What: Shares of 2U (NASDAQ: TWOU ) skyrocketed more than 26% Tuesday after the online education technology specialist released solid first-quarter results.
So what: 2U's quarterly revenue rose 38% year over year to $26.3 million, which translated to a generally accepted accounting principles net loss of $7.1 million, or $0.93 per share. However, on a pro forma basis and excluding stock-based compensation, 2U's net loss would have been $0.17 per share. Analysts, on average, had expected a slightly wider net loss of $0.18 per share on lower sales of $25.2 million.
2U CEO Chip Paucek said he was "very pleased" with 2U's revenue growth, and also noted that the company's adjusted EBITDA loss of $3.8 million was "well below forecast ... despite investments we have made to accelerate our program launch schedule."
For the current quarter, 2U sees revenue of $23.3 million to $24.1 million, which should result in a pro forma per share net loss including stock compensation of $0.30 to $0.28. Analysts had been slightly more optimistic on the top-line, expecting sales at the high end of that range to result in a $0.26 per share loss excluding stock compensation.
But that's of little consequence given 2U's solid full-year forecast, which calls for a pro forma net loss of $0.85 to $0.79 per share on revenue of $104.5 million to $107.5 million. Excluding the $7.85 million mid-point of expected stock compensation for the year, 2U's adjusted net loss per share should be roughly $0.64 to $0.58. By contrast, analysts were looking for a loss of $0.71 per share on sales of $105.4 million.
Now what: I had the pleasure of interviewing Paucek a few days before the report, which incidentally marks 2U's first earnings release as a publicly traded company. One thing that stood out in our talk was his unhindered long-term focus on changing higher education for the better. The company's typical contract length, for example, is 10 to 15 years, and each requires significant investments by 2U over the first few years.
But that's also why 2U takes between 60% and 70% of tuition revenue for each student enrolled with its university partners, and today's beat helps assuage concerns over its short-term losses. As long as 2U continues to build its empire for the future, long-term investors should be more than pleased.
You might be paying for college in a much different way soon
2U shows promise over the long-term, but it's also not the only great growth stock out there for patient investors. For example, did you know the plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player? When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.
Editor's Note: This article has been amended to clarify 2U's EPS performance vs. estimates. The Motley Fool apologizes for the error.