Home Bootcamps Trilogy Bootcamps Help 2U Earnings, But Future Remains Uncertain

Trilogy Bootcamps Help 2U Earnings, But Future Remains Uncertain


On his company’s most recent quarterly earnings call, 2U CEO and co-founder Chip Paucek shared an example of why he brought his company – an online graduate program manager for colleges – in the field of coding bootcamp.

A flagship online MBA program that 2U runs for the University of North Carolina at Chapel Hill has seen enrollment decline due to a “booming economy and an increasingly competitive world,” Paucek said Thursday. during a quarterly earnings call, according to a transcript. This drop was around 40% from 2016 to 2019, according to a report.

But with the help of technical courses added to the Trilogy 2U coding bootcamp curriculum purchased for $750 million last April – not to mention scholarships for 2U students and Chapel Hill staff – the MBA program seems to have took a turn. The program’s January cohort is 28% year-over-year enrollment growth, Paucek said.

“Our acquisition of Trilogy allows us to meet the demand from students, universities and industry for market-driven training in rapidly changing technical fields,” Paucek said. “This demand has fueled the rapid growth of our boot camp product.”

Similarly, a better-than-expected quarter for 2U – based in Landham, Maryland – has caused some analysts to think more positively about the company’s purchase of Trilogy and its strategy to achieve positive cash flow, which has saw its share price tumble last summer when it said investors expect lower profits from its core business of helping universities run their online programs.

2U’s stock was trading at $23.23 at Monday’s market close, up 2% from the Feb. 6 market close. The stock is down around 76% from its all-time high in April 2018.

This promotional video from the University of North Carolina at Chapel Hill features alumni of the online MBA program.

The trilogy begins to bear fruit

One of the highlights of 2U’s report for the three months ending Dec. 31 was the acquired Trilogy bootcamp business, which saw $33.2 million in revenue and accounted for approximately 20% of 2U’s revenue for the quarter. 2U’s total quarterly revenue of $163 million represents a 42% increase over the same period last year.

Still, the company reported a net loss of $44.6 million for the quarter, compared with a net profit of $4.8 million a year earlier. It ended the quarter with $190 million in cash and $255 million in debt due to a loan for the Trilogy acquisition.

2U’s revenue in 2019 increased 40% from the previous year to $547.7 million. But his net loss also increased, from $38.3 million in 2018 to $235.2 million last year.

2U offers and supports over 250 digital and in-person educational offerings, which include online degree programs, the 100 Trilogy bootcamps, and GetSmarter short courses. It claims to have served over 150,000 students and users.

Analysts expressed mixed feelings about the results. Some hailed an improved quarter and others expressed skepticism as to whether 2U turned its business around or simply masked issues with Trilogy.

“2U ended a turbulent 2019 on a high note as graduate program enrollment shows signs of stabilizing, while Trilogy appears to be a valuable addition to the business,” according to a report from the bank. investment Needham & Co.

“While we need to see more progress and evidence as 2U rolls out new programs, we believe management is on the right track with a focus on licensing programs that deliver higher conversion rates. and lower cost per lead, while looking for ways to create more affordable content,” the report continues.

Meanwhile, a report from Oppenheimer & Co. lists business model issues, a high price tag for Trilogy, an unclear path to profitability and diminished confidence in 2U executives as reasons why the investment bank sees a “slow road to recovery”.

A report by investment bank DA Davidson also questioned whether 2U could become free cash flow positive in 2021, as promised by 2U’s chief financial officer Paul Lalljie during the earnings call. “Overall, while the business tone has improved from two quarters ago and we want to like 2U for growth opportunities, we don’t have enough data points to be confident that 2U can truly deliver a healthy balance between growth and profitability,” according to the report.

The company expects its revenue for the year 2020 to be between $725 and $750 million, which would represent an increase of more than 25%. 2U expects a net loss in 2020 of between $200 million and $220 million. And it’s important to note that none of 2U’s college contracts are up for renewal until 2024.

This CNBC clip features 2U CEO Chip Paucek on his company’s purchase of Trilogy.

Slower program launches

While 2U executives have expressed disappointment with the online degree-granting program industry it’s best known for, the company has revealed some of its strategy to improve those profits. It will launch five new programs in 2020 and plans to launch at least 10 in 2021.

The number is a far cry from the 17 programs he launched in 2019, let alone previous goals 21 new programs in 2020 and 25 programs in 2021. But fewer programs will help 2U control costs. It invests around $5 million to $10 million to develop content and train teachers when each program launches, according to the Needham report.

“Let me be clear – demand for our programs remains strong and we like the programs we’re launching in 2020 that leverage our competitive advantages in licensing areas,” Paucek said during the talk. the call, according to a transcript. “We are expanding our geographic footprint in education, social work, as well as two new verticals: pharmaceuticals and architecture.”

2U has announced plans to launch four undergraduate programs with the University of London this year: a bachelor’s degree in Data Science and Business Analytics, Economics, Economics and Management, and Business and Management.

“We are trying to do things more on a consolidated basis and more importantly our goal is to ensure that we have an organization that is agile, flexible and at the same time efficient,” chief financial officer Lalljie said on the call. . “Launching five courses next year allows us to be selective.”

Trilogy CEO Dan Sommer discusses 2U’s purchase of his company in this Nasdaq interview.

Rants on recent titles

2U did not respond in detail to headline-grabbing developments ahead of its quarterly earnings call, including receiving a letter from Democratic presidential candidate and Massachusetts Sen. Elizabeth Warren and Sen. Sherrod Brown, a Democrat from Ohio.

In January, the couple wrote to the top five OPM companies ask questions about their business practices and express concern about the lack of transparency in their operation. According to the letters, the OPM contracts provide for colleges to share half of student tuition revenue and suggest the arrangement could violate federal law, which prohibits universities that receive federal dollars from paying commissions on tuition. student recruitment.

The letters went to 2U, Academic Partnerships, Pearson Learning, Wiley and Bisk. The letters demanded responses by February 21.

In response to a question about the letter, Paucek said 2U is “responding to senators and we really like what we have to say.” He said 2U programs are still controlled by universities. “It’s their programs and the decisions they make every day that drive the business and generate their opportunities with us. We talk all the time with our partners. We are excited about what we have to say about the power of business, the business model even in the states of these two particular senators.

The company previously promised to publish a transparency report in 2020 to detail the breakdown of registrations by gender, race and age; retention and graduation; employment and licensing outcomes; advertising and digital marketing expenses; completion time; average attendance rates, student satisfaction ratings, and hour requirements.

Another piece of news that 2U executives didn’t discuss — and analysts didn’t ask about it during the latest earnings call — is a report that the company is interested in going private through of a sale. Activist investor Sachem Head has reportedly become one of 2U’s largest shareholders.

Sachem Head is also the activist investor who bought shares of publicly traded Instructure, which will hold a vote this week to decide whether it goes private and sells to a private equity firm.