Delaware | 26-2335939 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
7900 Harkins Road, Lanham, MD | 20706 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ | |
Emerging growth company ¨ |
Condensed Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017 | ||
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2018 and 2017 | ||
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2018 | ||
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2018 and 2017 | ||
• | trends in the higher education market and the market for online education, and expectations for growth in those markets; |
• | the acceptance, adoption and growth of online learning by colleges and universities, faculty, students, employers, accreditors and state and federal licensing bodies; |
• | our ability to comply with evolving regulations and legal obligations related to data privacy, data protection and information security; |
• | our expectations about the potential benefits of our cloud-based software-as-a-service, or “SaaS,” technology and technology-enabled services to university clients and students; |
• | our dependence on third parties to provide certain technological services or components used in our platform; |
• | our ability to meet the anticipated launch dates of our graduate programs and short courses; |
• | our expectations about the predictability, visibility and recurring nature of our business model; |
• | our ability to acquire new university clients and expand our graduate programs and short courses with existing university clients; |
• | our ability to successfully integrate the operations of Get Educated International Proprietary Limited, or GetSmarter, achieve the expected benefits of the acquisition and manage, expand and grow the combined company; |
• | our ability to execute our growth strategy in the international, undergraduate and non-degree alternative markets; |
• | our ability to continue to acquire prospective students for our graduate programs and short courses; |
• | our ability to affect or increase student retention in our graduate programs; |
• | our expectations about the scalability of our cloud-based platform; |
• | our expectations regarding future expenses in relation to future revenue; |
• | potential changes in regulations applicable to us or our university clients; and |
• | our expectations regarding the amount of time our cash balances and other available financial resources will be sufficient to fund our operations. |
September 30, 2018 | December 31, 2017 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 442,226 | $ | 223,370 | |||
Short-term investments | 25,000 | — | |||||
Accounts receivable, net | 49,651 | 14,174 | |||||
Prepaid expenses and other assets | 14,878 | 10,509 | |||||
Total current assets | 531,755 | 248,053 | |||||
Property and equipment, net | 51,527 | 49,055 | |||||
Goodwill | 62,955 | 71,988 | |||||
Amortizable intangible assets, net | 130,692 | 90,761 | |||||
Prepaid expenses and other assets, non-current | 34,562 | 22,205 | |||||
Total assets | $ | 811,491 | $ | 482,062 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued expenses | $ | 34,513 | $ | 22,629 | |||
Accrued compensation and related benefits | 20,137 | 19,017 | |||||
Deferred revenue | 18,953 | 7,024 | |||||
Other current liabilities | 10,708 | 9,330 | |||||
Total current liabilities | 84,311 | 58,000 | |||||
Deferred government grant obligations | 3,500 | 3,500 | |||||
Deferred tax liabilities, net | 7,001 | 10,087 | |||||
Lease-related and other liabilities, non-current | 24,550 | 22,643 | |||||
Total liabilities | 119,362 | 94,230 | |||||
Commitments and contingencies (Note 5) | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued | — | — | |||||
Common stock, $0.001 par value, 200,000,000 shares authorized, 57,905,339 shares issued and outstanding as of September 30, 2018; 52,505,856 shares issued and outstanding as of December 31, 2017 | 58 | 53 | |||||
Additional paid-in capital | 948,070 | 588,289 | |||||
Accumulated deficit | (248,998 | ) | (205,836 | ) | |||
Accumulated other comprehensive income (loss) | (7,001 | ) | 5,326 | ||||
Total stockholders’ equity | 692,129 | 387,832 | |||||
Total liabilities and stockholders’ equity | $ | 811,491 | $ | 482,062 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | $ | 106,963 | $ | 70,250 | $ | 296,674 | $ | 200,074 | |||||||
Costs and expenses | |||||||||||||||
Curriculum and teaching | 6,351 | 1,792 | 16,665 | 1,792 | |||||||||||
Servicing and support | 16,586 | 12,939 | 49,116 | 37,322 | |||||||||||
Technology and content development | 16,361 | 12,735 | 45,436 | 33,080 | |||||||||||
Marketing and sales | 60,548 | 41,311 | 171,982 | 113,223 | |||||||||||
General and administrative | 18,974 | 17,227 | 63,323 | 44,821 | |||||||||||
Total costs and expenses | 118,820 | 86,004 | 346,522 | 230,238 | |||||||||||
Loss from operations | (11,857 | ) | (15,754 | ) | (49,848 | ) | (30,164 | ) | |||||||
Interest income | 1,799 | 18 | 3,053 | 267 | |||||||||||
Interest expense | (27 | ) | (36 | ) | (81 | ) | (37 | ) | |||||||
Other income (expense), net | (273 | ) | 59 | (1,493 | ) | (972 | ) | ||||||||
Loss before income taxes | (10,358 | ) | (15,713 | ) | (48,369 | ) | (30,906 | ) | |||||||
Income tax benefit | 414 | 974 | 5,207 | 974 | |||||||||||
Net loss | $ | (9,944 | ) | $ | (14,739 | ) | $ | (43,162 | ) | $ | (29,932 | ) | |||
Net loss per share, basic and diluted | $ | (0.17 | ) | $ | (0.30 | ) | $ | (0.78 | ) | $ | (0.62 | ) | |||
Weighted-average shares of common stock outstanding, basic and diluted | 57,663,361 | 48,961,914 | 55,128,845 | 47,962,201 | |||||||||||
Other comprehensive loss | |||||||||||||||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | (2,781 | ) | (3,617 | ) | (12,327 | ) | (3,617 | ) | |||||||
Comprehensive loss | $ | (12,725 | ) | $ | (18,356 | ) | $ | (55,489 | ) | $ | (33,549 | ) |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, June 30, 2018 | 57,315,585 | $ | 57 | $ | 936,664 | $ | (239,054 | ) | $ | (4,220 | ) | $ | 693,447 | |||||||||
Exercise of stock options | 499,043 | — | 2,239 | — | — | 2,239 | ||||||||||||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | 68,228 | 1 | (44 | ) | — | — | (43 | ) | ||||||||||||||
Issuance of common stock in connection with employee stock purchase plan | 22,483 | — | 1,278 | — | — | 1,278 | ||||||||||||||||
Stock-based compensation expense | — | — | 7,933 | — | — | 7,933 | ||||||||||||||||
Net loss | — | — | — | (9,944 | ) | — | (9,944 | ) | ||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (2,781 | ) | (2,781 | ) | ||||||||||||||
Balance, September 30, 2018 | 57,905,339 | $ | 58 | $ | 948,070 | $ | (248,998 | ) | $ | (7,001 | ) | $ | 692,129 |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, December 31, 2017 | 52,505,856 | $ | 53 | $ | 588,289 | $ | (205,836 | ) | $ | 5,326 | $ | 387,832 | ||||||||||
