2U, Inc.

number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Steve Vorostek. You may begin.

Thank you, Jeannie, and good afternoon, everyone. Welcome to 2U's first quarter 2024 earnings call. Joining me on the call this afternoon are Paul Lalje, our chief executive officer, and Matt Norden, our chief financial officer. We will be sharing our remarks before opening the call up for your questions. But first, I'd like to cover a few housekeeping items. Our earnings release and slide presentation are available on the Investor Relations website. Our remarks today are being recorded and a webcast replay will be made available later today. Statements made during our call will include forward-looking statements regarding our financial and operating results, plans and objectives of management for future operations, including our performance improvement initiatives, plans and ability to improve our balance sheet, anticipated trends for learners and university partners, changes in laws, regulations, and agency guidance for our industry, and other matters. These statements are subjects 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 to the risk factors described in the documents filed with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the quarter-ended March 31, 2024, and other SEC filings, 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 to-use performance. These non-GAAP measures should be considered an addition to and not a substitute for or an isolation from our 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. Let me hand the call to Paul.

Thank you, Steve, and good afternoon, everyone. We are off to a solid start in 2024. Our first quarter financial results exceeded our expectations as we continue to execute our shrink to grow strategy where we are laser focused on revenue that delivers the greatest impact on profitability. Revenue for the quarter was $198.4 million, while our adjusted EBITDA was $17.3 million, We have seen an increase in total new enrollments, which went up to 116,000 from 88,000 in the last quarter across all of our 4,600 partner programs. In addition, our learner network has grown to 86 million compared to 83 million last quarter. We are continuing to lean into our product lines that are performing strongly and have some exciting progress to share on our executive education and degree businesses. Matt will provide further details on our financial results shortly. On the business side, we've made significant strides to hone our strategies to optimize the business for profitability and a return to revenue growth. This began with a rigorous evaluation of operations and making smart decisions to enhance programs and focus resources. We have made significant progress in establishing the right operational framework and are now establishing a baseline for revenue, margin, and cash flow. We are also tackling our balance sheet challenges head on. We have the management team to navigate these hurdles and the fundamentals to fix our balance sheet in the near term and return to top line growth in 2025. We are bullish on the future of 2U because of the market opportunity and our leading position in the education industry. Advances in generative AI coinciding with paradigm shifts in the labor force are creating a technology moment and driving strong demand for workforce development. According to the World Economic Forum's Future of Jobs Report for 2023, 60% of workers will require additional training by 2027, although only half of them currently have access to the proper training resources. The position at the forefront of this wave we are ready to seize the immense opportunity that this presents. However, to make the most of this opportunity, we must ensure that we have the right foundation in place. To fully capitalize on this moment, we continue to focus on three areas, product innovation, operational efficiency, and fixing our balance sheet. Our goal is clear, to be the go-to company for workforce development, meeting learners where the learner wants to be met. Starting with product, in the first quarter we launched 42 new degree programs, many in high demand fields with a strong organic appeal. As I mentioned last quarter, our objective is to launch programs that deliver the best value proposition and outcomes for students, as well as provide strong economics for 2U. These launches fit the objective and they bode well for our future financial performance. Most of these programs are under our FLEX model and require about one-fifth of the capital outlay of a degree under our traditional model. And we anticipate that they will begin generating positive cash flow about one to two years sooner. We remain encouraged by the robust demand from our partners for our educational offerings. Recently, we expanded our partnership with Pepperdine University to launch six new degree programs. bringing the total number of degrees with Pepperdine to 12. One of these new degrees, a master's in speech language pathology, is a first of its kind for Pepperdine University and its newly established College of Health Science. This program aligns perfectly with our strategic focus and our core competencies, leveraging our strengths in fields where we have a proven track record. we possess the most extensive network of placement centers and have consistently demonstrated our ability to scale programs effectively in this vertical. Building on this success, we expect year-over-year growth in degree