Please ensure Javascript is enabled for purposes of website accessibility

2U, Inc. Beats Expectations in a Busy Quarter for New DGPs

By Steve Symington - Aug 3, 2018 at 7:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online-education platform leader unveiled eight new domestic graduate programs in the second quarter. Here's what investors need to know.

2U Inc. (TWOU 2.72%) announced better-than-expected second-quarter 2018 results late Thursday, detailing a particularly busy quarter for new domestic graduate-program announcements. 2U also increased its full-year financial guidance.

Still, shares of the online education platform company fell almost 6% on Friday. So let's have a seat to learn what 2U accomplished over the past few months, and whether the pullback is merited.

2U results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Growth

Revenue

$97.4 million

$65.0 million

49.8%

GAAP net income (loss)

($18.3 million)

($11.8 million)

N/A

GAAP earnings (loss) per share

($0.33)

($0.25)

N/A

DATA SOURCE: 2U, INC. GAAP = generally accepted accounting principles.

What happened with 2U this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition costs, 2U's net loss was $10.3 million, or $0.19 per share, widened from a loss of $5.2 million, or $0.11 per share in the same year-ago period.
  • Adjusted EBITDA arrived at a loss of $5.6 million, compared to a $1.5 million adjusted EBITDA loss in last year's second quarter.
  • Each of these figures compared favorably to 2U's respective guidance ranges provided in May. It called for revenue of $95.1 million to $96.1 million, a GAAP net loss per share of $0.42 to $0.41, an adjusted net loss per share of $0.22 to $0.21, and an adjusted EBITDA loss of $6.2 million to $5.7 million.
  • Recently announced domestic graduate programs (DGPs) include:
    • Two DGPs with Tufts University, including an online Master of Global Business Administration and a suite of online graduate-level degrees.
    • An accredited hybrid Juris Doctor degree with the University of Dayton School of Law.
    • A new MBA program within the previously announced DGP with Pepperdine University.
    • An online Master of Legal Studies degree with American University Washington College of Law.
    • An online Master of Science in Communication Sciences and Disorders degree with Baylor.
    • A 12-year extension of 2U's partnership with Washington University's St. Louis School of Law, including a new LL.M. in Taxation degree.
    • An online Master of Science in Data Science program through the University of Denver.
    • Two DGPs with Fordham University, including a Master of Studies in Law in Compliance, and a suite of specialized management and finance degrees.
Student on laptop in a quiet room with rows of desks

IMAGE SOURCE: GETTY IMAGES.

What management had to say

2U co-founder and CEO Chip Paucek stated:

In the three months since our last earnings report, we've announced a total of eight new graduate programs, putting us on pace to complete our 2019 launch cohort this quarter, the earliest in 2U's history. Ten years in, we have a proven and unparalleled track record of delivering for our partners and their students, which continues to drive exceptional momentum in both degree and short course pipeline as well as long-term contract extensions by existing clients.

Looking forward

For the third quarter of 2018, 2U is targeting revenue of $106 million to $107 million, adjusted EBITDA of $4.2 million to $4.8 million, a GAAP net loss per share of $0.20 to $0.19, and an adjusted net loss per share of $0.03 to $0.02. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates predicted a net loss of $0.03 per share on revenue slightly below the bottom end of 2U's outlook.

Finally, 2U once again raised its full-year 2018 outlook to call for revenue of $409.7 million to $412.2 million (up from $406.6 million to $410.6 million before), and an adjusted net loss per share of $0.10 to $0.08 (up from previous guidance for a loss per share of $0.13 to $0.10).

In the end, there was nothing not to like about 2U's latest beat-and-raise performance, so it seems strange to see the stock down nearly 6% on Friday in response. That said, investors should keep in mind that 2U stock had climbed more than 60% in the year leading up to this report, likely leaving traders tempted to take some profits off the table despite its positive momentum.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

2U, Inc. Stock Quote
2U, Inc.
TWOU
$11.34 (2.72%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.