Exercise of stock options | 1,000,574 | — | 7,032 | — | — | 7,032 | ||||||||||||||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | 543,092 | 1 | (3,451 | ) | — | — | (3,450 | ) | ||||||||||||||
Issuance of common stock in connection with a public offering of common stock, net of offering costs | 3,833,334 | 4 | 330,858 | — | — | 330,862 | ||||||||||||||||
Issuance of common stock in connection with employee stock purchase plan | 22,483 | — | 1,278 | — | — | 1,278 | ||||||||||||||||
Stock-based compensation expense | — | — | 24,064 | — | — | 24,064 | ||||||||||||||||
Net loss | — | — | — | (43,162 | ) | — | (43,162 | ) | ||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (12,327 | ) | (12,327 | ) | ||||||||||||||
Balance, September 30, 2018 | 57,905,339 | $ | 58 | $ | 948,070 | $ | (248,998 | ) | $ | (7,001 | ) | $ | 692,129 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (43,162 | ) | $ | (29,932 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 23,382 | 13,318 | |||||
Stock-based compensation expense | 24,064 | 15,537 | |||||
Changes in operating assets and liabilities: | |||||||
Increase in accounts receivable, net | (35,543 | ) | (33,915 | ) | |||
Increase in prepaid expenses and other assets | (5,426 | ) | (1,638 | ) | |||
Increase in accounts payable and accrued expenses | 10,796 | 6,101 | |||||
Increase (decrease) in accrued compensation and related benefits | 1,185 | (1,447 | ) | ||||
Increase in deferred revenue | 12,210 | 11,723 | |||||
Increase in payments to university clients | (11,066 | ) | (12,146 | ) | |||
(Decrease) increase in other liabilities, net | (3,976 | ) | 5,349 | ||||
Other | 1,493 | 971 | |||||
Net cash used in operating activities | (26,043 | ) | (26,079 | ) | |||
Cash flows from investing activities | |||||||
Purchase of a business, net of cash acquired | — | (97,102 | ) | ||||
Additions of amortizable intangible assets | (51,713 | ) | (16,383 | ) | |||
Purchases of property and equipment | (8,027 | ) | (20,924 | ) | |||
Purchase of investments | (25,000 | ) | — | ||||
Advances repaid by university clients | 25 | — | |||||
Advances made to university clients | (300 | ) | — | ||||
Net cash used in investing activities | (85,015 | ) | (134,409 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of common stock, net of offering costs | 330,862 | 189,917 | |||||
Proceeds from exercise of stock options | 7,032 | 4,118 | |||||
Tax withholding payments associated with settlement of restricted stock units | (3,450 | ) | (1,310 | ) | |||
Proceeds from ESPP share purchases | 1,278 | — | |||||
Proceeds from debt | — | 3,500 | |||||
Payments on debt | — | (984 | ) | ||||
Payments for acquisition of amortizable intangible assets | (4,900 | ) | — | ||||
Net cash provided by financing activities | 330,822 | 195,241 | |||||
Effect of exchange rate changes on cash | (908 | ) | (1,049 | ) | |||
Net increase in cash and cash equivalents | 218,856 | 33,704 | |||||
Cash and cash equivalents, beginning of period | 223,370 | 168,730 | |||||
Cash and cash equivalents, end of period | $ | 442,226 | $ | 202,434 |
1. | Organization |
2. | Significant Accounting Policies |
3. | Business Combination |
Nine Months Ended September 30, 2017 | |||
(in thousands, except per share amounts) | |||
Pro forma revenue | $ | 207,768 | |
Pro forma net loss | (34,306 | ) | |
Pro forma net loss per share, basic and diluted | $ | (0.72 | ) |
4. | Goodwill and Amortizable Intangible Assets |
Graduate Program Segment | Short Course Segment | Total | |||||||||
(in thousands) | |||||||||||
Balance as of December 31, 2017 | $ | — | $ | 71,988 | $ | 71,988 | |||||
Foreign currency translation adjustments | — | (9,033 | ) | (9,033 | ) | ||||||
Balance as of September 30, 2018 | $ | — | $ | 62,955 | $ | 62,955 |
September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||
Estimated Average Useful Life (in years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||
Capitalized technology | 3-5 | $ | 63,789 | $ | (14,593 | ) | $ | 49,196 | $ | 27,108 | $ | (9,486 | ) | $ | 17,622 | ||||||||||
Capitalized content development | 4-5 | 73,428 | (28,758 | ) | 44,670 | 55,872 | (21,417 | ) | 34,455 | ||||||||||||||||
University client relationships | 9 | 26,033 | (3,616 | ) | 22,417 | 29,443 | (1,636 | ) | 27,807 | ||||||||||||||||
Trade names and domain names | 10 | 16,852 | (2,443 | ) | 14,409 | 12,119 | (1,242 | ) | 10,877 | ||||||||||||||||
Total amortizable intangible assets, net | $ | 180,102 | $ | (49,410 | ) | $ | 130,692 | $ | 124,542 | $ | (33,781 | ) | $ | 90,761 |
Remainder of 2018 | $ | 6,094 | |
2019 | 23,015 | ||
2020 | 19,996 | ||
2021 | 15,503 | ||
2022 | 11,688 | ||
Thereafter | 22,043 | ||
Total | $ | 98,339 |
5. | Commitments and Contingencies |
6. | Debt |
7. | Income Taxes |
8. | Stockholders’ Equity |
Outstanding stock options | 4,097,480 | |
Possible future issuance under 2014 Equity Incentive Plan | 6,139,677 | |
Outstanding restricted stock units | 1,217,161 | |
Available for future issuance under employee stock purchase plan | 977,517 | |
Total shares of common stock reserved for future issuance | 12,431,835 |
9. | Stock-Based Compensation |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Curriculum and teaching | $ | 3 | $ | 2 | $ | 10 | $ | 2 | |||||||
Servicing and support | 1,346 | 1,100 | 3,538 | 2,956 | |||||||||||
Technology and content development | 1,089 | 904 | 2,875 | 2,447 | |||||||||||
Marketing and sales | 839 | 463 | 2,046 | 1,235 | |||||||||||
General and administrative | 4,656 | 3,678 | 15,595 | 8,897 | |||||||||||
Total stock-based compensation expense | $ | 7,933 | $ | 6,147 | $ | 24,064 | $ | 15,537 |
Number of Options | Weighted-Average Exercise Price per Share | |||||
Outstanding balance at December 31, 2017 | 4,559,176 | $ | 15.10 | |||
Granted | 663,615 | 84.13 | ||||
Exercised | (1,000,574 | ) | 7.03 | |||
Forfeited | (124,737 | ) | 41.20 | |||
Expired | — | — | ||||
Outstanding balance at September 30, 2018 | 4,097,480 | 27.45 | ||||
Exercisable at September 30, 2018* | 2,814,863 | 13.34 |
* | As of September 30, 2018, the aggregate intrinsic value of options exercisable was $174.2 million and such shares had a weighted-average remaining contractual term of 5.08 years. |
Number of Restricted Stock Units | Weighted- Average Grant Date Fair Value | |||||
Outstanding balance at December 31, 2017 | 1,413,423 | $ | 29.95 | |||
Granted | 523,281 | 81.74 | ||||
Vested | (585,799 | ) | 25.54 | |||
Forfeited | (133,744 | ) | 43.98 | |||
Outstanding balance at September 30, 2018 | 1,217,161 | 52.80 |
10. | Net Loss per Share |
Three and Nine Months Ended September 30, | |||||
2018 | 2017 | ||||
Stock options | 4,097,480 | 4,912,509 | |||
