2U, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the To Use Third Quarter Earnings Code. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone keypad. If you're requiring assistance from an operator, please press star 0. And now I'd like to turn your conference over to your speaker today. Mr. Kinkoff, please go ahead, sir.

Thank you, Operator. Good afternoon, everyone, and welcome to 2U's third quarter 2020 earnings conference call. I'm Ken Gough, SVP of Investor Relations at 2U, and I'd like to start by saying that I am the appropriate amount of excited for this to be my first time reading the disclosures on one of our calls. I'm also joined by Chip Pausack, our CEO, and Paul Lalje, our CFO. Following Chip and Paul's prepared remarks, we will take questions. Our Investor Relations website, investor.2u.com, has our earnings press release and slide presentation, as well as a simultaneous webcast of this call. A webcast replay of this call will be made available for the next 90 days. Statements made on this call include forward-looking statements regarding our financial and operating results, the continued impact of COVID-19 pandemic, new educational offerings, student and university demand, and other matters. These statements are subject to risks, uncertainties, and assumptions. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them. Please refer to the earnings press release and the risk factors described in the documents we file with the Security and Exchange Commission, including our annual report on Form 10-K for the year ended December 31st, 2019, and our most recent quarterly report on Form 10-Q for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of two-use performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and on the investor relations page of our website. With that, let me hand it over to Chip.

Thanks, Ken. To start, I hope everyone listening is doing well and staying safe. Turning to our business, 2U had an excellent quarter. It's crystal clear that our offerings are exactly what students and universities need, and we're providing significant societal benefit. It's apparent in the demand we're seeing and in our results. We delivered revenue of 201.1 million, which is growth of 31 percent all organic. Adjusted EBITDA crossed into positive territory, coming in at 3.7 million. Cash flow is approaching break-even on a trailing four-quarter basis, and our balance sheet is in a net positive cash position for the first time since early 2019. Enrollment trends in the third quarter were favorable, and we expect that trend to continue. We're clearly delivering products that meet the diverse needs of lifelong learners. And we believe the impacts of COVID-19 accelerated demand across our three primary products, short courses, boot camps, and degrees. And all of this is reflected in our reintroduced guidance. Now let's take a step back so I can offer you a few perspectives on the business. I'm very proud of what 2U has accomplished in 2020. Twelve and a half years ago, we started with a vision for where higher education was headed. And because of the strategic choices and investments we've made since then, 2U is now uniquely positioned to meet the needs of our partners and lifelong learners at a moment when the value and demand for online education has never been greater. We believe the impact of these choices and investments, particularly our move into alternative credentials, can now be seen in the strength of our third quarter results. The value of non-degree educational offerings was clear to adult learners even before the COVID-19 outbreak. In a survey from research firm Strata, the majority of respondents saw themselves as more attractive job candidates and reported personal and subjective benefits from earning non-degree credentials that go beyond labor market returns. That sentiment among both learners and employers is also reflected in the findings of our recently released report called The future of work is here, which is linked in the earnings presentation. We first saw the strategic and growth potential in this segment of the market four years ago before acquiring the short course business. And our acquisition of the boot camp business five quarters ago further demonstrated our commitment to expanding non-degree offerings. Today, those deals are bearing fruit. We believe that 2U's alternative credential segment generates more annual revenue than any of the other MOOC and alternative credential providers based anywhere outside of China. These non-degree offerings serve directly as an on-ramp to degrees, a way to supplement existing degree offerings, and an avenue for current degree holders to upskill or reskill. They're a natural complement to, not a replacement for, our degree business. In fact, in today's challenging economy, a degree clearly helps lead to job stability. Just look at the Bureau of Labor Statistics unemployment numbers over 2020, which consistently show that individuals with only a high school diploma are out of work at rates at more than double those with a college degree. As we've said before, the career curriculum continuum is not a linear concept, but rather an expression and reflection of the breadth of educational offerings adult learners need and want at various career and life stages. So 2U's portfolio tells a story of and, not or. The whole is greater than the sum of its parts. And the impact from COVID and the economy is only making our portfolio of offerings more valuable. We're seeing growing interest from new and existing partners in launching not just alternative credential and grad programs, but also online undergrad degrees, which is by far the largest part of the addressable higher education market and an area that has become hot for 2U. our LSE and University of London undergrad degree offerings have officially expanded again with the addition of two signature degrees, a BSc in finance and a BSc in mathematics and economics. And the first LSE undergrad cohort successfully launched in August with the upcoming fall cohort expected to come in well above our initial targets. We've talked about early indicators over the past few quarters. which are now beginning to translate into current period results. These leading indicators demonstrate the counter-cyclical attributes of this market, and we believe will drive upside to future performance. And given the long cycle nature of the degree business, we expect the positive momentum should be sustainable going forward. As the business grows, we've also improved our enterprise-wide operational efficiency and increased our liquidity. the degree business is now nicely profitable on an EBITDA basis with strong cohort margins. This enhanced profitability is the result of a more measured cadence of program launches and an increased focus on driving scale and tech-enabled efficiencies. As we invest in launching profitable offerings across our portfolio of products, we remain focused on delivering continued margin expansion and driving toward positive cash generations. Looking at the market landscape today, the real challenge and opportunity for universities is not finding an online program manager to launch a degree. It's finding a true digital transformation partner in order to better serve adult learners who, at all stages and ages of life, are searching for high-quality online education offerings differentiated by length or cost, certificate or degree, standalone or stackable. Because of the strategic choices and investments 2U made over the past 12 and a half years, we've become the digital transformation partner of choice to more than 75 great nonprofit universities around the world. Through our scalable platform, comprehensive tech-enabled capabilities, and market-relevant product strategy across the career curriculum continuum, 2U is helping drive and enable the digital transformation of the great nonprofit universities. And through it all, 2U has evolved and become more nimble and innovative. We're offering universities co-investment opportunities, supporting our partners' campus operations, and launching innovative new products like our new artificial intelligence offering with Columbia University School of Engineering. Another exciting example of 2U's innovation is our tech boot camp for credit announcement last week with Netflix and Norfolk State University. We're happy to team up with an iconic company like Netflix and one of the nation's most respected HBCUs to help increase black representation and career pathways in tech. So as they like to say at Norfolk State, behold the green and gold. There's never been a more important and exciting time to be in EdTech and 2U is meeting the moment and doing our part to help drive the digital transformation and sustainability of higher education. We are powering more relevant, high-quality, blended, affordable, and accessible degrees and alternative credentials that meet society's critical needs. Now I'll turn it over to Paul to take you through our results and discuss expectations for the year.