enrollments from continuing programs. When combined with enrollments from newly launched programs, we have confidence in our ability to deliver profitable growth in our degree segment next year. Our long-term prospects are also looking good. Based on a robust pipeline, scale on our strong track record of delivering positive learner outcomes. In the alternative credential segment, we are seeing that online education is emerging as the most important tool for upskilling workforces facing unprecedented technological changes. We intend to capture this opportunity. This quarter, we signed five new contracts to offer AI boot camps, which we believe will help mitigate the softer demand we're seeing in coding. Just as important, we are working to deliver these programs as efficiently as possible through innovations in our delivery model. As with all of our business improvements, continuity of student experience and delivering, strong student outcomes remain at the forefront of our decision making. In the first quarter, Our students achieved completion rates of 89% for exec ed and 76% for our boot camps. In exec ed, we continue to see accelerated growth led by our AI courses offered by MIT Sloan and Oxford, and we expect this trend to continue. We recently signed a subscription-based contract with the Council of Higher Education in Andhra Pradesh, India. The program is off to an impressive start, with over 100 course completions in the first month alone. Our high-quality online courses are now available to over 1 million students across the state's 22 universities, providing a valuable learning resource. Our boot camp business is experiencing weaker demand, particularly in coding. Although our executive education business is performing well, and making up for some of the shortfall in boot camp, the overall predictability in demand for the boot camp business remains difficult. Now turning to operating efficiency. We are building on our prior actions, which have already reduced our operating expenses by approximately $90 million on an annual basis. Our focus remains on optimizing our cost structure on all fronts, from personnel and delivery costs to our technology stack and marketing efforts. Two specific ways we're looking to reduce our costs while increasing efficiency and quality are, first, through the introduction of technology into various points of our processes, and second, by strategically teaming up with partners that excel in specific areas. If a partner demonstrates superior efficiency and effectiveness, We'll prioritize collaboration over performing those functions ourselves, allowing us to focus on areas that are our core competency. These types of changes can increase our speed to market, improve our efficiency while reducing our fixed costs. edX Marketplace gives us powerful reach and scale. The key to unlocking the value of this reach and scale is organic lead generation. Through improved market segmentation, cross-sell activities, and search engine optimization, we expect to increase organic lead generation. Financial benefits include incremental revenue from a greater yield on marketing dollars and reducing our technology and marketing support costs. These are examples of how we're operating differently. Turning now to the balance sheet. We are tackling our balance sheet challenges head-on. The business improvements are meant to put us on a trajectory to deliver higher profitability and cash flow, which in return becomes the impetus for fixing the balance sheet. We have begun the process of fixing the balance sheet by working collaboratively with our lenders and expect those conversations will continue over the coming months as we work for the best possible terms. As we implement our plans, we are closely monitoring the needs of our students, partners, and employees. For students, we strive to continue delivering a compelling value proposition that includes the content they need, delivery that fits the way they want to learn, at a price that represents good value, and outcomes that support their life's goals. For university partners, we need to deliver programs that support and advance their missions while providing flexibility program structure. Just as important, we need to demonstrate that we have the right plan in place to continue to be a valued partner for many years to come. We are talking to partners regularly, especially as we work on fixing the balance sheet. And none of this is possible without the day-to-day contributions of our valuable employees. In a period of significant change for the company, we thank our employees, my colleague for their focus and unwavering commitment to our mission, our students, and our partners. In conclusion, I want to emphasize that we possess the necessary technology, partnerships, and resources to return to top line growth. Our primary goal is to expand our product range by offering relevant programs that are competitively priced and delivered in the most efficient manner. With new launches in the first quarter, and the upcoming new launches, we are confident we will achieve top line growth in 2025. Additionally, we expect our profitability and cash flow to improve due to the cost saving measures we are implementing. We are poised to fix our balance sheet while maintaining our reputation as a good company so we can ensure that we have a solid capital structure that matches our reputation as a top tiered company. And with that, I'll turn the call over to Matt.