Dive Brief:

• After publicly announcing a market-moving shift last quarter in its long-term growth strategy, 2U returned to investors in the latest quarter reporting plans to streamline operations. Executives said they also want to be more strategic about the programs they add and how they market them.
• 2U added 15 new degree programs during the period. Its revenue per full course equivalent enrollment — the number of students enrolled in a course multiplied by the share of the course completed during that period — was slightly higher for its alternative credential segment ($3,825) than for its graduate segment ($2,527).
• CEO Chip Paucek emphasized the company's interest in offering a wider array of programs. "Over time, we need to have price points across the entire spectrum," he said on a call with analysts Tuesday.

Dive Insight:

Paul Lalljie, who was hired as 2U's new chief financial officer last month, said the short courses and alternative credentials are "more capital-light," giving the company more options for how it adds programs and the level of investment it makes.

Paucek emphasized the influence of shorter-term programs for 2U going forward. 

"On the STEM side ... if we hadn't gone down the path of short courses and boot camps, we'd be at a very significant competitive disadvantage to the rest of the space," he said. "That's where we need to be, is lower-priced, faster-options for STEM that at the same time drive quality."

Last quarter, 2U said it would slow adding new programs and expects them to be smaller going forward. 

The company also said on its second-quarter earnings call that it would work with colleges on a wider range of program types outside of full degrees, including with an existing customer on a fee-for-service payment basis. That is a notable shift from its longtime approach of sharing revenue with colleges in exchange for help standing up an online program.

At the time, 2U credited growing competition in online education as a reason for its broader change in tack. The company expects the fee-for-service model will help it support smaller programs.

Though its stock fell 65% when it announced the changes — and has not fully returned to prior levels ⏤ higher ed observers told Education Dive they weren't necessarily surprised at the news. In the last year, 2U has acquired companies and formed partnerships to increase its program variety. In February, for instance, 2U announced it was working with Keypath Education to support smaller, lower-cost online degree programs.

In April, it announced it was buying boot camp company Trilogy in a $750 million cash-and-stock deal. The move netted 2U nearly three-dozen new college and university partnerships. It also shed light on how it might work with its partners on a wide array of program types, with the University of North Carolina at Chapel Hill's business school saying it would offer for-credit coding classes through the new arrangement. 

The company has plotted its diversification on what it calls the "career curriculum continuum," which spans MOOCs to full degrees and includes offerings such as short courses, course stacks, boot camps and professional certificates. 

More recently, 2U said it plans to work across UNC-Chapel Hill to deliver online programs and could do so with other institutions. And it is working with the London School of Economics on an online bachelor's degree.

"More flexible partnership options are a reality of where we're going," Paucek told analysts on Tuesday's call. 

Broadening its focus beyond graduate degrees puts attention on the company's short-course segment. 

During the third quarter, revenue in 2U's alternative credentials segment rose by $4 million, or 23.2% year-over-year, excluding the impact of acquiring Trilogy earlier this year. Including the acquisition, the segment pulled in $50.4 million in total revenue for the period. Full course equivalent enrollment rose 64.8% year-over-year during that time, or 5,792 students.

Meanwhile, revenue in the company's graduate program segment increased by $13.7 million, or 15.2%, from a year ago. That was driven by a 25.2% increase in enrollment, or 8,245 students, and offset by a slight dip in revenue per full course equivalent enrollment during the quarter. Executives said declines from a legacy program hampered the segment's growth.