Restricted stock units | 1,217,161 | 1,435,180 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator (in thousands): | |||||||||||||||
Net loss | $ | (9,944 | ) | $ | (14,739 | ) | $ | (43,162 | ) | $ | (29,932 | ) | |||
Denominator: | |||||||||||||||
Weighted-average shares of common stock outstanding, basic and diluted | 57,663,361 | 48,961,914 | 55,128,845 | 47,962,201 | |||||||||||
Net loss per share, basic and diluted | $ | (0.17 | ) | $ | (0.30 | ) | $ | (0.78 | ) | $ | (0.62 | ) |
11. | Segment and Geographic Information |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Revenue by segment* | |||||||||||||||
Graduate Program Segment | $ | 89,719 | $ | 65,924 | $ | 251,487 | $ | 195,748 | |||||||
Short Course Segment | 17,244 | 4,326 | 45,187 | 4,326 | |||||||||||
Total revenue | $ | 106,963 | $ | 70,250 | $ | 296,674 | $ | 200,074 | |||||||
Segment profitability** | |||||||||||||||
Graduate Program Segment | $ | 5,564 | $ | (718 | ) | $ | (615 | ) | $ | 1,693 | |||||
Short Course Segment | (889 | ) | (3,002 | ) | (1,787 | ) | (3,002 | ) | |||||||
Total segment profitability | $ | 4,675 | $ | (3,720 | ) | $ | (2,402 | ) | $ | (1,309 | ) | ||||
Segment profitability margin*** | |||||||||||||||
Graduate Program Segment | 5.2 | % | (1.0 | )% | (0.2 | )% | 0.8 | % | |||||||
Short Course Segment | (0.8 | ) | (4.3 | ) | (0.6 | ) | (1.5 | ) | |||||||
Total segment profitability margin | 4.4 | % | (5.3 | )% | (0.8 | )% | (0.7 | )% |
* | The Company has excluded approximately $44,000 of intersegment revenues from the three and nine months ended September 30, 2018. |
** | The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. |
*** | The Company defines segment profitability margin as segment profitability as a percentage of consolidated revenue. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net loss | $ | (9,944 | ) | $ | (14,739 | ) | $ | (43,162 | ) | $ | (29,932 | ) | |||
Adjustments: | |||||||||||||||
Interest income | (1,799 | ) | (18 | ) | (3,053 | ) | (267 | ) | |||||||
Interest expense | 27 | 36 | 81 | 37 | |||||||||||
Foreign currency loss (gain) | 273 | (59 | ) | 1,493 | 972 | ||||||||||
Depreciation and amortization expense | 8,599 | 5,887 | 23,382 | 13,318 | |||||||||||
Income tax benefit | (414 | ) | (974 | ) | (5,207 | ) | (974 | ) | |||||||
Stock-based compensation expense | 7,933 | 6,147 | 24,064 | 15,537 | |||||||||||
Total adjustments | 14,619 | 11,019 | 40,760 | 28,623 | |||||||||||
Total segment profitability | $ | 4,675 | $ | (3,720 | ) | $ | (2,402 | ) | $ | (1,309 | ) |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Total assets | |||||||
Graduate Program Segment | $ | 700,978 | $ | 359,597 | |||
Short Course Segment | 110,513 | 122,465 | |||||
Total assets | $ | 811,491 | $ | 482,062 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Trade accounts receivable | |||||||
Graduate Program Segment accounts receivable, net | $ | 22,397 | $ | 12,520 | |||
Graduate Program Segment unbilled revenue | 25,583 | 666 | |||||
Short Course Segment accounts receivable, net | 1,435 | 988 | |||||
Total trade accounts receivable | $ | 49,415 | $ | 14,174 | |||
Contract liabilities | |||||||
Graduate Program Segment deferred revenue | $ | 9,607 | $ | 2,523 | |||
Short Course Segment deferred revenue | 9,346 | 4,501 | |||||
Total contract liabilities | $ | 18,953 | $ | 7,024 |
• | Our Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. We target students seeking a full graduate degree of the same quality they would receive on-campus. |
• | Our Short Course Segment provides premium online short courses to working professionals in more than 150 countries. We target working professionals seeking career advancement through skills attainment. |
• | Revenue was $107.0 million, an increase of 52.3% from $70.3 million in the third quarter of 2017. |
• | Net loss was $(9.9) million, or $(0.17) per share, compared to $(14.7) million or $(0.30) per share, in the third quarter of 2017. |
• | Adjusted EBITDA was $4.7 million, compared to an adjusted EBITDA loss of $(3.7) million in the third quarter of 2017. |
• | We launched five new graduate programs. |
Three Months Ended September 30, | |||||||||||||||||||||
2018 | 2017 | Period-to-Period Change | |||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Amount | Percentage | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Revenue | $ | 106,963 | 100.0 | % | $ | 70,250 | 100.0 | % | $ | 36,713 | 52.3 | % | |||||||||
Costs and expenses | |||||||||||||||||||||
Curriculum and teaching | 6,351 | 5.9 | 1,792 | 2.6 | 4,559 | 254.5 | |||||||||||||||
Servicing and support | 16,586 | 15.5 | 12,939 | 18.4 | 3,647 | 28.2 | |||||||||||||||
Technology and content development | 16,361 | 15.3 | 12,735 | 18.1 | 3,626 | 28.5 | |||||||||||||||
Marketing and sales | 60,548 | 56.5 | 41,311 | 58.8 | 19,237 | 46.6 | |||||||||||||||
General and administrative | 18,974 | 17.7 | 17,227 | 24.5 | 1,747 | 10.1 | |||||||||||||||
Total costs and expenses | 118,820 | 110.9 | 86,004 | 122.4 | 32,816 | 38.2 | |||||||||||||||
Loss from operations | (11,857 | ) | (10.9 | ) | (15,754 | ) | (22.4 | ) | 3,897 | (24.7 | ) | ||||||||||
Interest income | 1,799 | 1.7 | 18 | — | 1,781 | * | |||||||||||||||
Interest expense | (27 | ) | — | (36 | ) | (0.1 | ) | 9 | (25.0 | ) | |||||||||||
Other income (expense), net | (273 | ) | (0.3 | ) | 59 | 0.1 | (332 | ) | * | ||||||||||||
Loss before income taxes | (10,358 | ) | (9.5 | ) | (15,713 | ) | (22.4 | ) | 5,355 | (34.1 | ) | ||||||||||
Income tax benefit | 414 | 0.4 | 974 | 1.4 | (560 | ) | 42.4 | ||||||||||||||
Net loss | $ | (9,944 | ) | (9.1 | ) | $ | (14,739 | ) | (21.0 | ) | $ | 4,795 | 67.4 |
* | Not meaningful for comparative purposes. |
Three Months Ended September 30, | Period-to-Period Change | |||||||||||||
2018 | 2017 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Revenue by segment* | ||||||||||||||
Graduate Program Segment | $ | 89,719 | $ | 65,924 | $ | 23,795 | 36.1 | % | ||||||
Short Course Segment | 17,244 | 4,326 | 12,918 | 298.6 | ||||||||||
Total revenue | $ | 106,963 | $ | 70,250 | $ | 36,713 | 52.3 |
* | Approximately $44,000 of intersegment revenues have been excluded from the three months ended September 30, 2018. |
Nine Months Ended September 30, | |||||||||||||||||||||
2018 | 2017 | Period-to-Period Change | |||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Amount | Percentage | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Revenue | $ | 296,674 | 100.0 | % | $ | 200,074 | 100.0 | % | $ | 96,600 | 48.3 | % | |||||||||
Costs and expenses | |||||||||||||||||||||
Curriculum and teaching | 16,665 | 5.6 | 1,792 | 0.9 | 14,873 | 830.1 | |||||||||||||||
Servicing and support | 49,116 | 16.6 | 37,322 | 18.7 | 11,794 | 31.6 | |||||||||||||||
Technology and content development | 45,436 | 15.3 | 33,080 | 16.5 | 12,356 | 37.4 | |||||||||||||||
