Dive Brief:
- 2U’s revenue was flat in 2022’s third quarter, but officials remained optimistic that the acquisition of edX late last year would attract learners to the company’s online degree and alternative credential offerings.
- Revenue dipped to $232.2 million, down 0.1% from the same period last year. Meanwhile, costs and expenses grew almost 22% to $336.5 million, largely due an accounting adjustment to reflect reduced asset value. Net loss more than doubled to $121.7 million.
- So far this year, 2U has spent $29.2 million on restructuring costs, including across-the-board layoffs. Officials said they’ve reduced personnel expenses by 20% since the reductions announced last quarter.
Dive Insight:
2U got its start in 2008 as an online program management company, or OPM, meaning it helped colleges launch and run online degrees in exchange for a cut of their revenue.
It has vastly expanded its reach in recent years, including by acquiring edX, a prominent MOOC platform. As one of the few publicly traded OPMs, 2U’s earnings provide a glimpse into how the sector — as well as online education as a whole — is faring.
The company's degree segment revenue declined 7.1% to $137.2 million, partly due to enrollment decreases. 2U isn’t alone — enrollment in colleges and universities dipped 1.1% in fall 2022 from the year before, according to preliminary data from the National Student Clearinghouse Research Center.
But 2U CEO and co-founder Chip Paucek expressed optimism about the company’s future.
During a Monday call with analysts, Paucek touted the company’s strategy, which involves using edX — and its free online classes — to eventually attract students to paid options, such as certificate and degree programs.
“We’re all in on just the notion of free-to-degree, and having steps along the way,” Paucek said. “EdX has the kind of muscle mass on the internet that 2U’s never had before.”
Paucek gave the example of George Washington University, which is working with edX to launch a MicroMasters program in public health, a series of graduate-level courses on the platform that lead to a certificate. If students are then accepted into the university’s online master’s of public health — which 2U helps manage — they will be eligible to receive credit for the certificate.
“We have many more of these in negotiation,” said Paucek. He predicted these types of initiatives would help drive revenue growth in the degree business near the end of 2023.
Company officials have repeatedly told analysts that this strategy will help lower 2U’s marketing costs. In the third quarter of 2022, the company decreased its paid marketing costs by $18.7 million from the second quarter, according to a news release. Overall, marketing and sales expenses declined year over year by 20.3% to $94.3 million.
Paucek pointed to segments of the company that are rapidly growing. Revenue for alternative credentials, for instance, increased 12.3% to $95 million. That was driven by revenue increases in the company’s boot camps, particularly those for web development and cybersecurity.
