2U, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the 2U Incorporated First Quarter 2022 Earnings Call. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you should require any assistance, please press 0 on your touch-tone telephone. I would now like to hand the conference over to your host. Linnian Brownstein, Deputy General Counsel. Thank you. Please go ahead. Linnian Brownstein, Deputy General Counsel. Thank you. Please go ahead. Linnian Brownstein, Deputy General Counsel.

Thank you, Operator. Good afternoon, everyone, and welcome to TU's first quarter 2022 earnings conference call. On the call this afternoon are Chip Pausek, our co-founder and CEO, and Paul Lalje, our CFO. Following Chip and Paul's prepared remarks, we will take questions. Our investor relations website, investor.tu.com, has our earnings press release and slide presentation, as well as a simultaneous webcast of this call. A webcast replay of the call will be made available for the next 90 days. Statements made on this call may include forward-looking statements regarding our financial and operating results, the continued impact of the COVID-19 pandemic, plans and objectives of management for future operations, the integration of edX, student and university demands, 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 plan or duty to update them. Please refer to the earnings press release and to the risk factors described in the documents we file with the SEC, including our annual report on Form 10-K for the year ended December 31, 2021. for information on risks, uncertainties, and assumptions that may cause our 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 years' 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-NAP measures, including reconciliations with comparable gap results, in our earnings press release and on the investor relations page of our website. With that, let me hand the call over to Chip.

Thank you, Lillian. Welcome, everyone, to our first quarter 2022 earnings call. Let's get straight to the results for the quarter and our guide. We had a strong first quarter, as we expected. we delivered 253.3 million in revenue, a 9% year-over-year increase over Q1 2021, and adjusted EBITDA totaled 12.3 million dollars. For guidance, which Paul will talk about in more detail later on the call, we're keeping our 2022 revenue guide in line with what we said in February, and we're increasing our adjusted EBITDA guidance, which is now expected to range from 80 to 90 million dollars. This represents growth of 28% at the midpoint and a $5 million increase to our previous guide. So overall, we're pleased with our Q1 results and how things are shaping up for the rest of the year. To be clear, the macro environment continues to remain complicated due to the ongoing impacts of COVID, the strong labor market, and some overall softness in education traffic and demand. People are also returning to normal life, and that has some impact. But I'm pleased to say we're holding our own nicely, all while we continue to transform 2U to a platform company. We believe our free-to-degree product portfolio with edX as our consumer brand is just what the market needs. Higher education, like so many industries, is becoming consumer-centric, a dynamic only accelerated by COVID. and we believe that the companies who best understand this learner-centric shift and can offer students the education and skills they want when they need it throughout their working lives will win. We've been working on integrating edX since we closed in November, and I wanted to take a moment to give you some details. edX is now the most comprehensive free-to-degree marketplace of educational offerings worldwide. If you go to edX.org today, not only will you see thousands of open courses, you'll now find an unmatched portfolio of all of 2U's offerings across degrees, boot camps, and executive education, available to learners everywhere in the world. It's pretty incredible, and the first time in 2U's history where all of our program offerings can be found in one place. We're off to a great start on edX, but we have much more to do. We see six keys to unlocking the full potential of edX.org and cementing it as the preferred destination of choice for learners across the globe. Those six are, number one, traffic, number two, SEO and content publishing, number three, portfolio marketing versus single product marketing, number four, product evolution with stackable credentials, number five, white label opportunities and revenue model flexibility, And number six, new international channels and enterprise expansion. We're making some good progress across all of these dimensions, and I'll hit on some with a few comments. We grew learners this quarter to 44 million, primarily with greater SEO efforts. Right out of the gate post-close, SEO and content publishing have been a core focus of our team. It's going unbelievably well, and we're already seeing it bear some pretty compelling fruit. For example, If you type executive education into Google, you should see edX as a top organic search result for that term, often in the top five. Go ahead and try it. You can do the same for online boot camps and online master's degrees. Although these offerings have been on edX.org for only a few months, they already rank on page one of Google's organic search returns, and in many cases, in the top five. This is a big deal. It means not just monetizing the existing traffic, but creating better and better lead flow every day. Organic traction on Google is a key driver of our business. You'll see us actively continue to publish new content on a discipline basis, a career basis, and a learning opportunity basis, all of which should continue to significantly improve organic search results across a variety of categories. It's early, but these SEO efforts are already creating some really great traction for 2U's products and partners. We're seeing run rates of 500,000 leads per year coming to the 2U prospect forms on edX in 2022. This represents nearly 10% of our lead volume company-wide, with no additional marketing costs involved. And better, we expect to be able to triple this amount over the next 18 months. The reality is a tiny fraction of the edX traffic are even seeing the 2U products. We have much, much wood to chop. University of London and LSE undergrad are an example of a 2U degree benefiting from this new lead flow. LSE undergrad is a global brand, a high-quality experience, and a very affordable degree, roughly $26,000. Learners are coming from all over the globe. We're seeing significant traction from edX. Over Q1 alone, edX already represents 20% of our lead volume and our largest non-paid channel for this degree. And those leads are submitting applications at a 30-plus percent better rate than leads from our paid channels. That is huge. The implications for this across our business is significant, particularly as we create more affordable pathways for people and improve our products fit with edX. on new products and stackable credentials. This takes time, but we're also making considerable progress. We love the MicroMasters and MicroBachelors programs. We have 30-plus MicroMasters in negotiation with our university partner base. These will create quality, career-focused options for our learners, saving them tuition dollars in the process. Each MicroMasters offers 9 to 12 credits for free to the learner, stacking into the full master's program if the learner wants to move ahead with their studies. And before I turn it over to Paul, I want to add a quick comment on both the Enterprise Channel and our university pipeline and partners. The Enterprise Channel continues to grow quickly. We saw almost 70% growth in revenue from Enterprise in Q1 compared to the previous quarter. We've integrated all activity under the edX for Business brand, and we're seeing a lot of interest and traction in the market because of the breadth and diversity of edX's offerings. On the university side, we continue to see growing demand from new and existing clients. We're on a bit of a roll now. I'm happy to announce our newest degree with the University of North Carolina at Chapel Hill. UNC is launching a new school of data science and a new degree program, a master's in data science. This will launch in 2023. We love this opportunity with one of our flagship clients. Overall, partners are excited about the opportunity that edX brings to the table as a digital transformation partner and a platform for serving adult learners worldwide. As a testament to the central role great universities play in the 2U vision, we're excited to announce the launch of 2U's first University Leadership Council. The council comprises 15 presidents and provosts from our partners who will help guide us in our mission to unlock human potential through high-quality, affordable online higher education. Members include Alan Garber, provost of Harvard University, Cynthia Barnhart, provost of MIT, and Wayne Frederick, president of Howard University, among other incredible leaders. The full council can be viewed at edX.org. Take time to check it out. Now I'll turn it over to Paul to get into the financials.