Marketing and sales | 171,982 | 58.0 | 113,223 | 56.6 | 58,759 | 51.9 | |||||||||||||||
General and administrative | 63,323 | 21.3 | 44,821 | 22.4 | 18,502 | 41.3 | |||||||||||||||
Total costs and expenses | 346,522 | 116.8 | 230,238 | 115.1 | 116,284 | 50.5 | |||||||||||||||
Loss from operations | (49,848 | ) | (16.8 | ) | (30,164 | ) | (15.1 | ) | (19,684 | ) | 65.3 | ||||||||||
Interest income | 3,053 | 1.0 | 267 | 0.1 | 2,786 | * | |||||||||||||||
Interest expense | (81 | ) | — | (37 | ) | — | (44 | ) | 115.7 | ||||||||||||
Other income (expense), net | (1,493 | ) | (0.5 | ) | (972 | ) | (0.4 | ) | (521 | ) | 53.5 | ||||||||||
Loss before income taxes | (48,369 | ) | (16.3 | ) | (30,906 | ) | (15.4 | ) | (17,463 | ) | 56.5 | ||||||||||
Income tax benefit | 5,207 | 1.8 | 974 | 0.4 | 4,233 | * | |||||||||||||||
Net loss | $ | (43,162 | ) | (14.5 | ) | $ | (29,932 | ) | (15.0 | ) | $ | (13,230 | ) | 44.2 |
* | Not meaningful for comparative purposes. |
Nine Months Ended September 30, | Period-to-Period Change | |||||||||||||
2018 | 2017 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Revenue by segment* | ||||||||||||||
Graduate Program Segment | $ | 251,487 | $ | 195,748 | $ | 55,739 | 28.5 | % | ||||||
Short Course Segment | 45,187 | 4,326 | 40,861 | 944.5 | ||||||||||
Total revenue | $ | 296,674 | $ | 200,074 | $ | 96,600 | 48.3 |
* | Approximately $44,000 of intersegment revenues have been excluded from the nine months ended September 30, 2018. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net loss | $ | (9,944 | ) | $ | (14,739 | ) | $ | (43,162 | ) | $ | (29,932 | ) | |||
Adjustments: | |||||||||||||||
Interest income | (1,799 | ) | (18 | ) | (3,053 | ) | (267 | ) | |||||||
Interest expense | 27 | 36 | 81 | 37 | |||||||||||
Foreign currency loss (gain) | 273 | (59 | ) | 1,493 | 972 | ||||||||||
Depreciation and amortization expense | 8,599 | 5,887 | 23,382 | 13,318 | |||||||||||
Income tax benefit | (414 | ) | (974 | ) | (5,207 | ) | (974 | ) | |||||||
Stock-based compensation expense | 7,933 | 6,147 | 24,064 | 15,537 | |||||||||||
Total adjustments | 14,619 | 11,019 | 40,760 | 28,623 | |||||||||||
Total segment profitability | $ | 4,675 | $ | (3,720 | ) | $ | (2,402 | ) | $ | (1,309 | ) |
Three Months Ended September 30, | Period-to-Period Change | |||||||||||||
2018 | 2017 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Revenue by segment* | ||||||||||||||
Graduate Program Segment | $ | 89,719 | $ | 65,924 | $ | 23,795 | 36.1 | % | ||||||
Short Course Segment | 17,244 | 4,326 | 12,918 | 298.6 | ||||||||||
Total revenue | $ | 106,963 | $ | 70,250 | $ | 36,713 | 52.3 | |||||||
Segment profitability | ||||||||||||||
Graduate Program Segment | $ | 5,564 | $ | (718 | ) | $ | 6,282 | (874.6 | ) | |||||
Short Course Segment | (889 | ) | (3,002 | ) | 2,113 | (70.4 | ) | |||||||
Total segment profitability | $ | 4,675 | $ | (3,720 | ) | $ | 8,395 | (225.7 | ) |
* | Approximately $44,000 of intersegment revenues have been excluded from the three months ended September 30, 2018. |
Nine Months Ended September 30, | Period-to-Period Change | |||||||||||||
2018 | 2017 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Revenue by segment* | ||||||||||||||
Graduate Program Segment | $ | 251,487 | $ | 195,748 | $ | 55,739 | 28.5 | % | ||||||
Short Course Segment | 45,187 | 4,326 | 40,861 | 944.5 | ||||||||||
Total revenue | $ | 296,674 | $ | 200,074 | $ | 96,600 | 48.3 | |||||||
Segment profitability | ||||||||||||||
Graduate Program Segment | $ | (615 | ) | $ | 1,693 | $ | (2,308 | ) | (136.4 | ) | ||||
Short Course Segment | (1,787 | ) | (3,002 | ) | 1,215 | (40.5 | ) | |||||||
Total segment profitability | $ | (2,402 | ) | $ | (1,309 | ) | $ | (1,093 | ) | 83.5 |
* | Approximately $44,000 of intersegment revenues have been excluded from the nine months ended September 30, 2018. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017* | ||||||||||||
Graduate Program Segment | |||||||||||||||
Full course equivalent enrollments | 32,665 | 24,062 | 92,983 | 71,822 | |||||||||||
Average revenue per full course equivalent enrollment | $ | 2,747 | $ | 2,740 | $ | 2,705 | $ | 2,725 | |||||||
Short Course Segment | |||||||||||||||
Full course equivalent enrollments | 8,937 | 4,079 | 23,161 | 4,079 | |||||||||||
Average revenue per full course equivalent enrollment** | $ | 1,930 | $ | 1,232 | $ | 1,951 | $ | 1,232 |
* | We acquired GetSmarter on July 1, 2017 and their results of operations are included in our consolidated financial results effective with the third quarter of 2017. As such, the full course equivalent enrollment metrics of our Short Course Segment are measured only for the third quarter of 2017. |
** | The calculation of the Short Course Segment’s average revenue per full course equivalent enrollment includes $0.7 million of revenue that was excluded from the results of operations for the third quarter of 2017, due to an adjustment recorded as part of the valuation of GetSmarter. |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
• | adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | adjusted EBITDA does not reflect acquisition related gains or losses such as, but not limited to, post-acquisition changes in the value of contingent consideration reflected in operations; |
• | adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; |
• | adjusted EBITDA does not reflect interest or tax payments that may represent a reduction in cash available to us; and |
• | other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net loss | $ | (9,944 | ) | $ | (14,739 | ) | $ | (43,162 | ) | $ | (29,932 | ) | |||
Adjustments: | |||||||||||||||
Interest income | (1,799 | ) | (18 | ) | (3,053 | ) | (267 | ) | |||||||
Interest expense | 27 | 36 | 81 | 37 | |||||||||||
Foreign currency (gain) loss | 273 | (59 | ) | 1,493 | 972 | ||||||||||
Depreciation and amortization expense | 8,599 | 5,887 | 23,382 | 13,318 | |||||||||||
Income tax benefit | (414 | ) | (974 | ) | (5,207 | ) | (974 | ) | |||||||
Stock-based compensation expense | 7,933 | 6,147 | 24,064 | 15,537 | |||||||||||
Total adjustments | 14,619 | 11,019 | 40,760 | 28,623 | |||||||||||
Adjusted EBITDA (loss) | $ | 4,675 | $ | (3,720 | ) | $ | (2,402 | ) | $ | (1,309 | ) |
Nine Months Ended September 30, | Period-to-Period Change | |||||||||||||
2018 | 2017 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Cash (used in) provided by: | ||||||||||||||
Operating activities | $ | (26,043 | ) | $ | (26,079 | ) | $ | 36 | (0.1 | )% | ||||
Investing activities | (85,015 | ) | (134,409 | ) | 49,394 | (36.7 | ) | |||||||
Financing activities | 330,822 | 195,241 | 135,581 | 69.4 | ||||||||||
Effect of exchange rate changes on cash | (908 | ) | (1,049 | ) | 141 | (13.4 | ) | |||||||
Net increase in cash and cash equivalents | $ | 218,856 | $ | 33,704 | $ | 185,152 | 549.3 |
