments on debt                                              11,270                                                                16,475                                                              17,064          12,147



      Unlevered free cash
       flow                                                                   $
              (9,895)                                                                                      $
        (44,243)                 $
      (58,527)    $
      (80,262)





       Includes transaction, integration, restructuring-related,
        stockholder activism, and litigation-related costs.


                            
              
                2U, Inc.


                                      Reconciliation of Non-GAAP Measures


                          
              
                (unaudited)




     The following table presents a reconciliation of net
      loss guidance to adjusted EBITDA guidance, at the
      midpoint of the ranges provided by the company, for
      the period indicated:




                                                                    Year
                                                             Ending
                                                          December 31,


                                                                        2020



                                                               (in millions)


     Net loss                                                                $
        (217.5)


     Stock-based
      compensation
      expense                                                           84.0


     Foreign
      currency loss                                                      1.6


     Amortization
      of acquired
      intangible
      assets                                                            43.0


     Income tax
      benefit on
      amortization
      of acquired
      intangible
      assets                                                           (1.4)


     Loss on debt
      extinguishment                                                    11.7


     Other*                                                             11.8



       Adjusted net
        loss                                                          (66.8)



     Net interest
      expense                                                           25.0


     Income tax
      benefit                                                          (0.2)


     Depreciation
      and
      amortization
      expense                                                           52.5



       Adjusted
        EBITDA                                                                  $
        10.5





       Includes $2.0 million of transaction and integration costs,
        $3.2 million of restructuring-related costs, $5.6 million of
        stockholder activism costs, and $1.0 million of litigation-
        related costs.


                                                                                                                                                                                                  
          
                2U, Inc.


                                                                                                                                                                                          
         
            Key Financial Performance Metrics


                                                                                                                                                                                                
          
                (unaudited)





     
                Full Course Equivalent Enrollments





     
                
                  Graduate Program Segment





     The following table sets forth the FCE enrollments and average revenue per FCE enrollment in the company's Graduate Program Segment for the last eight quarters.




                                                     Q3 '20                                               Q2 '20                                     Q1 '20                      Q4 '19     Q3 '19                                         Q2 '19 Q1 '19              Q4 '18

                                                                                                                                                                                                                                                                         ---

      Graduate
       Program
       Segment FCE
       enrollments                                   47,842                                                          46,142                                                        45,734                      41,704                                 40,910                 39,180          39,512     34,695


      Graduate
       Program
       Segment
       average
       revenue per
       FCE enrollment                                         $
              2,551                                                                                $
              2,507                    $
             2,590                                         $
     2,595               $
     2,527        $
     2,588   $
     2,637 $
     2,792









     
                
                  Alternative Credential Segment





     The following table sets forth the FCE enrollments and average revenue per FCE enrollment in the company's Alternative Credential Segment for the last eight quarters.




                                                     Q3 '20                                               Q2 '20                                     Q1 '20                      Q4 '19     Q3 '19                                         Q2 '19 Q1 '19              Q4 '18

                                                                                                                                                                                                                                                                         ---

      Alternative
       Credential
       Segment FCE
       enrollments                                   23,067                                                          20,435                                                        15,141                      14,639                                 14,729                 12,662           9,128      9,041


      Alternative
       Credential
       Segment
       average
       revenue per
       FCE
       enrollment*                                            $
              3,426                                                                                $
              3,279                    $
             3,766                                         $
     3,883               $
     3,825        $
     2,955   $
     1,979 $
     2,015





       The Trilogy acquisition was completed on May 22, 2019. Average
        revenue per FCE enrollment for the company's Alternative
        Credential Segment includes $3.3 million, $6.0 million and
        $1.9 million of purchase accounting adjustments for the
        second, third and fourth quarters of 2019, respectively.

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SOURCE 2U, Inc.