2U Inc. (NASDAQ:TWOU) announced first-quarter 2018 results on Thursday after the market closed, highlighting not only the strength of its core Graduate Program business, but also the growing influence of its short-course offerings following its acquisition of GetSmarter last year. Shares were up more than 6% on Friday as of this writing, so let's settle in to learn more about what drove the online education-platform company this quarter, as well as what investors should be watching in the year ahead.

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2U results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Growth


$92.3 million

$64.8 million


GAAP net income (loss)

($14.9 million)

($3.4 million)


GAAP earnings (loss) per share





What happened with 2U this quarter?

  • On an adjusted (non-GAAP) basis, which excludes stock-based compensation, acquisition expenses, and foreign-currency exchange, 2U's net loss was $6.1 million, or $0.12 per share, compared to net income of $0.01 per share in last year's first quarter.
  • Remember that 2U agreed to absorb the majority of the cost structure of its newly launched graduate programs in exchange for receiving most of the tuition revenue from those programs. This means effectively sacrificing near-term earnings in favor of long-term growth and profitability.
  • These results are above the high ends of 2U's guidance ranges provided last quarter that called for revenue of $91.1 million to $91.6 million and an adjusted net loss of $0.14 to $0.13 per share.
  • Adjusted EBITDA came in at a loss of $1.5 million compared to positive adjusted EBITDA of $3.9 million in the same year-ago period.
  • Recently announced three new Domestic Graduate Programs (DGPs) with Baylor University, including:
    • An online Doctor of Education in Learning and Organizational Change, launching this August.
    • An online Master of Public Health specializing in Community Health, expected to launch in April 2019, pending accreditation.
    • An online Master of Social Work, expected to launch in May 2019, pending accreditation.
  • On Thursday, 2U also announced:
    • A new DGP with Pepperdine University Graziadio Business School for a suite of online graduate business degrees to launch in 2019. 
    • A partnership with Rice University to launch business-focused online short courses this fall.

What management had to say

2U co-founder and CEO Chip Paucek stated:

Our short course business has emerged as a powerful contributor to our growth story. When combined with the expected growth of our Graduate Program Segment, revenue guidance is up about $8 million over our prior guidance. In addition, the annual number of launched graduate programs has increased substantially over the past few years and shows no signs of slowing down. Our pipeline also continues to be strong, giving us confidence in our revenue expectations in that core segment in future years.

Looking forward

For the second quarter of 2018, 2U expects revenue of $95.1 million to $96.1 million, a GAAP net loss per share of $0.42 to $0.41, and an adjusted net loss per share of $0.22 to $0.21. 2U also called for its second-quarter adjusted EBITDA loss to be in the range of $6.2 million to $5.7 million. As such, 2U increased its full-year guidance to call for 2018 revenue of $406.6 million to $410.6 million (up from $397.7 million to $402.7 million previously), and an adjusted net loss per share of $0.13 to $0.10 (compared to an expected per-share loss of $0.14 to $0.10 before).

All told, investors couldn't have asked for a better start to the year from 2U. With no end in sight to the strong demand for its graduate programs, and the emerging rise of its short-course offerings as a source of supplementary growth, it's hardly surprising to see shares of 2U flirting with a fresh all-time high today.

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