Exhibit Number | Description | Form | File No. | Exhibit Number | Filing Date | Filed Herewith | ||||||
Amended and Restated Certificate of Incorporation of the Registrant. | 8-K | 001-36376 | 3.1 | April 4, 2014 | ||||||||
Amended and Restated Bylaws of the Registrant. | 8-K | 001-36376 | 3.2 | April 4, 2014 | ||||||||
Certification of Chief Executive Officer of 2U, Inc. pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||
Certification of Chief Financial Officer of 2U, Inc. pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||
Certification of Chief Executive Officer of 2U, Inc. in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||
Certification of Chief Financial Officer of 2U, Inc. in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
2U, Inc. | ||
November 5, 2018 | By: | /s/ Christopher J. Paucek |
Christopher J. Paucek | ||
Chief Executive Officer | ||
November 5, 2018 | By: | /s/ Catherine A. Graham |
Catherine A. Graham | ||
Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of 2U, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 5, 2018 | By: | /s/ Christopher J. Paucek | |
Name: | Christopher J. Paucek | |||
Title: | Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of 2U, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 5, 2018 | By: | /s/ Catherine A. Graham | |
Name: | Catherine A. Graham | |||
Title: | Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 5, 2018 | By: | /s/ Christopher J. Paucek | |
Name: | Christopher J. Paucek | |||
Title: | Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 5, 2018 | By: | /s/ Catherine A. Graham | |
Name: | Catherine A. Graham | |||
Title: | Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 31, 2018 |
|
Document and Entity Information | ||
Entity Registrant Name | 2U, Inc. | |
Entity Central Index Key | 0001459417 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 57,922,612 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, issued (in shares) | 57,905,339 | 52,505,856 |
Common stock, outstanding (in shares) | 57,905,339 | 52,505,856 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Revenue | $ 106,963 | $ 70,250 | $ 296,674 | $ 200,074 |
Costs and expenses | ||||
Curriculum and teaching | 6,351 | 1,792 | 16,665 | 1,792 |
Servicing and support | 16,586 | 12,939 | 49,116 | 37,322 |
Technology and content development | 16,361 | 12,735 | 45,436 | 33,080 |
Marketing and sales | 60,548 | 41,311 | 171,982 | 113,223 |
General and administrative | 18,974 | 17,227 | 63,323 | 44,821 |
Total costs and expenses | 118,820 | 86,004 | 346,522 | 230,238 |
Loss from operations | (11,857) | (15,754) | (49,848) | (30,164) |
Interest income | (1,799) | (18) | (3,053) | (267) |
Interest expense | (27) | (36) | (81) | (37) |
Other income (expense), net | (273) | 59 | (1,493) | (972) |
Loss before income taxes | (10,358) | (15,713) | (48,369) | (30,906) |
Income tax benefit | 414 | 974 | 5,207 | 974 |
Net loss | $ (9,944) | $ (14,739) | $ (43,162) | $ (29,932) |
Net loss per share, basic and diluted (in dollars per share) | $ (0.17) | $ (0.30) | $ (0.78) | $ (0.62) |
Weighted-average shares of common stock outstanding, basic and diluted (in shares) | 57,663,361 | 48,961,914 | 55,128,845 | 47,962,201 |
Other comprehensive loss | ||||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | $ (2,781) | $ (3,617) | $ (12,327) | $ (3,617) |
Comprehensive loss | $ (12,725) | $ (18,356) | $ (55,489) | $ (33,549) |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Other comprehensive loss | ||||
Foreign currency translation adjustments, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Organization |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization 2U, Inc. (together with its subsidiaries, the “Company”) is a leading education technology company that well-recognized nonprofit colleges and universities trust to bring them into the digital age. The Company’s comprehensive platform of tightly integrated technology and services provides the digital infrastructure universities need to attract, enroll, educate and support students at scale. With the Company’s platform, students can pursue their education anytime, anywhere, without quitting their jobs or moving; and university clients can improve educational outcomes, skills attainment and career prospects for a greater number of students. The Company has two operating segments, which are also its two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals around the world through relationships with leading universities in the United States, the United Kingdom and South Africa. |
Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and nine months ended September 30, 2018 and 2017 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. All significant intercompany accounts and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. Reclassifications Certain immaterial prior period amounts on the condensed consolidated balance sheet and statement of cash flows have been reclassified to conform to the current period’s presentation. Use of Estimates The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. Short-Term Investments The Company’s short-term investments relate to certificates of deposit with original maturities between three months and one year. As of September 30, 2018, the Company had a $25.0 million certificate of deposit included in short-term investments that qualifies as a Level 1 fair value measurement asset and was stated at cost, which approximates fair value. Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments using the modified retrospective transition method and has concluded that doing so did not have a material impact on the amount and timing of either its revenue or costs. As part of its assessment, the Company completed reviews of its contracts and evaluated its costs, including costs of obtaining contracts with its university clients and costs associated with content development. Certain of these contract and content costs will be capitalized under the new standard. The adoption of ASU 2014-09 did not have a material impact as of January 1, 2018, and no cumulative adjustment was recorded. Further, the amounts reported as of September 30, 2018 on the condensed consolidated balance sheets and the results of operations for the three and nine months ended September 30, 2018 reported on the condensed consolidated statements of operations and comprehensive loss would not have been materially different than under legacy U.S. GAAP (i.e., Topic 605). The Company generates substantially all of its revenue from contractual arrangements with either its university clients or students to provide a comprehensive platform of tightly integrated technology and technology-enabled services that support its graduate programs and short courses. