2U, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the 2U4Q20 earnings report call. At this time, all participants 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 will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I will now attend the conference over to Mr. Ken Goff, SVP of Investor Relations. Thank you. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and welcome to 2U's full year and fourth quarter 2020 earnings conference call. I'm Ken Goff, Senior Vice President of Investor Relations at 2U. I'm joined by Chip Pousek, our co-founder and CEO, and Paul Walge, 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 the 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 Securities 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. I want to start this call by first thanking my fellow two youths all around the world. 2020 presented us all with unprecedented complexities, and our global team rose to the challenge again and again to deliver on behalf of our partners, their students, and each other. Through it all, their hard work, resilience, empathy, and humor was truly inspiring and has made 2U a stronger and better company. That strength is clearly reflected in the financial and operational results we delivered for the year. We grew revenue by 35% to $775 million, and we achieved EBITDA profitability for the year, coming in at $16.1 million. We set out at the beginning of 2020 with four key financial priorities for the business. Drive strong revenue growth, deliver margin improvements, improve operational efficiency, and drive toward positive free cash flow. We outperformed expectations across all of these important measures, all while staying hyper-focused on quality, and most importantly, student outcomes. And we enter 2021 in a position of strength and with the momentum for another great year of performance and positive societal impact. We understand that as a disruptor, the burden of proof is on us to demonstrate that the business we built is sustainable. We never doubted it, and that chapter should be closed for the rest of you as well. I think it's clear that 2020 results provide many compelling proof points And with each passing quarter, we expect to add more. You'll hear more on all this from Paul. So I'll now turn to what we're seeing in the marketplace. Earlier this year, you heard me talk about the structural changes and challenges facing higher education as institutions grapple with a digital transformation imperative, an imperative, to be clear, that was at their doorstep even before COVID. Since the start of the pandemic, we've seen this drive a clear increase in pipeline conversations with existing and prospective partners. Universities understand that online is here to stay and must be part of their broader institutional strategies now and for the future. We hear three common and interconnected themes emerging from our conversations. First, a focus on better serving non-traditional working adult learners who are looking for both degree and non-degree offerings across their careers and lives. Second, pressure to identify new and sustainable revenue streams at the same time institutions are facing inescapable budgetary and investment constraints. And third, growing demands on colleges and universities from business and government to do a better job aligning students in-demand jobs, and creating career-focused upskilling and reskilling pathways. We believe these three themes reflect structural changes already happening in the market that will continue to shape the higher education landscape long after COVID is under control. You can already see them playing out in some of our recent announcements. Take our new partnership with Morehouse College, one of the most respected and iconic HBCUs, with an unmatched 154-year legacy of excellence in educating black men of integrity and character. Morehouse President David Thomas has a clear digital transformation vision for the college with a focus on better serving non-traditional adult learners. And our new online undergraduate degree offerings represent the foundational building blocks of that vision. As President Thomas said in announcing our partnership last week, quote, There's never been a more important time for the impact of Morehouse to scale, end quote. And he's right. Today, according to the Census Bureau, there are over 3 million black men in the U.S. with some college credits. Morehouse Online will now offer the market a flexible, affordable, and academically rigorous degree completion program from an institution with an unrivaled track record of positively transforming the lives of black men. If that doesn't give meaning to our mission of eliminating the back row in higher education, then I don't know what will. But when it comes to undergrad, our partnership with Morehouse College is neither the beginning nor the end of the story for 2U. It took us over a decade to enter the undergraduate market, which is more than six times larger than the graduate market. And in the past 14 months, we've already signed Simmons University, the London School of Economics, and now Morehouse, three great partners. Keep an eye out for even more 2U-powered undergrad offerings. As more and more universities move to embrace online as part of their digital transformation strategies, one of the challenges they will face is deciding what degree and non-degree programs to launch. And in an increasingly crowded online marketplace where schools are constrained by tight budgets and limited investment dollars, these can be high-stakes decisions. Getting it wrong can result in significant financial and reputational risk to a school, as reflected in the recent Burning Glass report, Bad Bets, The Cost of Failing Programs. One of the underappreciated capabilities we bring to the table, beyond just investment capital, is an unmatched proprietary data set that helps our partners make well-informed choices about the right programs to launch, which is now more important than ever. Finally, before turning it over to Paul, I want to spend a few minutes talking about our alternative credential segment. These offerings are not only delivering impressive growth, but also meeting critical societal needs. Even before COVID, the demand for non-degree, career-focused, skill-based post-secondary education was growing rapidly. The economic toll of COVID, particularly on women and black and brown communities, has been devastating. only furthering demand for these kinds of alternative credentials. Even workers who were able to remain employed during the pandemic have seen their companies rapidly pivot to digital and embrace e-commerce in order to survive. So these workers also need to learn new skills to stay relevant. Our growing portfolio of short courses focused on functional and leadership skills, as well as emerging and disruptive technologies, is purpose-built for this, Our newest short course partnership is with the Institute for Management and Development in Switzerland, or IMD, announced earlier this week. This is the latest example of the growing strength and international reach of our alternative credentials business. We couldn't be more thrilled to team up with David Bach, Dean of Innovation and Programs from IMD, one of the world's top-ranked and most respected business schools, to offer short courses in cybersecurity, supply chain, and other timely and relevant subjects. It's clear there's no silver bullet for solving society's growing workforce skills gap. But we believe the unparalleled reach and scale of our global offerings and network of tech skills-based boot camps will allow 2U to play an important role in helping solve this problem. In 2020 alone, more than 20,000 students enrolled in 2U-powered university boot camps. And today, we power boot camps in eight different career-relevant subjects, coding, data analytics, UX UI, cybersecurity, technology project management, FinTech, digital marketing, and product management. And across our portfolio, we now support boot camps at 44 different universities in 28 states, covering more than 75% of the total US population. We're also providing comprehensive career services at an industry-leading scale. Over the past 12 months, our workforce engagement team has hosted more than 750 job-related events and spent 22,000 hours supporting job-seeking students. We also provided students from our boot camps over 11,000 free job referrals to our growing network of more than 6,600 employers. But helping close the workforce skills gap isn't just about powering quality programs and career services at scale. it's also about creating more accessible and affordable offerings that foster greater equality of opportunity and we're finding innovative ways to do just that whether it's our three million dollar scholarship program which has already reached over a thousand students since its launch in june of last year our groundbreaking collaboration with netflix and norfolk state university or our more recently announced Access to Education Scholarship Fund, a private public partnership with Employee Prince George's, our local Maryland workforce organization, and George Washington University. We're breaking down historical barriers and creating pathways into well-paying, in-demand jobs for women and minority communities. We believe these kinds of rescaling and upscaling partnerships between higher education, business and government are both scalable and sustainable across urban and rural communities. They also represent the kind of smart policy solutions we need to get millions of Americans back to work. So we look forward to working with governors as well as the new Congress and Biden administration on a bipartisan basis to support expansion of funding for these and other higher education initiatives. As we kick off the second month of 2021, I'm both realistic about the difficulties we all continue to face as a result of the ongoing threats posted by COVID, but at the same time, deeply optimistic about the positive impact, too, you can have on the lives of people who choose education as a step forward on their path to a better future. With that, over to our fine CFO, Paul Laugie.