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Graduate Program Segment derives revenue primarily from contractually specified percentages of the amounts the Company’s university clients receive from their students in 2U-enabled graduate programs for tuition and fees, less credit card fees and other specified charges the Company has agreed to exclude in certain university client contracts. The Company’s contracts with university clients in this segment have 10 to 15 year initial terms and have a single performance obligation, as the promises to provide a platform of tightly integrated technology and services university clients need to attract, enroll, educate and support students are not distinct within the context of the contracts. The single performance obligation is delivered as the university clients receive and consume benefits, which occurs ratably over a series of academic terms. The amounts received from university clients over the term of the arrangement are variable in nature in that they are dependent upon the number of students that are enrolled in the program within each academic term. These amounts are allocated to and are recognized ratably over the related academic term, defined as the period beginning on the first day of classes through the last. A refund allowance is established for the Company’s share of tuition and fees ultimately uncollected by university clients. The Short Course Segment derives revenue directly from contracts with students for the tuition and fees paid to enroll in and progress through the Company’s short courses which run between six and 16 weeks. The Company’s contracts with students in this segment have multiple performance obligations as the delivery of the short course and student support services are each considered distinct performance obligations. These performance obligations are each satisfied ratably over the same short course presentation period, which is defined as the period beginning on the first day of the course through the last. The Company recognizes the gross proceeds received from the students and shares contractually specified percentages with its university clients, for providing short course content and certification, in the form of a royalty recognized as curriculum and teaching costs on the Company’s condensed consolidated statements of operations and comprehensive loss. The Company’s contracts with university clients in this segment are typically shorter and less restrictive than the Company’s contracts with university clients in the Graduate Program Segment. The Company does not disclose the value of unsatisfied performance obligations for the Graduate Program Segment because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company does not disclose the value of unsatisfied performance obligations for the Short Course Segment because the performance obligation is part of a contract that has an original duration of less than one year. Contract Acquisition Costs The Company pays commissions to certain of its employees to obtain contracts with university clients in the Graduate Program Segment. These costs are capitalized and recorded on a contract-by-contract basis and amortized using the straight-line method over the expected life, which is generally the length of the contract. With respect to contract acquisition costs in the Short Course Segment, the Company has elected to apply the practical expedient in ASC Topic 606 to expense these costs as incurred, as the terms of contracts with students in this segment are less than one year. Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients in exchange for contract extensions and various marketing and other rights. Generally, these amounts are capitalized and amortized as contra revenue over the life of the contract, commencing on the later of when payment is due or when contract revenue recognition begins. Accounts Receivable, Contract Assets and Liabilities Balance sheet items related to contracts consist of accounts receivable, net and deferred revenue on the Company’s condensed consolidated balance sheets. Included in accounts receivable, net are trade accounts receivable, which are comprised of billed and unbilled revenue. Accounts receivable, net is stated at net realizable value, and the Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. The Company’s estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable, net. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. The Company recognizes unbilled revenue when revenue recognition occurs in advance of billings. Unbilled revenue is recognized in the Graduate Program Segment because billings to university clients do not occur until after the academic term has commenced and final enrollment information is available. The Company’s unbilled revenue represents contract assets. Deferred revenue represents the excess of amounts billed or received as compared to amounts recognized in revenue on the condensed consolidated statements of operations and comprehensive loss as of the end of the reporting period, and such amounts are reflected as a current liability on the Company’s condensed consolidated balance sheets. The Company generally receives payments for its share of tuition and fees from graduate program university clients early in each academic term and from short course students, either in full upon registration for the course or in full before the end of the course based on a payment plan, prior to completion of the service period. These payments are recorded as deferred revenue until the services are delivered or until the Company’s obligations are otherwise met, at which time revenue is recognized. Capitalized Content Development The Company develops content for each offering on a course-by-course basis in conjunction with the faculty for each graduate program and short course. University clients and their faculty generally provide materials used for the course in an on-campus setting, including curricula, case studies and other reading materials, and presentations. The Company is responsible for the conversion of the materials into a format suitable for delivery through its online learning platform, including all expenses associated with this effort. With regard to the Graduate Program Segment, the development of content is part of the Company’s single performance obligation and is considered a contract fulfillment cost. The content development costs that qualify for capitalization are third-party direct costs, such as videography, editing and other services associated with creating digital content. Additionally, the Company capitalizes internal payroll and payroll-related costs incurred to create and produce videos and other digital content utilized in the university clients’ offerings for delivery via the Company’s online learning platform. Capitalization ends when content has been fully developed by both the Company and the university client, at which time amortization of the capitalized content development costs begins. The capitalized costs for each offering are recorded on a course-by-course basis and included in capitalized content costs in amortizable intangible assets, net on the Company’s condensed consolidated balance sheets. These costs are amortized using the straight-line method over the estimated useful life of the respective course, which is generally four to five years. The estimated useful life corresponds with the planned curriculum refresh rate. This refresh rate is consistent with expected curriculum refresh rates as cited by faculty members for similar on-campus offerings. It is reasonably possible that developed content could be refreshed before the estimated useful lives are complete or be expensed immediately in the event that the development of a course is discontinued prior to launch. Marketing and Sales Costs The majority of the marketing and sales costs incurred by the Company are directly related to acquiring students for its university clients’ graduate programs, with lesser amounts related to acquiring students for its short courses and marketing and advertising efforts related to the Company’s own brand. For the three and nine months ended September 30, 2018 and 2017, costs related to the Company’s marketing and advertising of its own brand were not material. All such costs are expensed as incurred and reported in marketing and sales expense on the Company’s condensed consolidated statements of operations and comprehensive loss. As of September 30, 2018 and December 31, 2017, the Company had $16.1 million and $11.7 million, respectively, of accrued marketing costs included in accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets. Non-Cash Long-Lived Asset Additions During the nine months ended September 30, 2018, the Company had capital asset additions of $70.7 million in property and equipment and capitalized technology and content development, of which $6.1 million consisted of non-cash capital expenditures, primarily related to the acquisition of certain long-lived assets for which a liability was accrued. During the nine months ended September 30, 2017, the Company had capital asset additions of $49.6 million in property and equipment and capitalized technology and content development, of which $12.3 million consisted of non-cash capital expenditures. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires customers in cloud computing arrangements that are service contracts to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU as of July 1, 2018 under the prospective method. Adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies and corrects unintended applications of guidance, and makes improvements to several Accounting Standards Codification topics. The applicable amendments in this ASU will be effective for the Company in annual periods beginning after December 15, 2018. The Company is currently evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU were effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018. Adoption of this standard did not have a material impact on the Company’s condensed consolidated statements of cash flows and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and the Company will adopt this ASU in the first quarter of 2019. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-10 clarifies ambiguous or potentially conflicting guidance in ASU No. 2016-02, but is not expected to have a material impact on the Company. ASU No. 2018-11 provides entities with an additional transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new lease standard at the adoption date, rather than at the beginning of the earliest period presented, and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company expects to elect this transition method at the adoption date of January 1, 2019. A number of optional practical expedients may be applied in transition. The Company is currently in the process of evaluating if it will elect any of the other remaining practical expedient options. The Company does not intend to recognize right-of-use assets or lease liabilities for leases with a term of 12 months or less, as permitted by the short-term lease practical expedient. In transition, the Company plans to apply the package of practical expedients that permit entities to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for expired or existing leases, or (iii) whether previously capitalized initial direct costs would qualify for capitalization under the new standard. The Company plans to apply the practical expedient that permits a lessee to account for lease and non-lease components in a contract as a single lease component. In addition, the Company does not intend to use hindsight during transition. The Company is currently evaluating the effect that this ASU will have on its consolidated financial position and related disclosures and is in the process of considering changes to its systems and processes. The Company expects there will be an increase in assets and liabilities on the consolidated balance sheets upon adoption due to the recording of right-of-use assets and corresponding lease-related liabilities, which may be material. Refer to Note 7 in “Notes to Consolidated Financial Statements” included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for more information about the Company’s lease-related obligations. |
Business Combination |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||
Business Combination | Business Combination On July 1, 2017, the Company, through a wholly owned subsidiary (“2U South Africa”), completed its acquisition of all of the outstanding equity interests of GetSmarter pursuant to a Share Sale Agreement, dated as of May 1, 2017 (the “Share Sale Agreement”), as amended by an addendum, dated as of June 29, 2017, for a net purchase price of $98.7 million in cash. In addition, 2U South Africa agreed to pay a potential earn out payment of up to $20.0 million, subject to the achievement of certain financial milestones in calendar years 2017 and 2018. The valuation of the assets acquired and liabilities assumed (i.e., purchase price allocation) was completed as of December 31, 2017. As of September 30, 2018, there has been no material change in the expected earnout payment from the final valuation of the purchase price allocation since December 31, 2017. The unaudited pro forma combined financial information below is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combination occurred as of the dates indicated or what the results would be for any future periods. The following table presents the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share for the nine months ended September 30, 2017 as if the acquisition of GetSmarter had occurred on January 1, 2017:
For the three months ended September 30, 2017, the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share are equal to the Company’s consolidated revenue, net loss and net loss per share, respectively, as the acquisition of GetSmarter occurred on July 1, 2017. |
Goodwill and Amortizable Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Amortizable Intangible Assets | Goodwill and Amortizable Intangible Assets The table below summarizes the changes in the carrying amount of goodwill by reportable segment:
Amortizable intangible assets consisted of the following as of:
The amounts presented above include $32.4 million and $15.6 million of in process capitalized technology and content development as of September 30, 2018 and December 31, 2017, respectively. In the first half of 2018, the Company acquired certain third party technologies to enhance the Company’s proprietary operating system, 2UOS, for aggregate consideration of $9.5 million. These amounts are classified as capitalized technology within amortizable intangible assets, net, on the Company’s condensed consolidated balance sheets. Additionally, during the same period the Company purchased several active websites and additional domains for consideration of $5.7 million to support the marketing efforts of certain graduate programs. As of September 30, 2018, these acquired assets are classified in trade names and domain names within amortizable intangible assets, net, on the Company’s condensed consolidated balance sheets. In the first quarter of 2018, the Company entered into an agreement with WeWork Companies, Inc. (“WeWork”) and Flatiron School, Inc., a wholly owned subsidiary of WeWork, to purchase a perpetual source code license for the Learn.co platform and certain integration software development services for $14.5 million. As of September 30, 2018, the Company has recorded capitalized technology of $13.2 million related to this agreement in amortizable intangible assets, net on the Company’s condensed consolidated balance sheets. The remaining $1.3 million is payable under the agreement upon the achievement of certain milestones related to the software development services. In addition, the Company entered into a multi-year agreement to purchase Global Access Memberships to WeWork spaces around the world that will be provided to students in 2U-powered online graduate programs, an agreement to offer $5 million in scholarships to certain WeWork community members and employees, and collaborate on additional mutually agreed upon projects. The Company recorded amortization expense related to amortizable intangible assets of $6.4 million and $3.6 million for the three months ended September 30, 2018 and 2017, respectively. The Company recorded amortization expense related to amortizable intangible assets of $17.1 million and $8.7 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands):
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Commitments and Contingencies |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Contingencies From time to time, the Company may become involved in legal proceedings or other contingencies in the ordinary course of its business. The Company is not presently involved in any legal proceeding or other contingency that, if determined adversely to it, would individually or in the aggregate have a material adverse effect on its business, operating results, financial condition or cash flows. Accordingly, the Company does not believe that there is a reasonable possibility that a material loss exceeding amounts already recognized may have been incurred as of the date of the balance sheets presented herein. Marketing and Sales Commitments Certain of the agreements entered into between the Company and its university clients in the Graduate Program Segment require the Company to commit to meet certain staffing and spending investment thresholds related to marketing and sales activities. In addition, certain of the agreements in the Graduate Program Segment require the Company to invest up to agreed upon levels in marketing the programs to achieve specified program performance. The Company believes it is currently in compliance with all such commitments. Future Minimum Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients in exchange for contract extensions and various marketing and other rights. As of September 30, 2018, the future minimum payments due to university clients has not materially changed relative to the amounts provided in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Contingent Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company would be obligated to make future minimum program payments to a university client in the event that certain program metrics, partially associated with programs not yet launched, are not achieved. Due to the dependency of these calculations on future program launches, the amounts of any associated contingent payments cannot be reasonably estimated at this time. |
Debt |
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Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Debt Lines of Credit Effective in the third quarter of 2018, the Company amended its $25.0 million revolving line of credit agreement to extend the maturity date through December 31, 2018. No amounts were outstanding under this credit agreement as of September 30, 2018 or December 31, 2017. The Company intends to amend or extend this agreement under comparable or more favorable terms, prior to expiration. Certain of the Company’s operating lease agreements entered into prior to September 30, 2018 require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of September 30, 2018, the Company has entered into standby letters of credit totaling $15.0 million as security deposits for the applicable leased facilities and in connection with government grants. These letters of credit reduced the aggregate amount the Company may borrow under its revolving line of credit to $10.0 million. The Company’s $1.9 million revolving debt facilities related to the Short Course Segment expired on March 31, 2018 and were not renewed. Government Grants The Company has a total of two outstanding conditional loan agreements with Prince George’s County, Maryland and the State of Maryland for an aggregate amount of $3.5 million, each bearing an interest rate of 3% per annum. These agreements are conditional loan obligations that may be forgiven provided that the Company attains certain conditions related to employment levels at our Lanham, Maryland headquarters. The conditional loan with the State of Maryland has a maturity date of December 31, 2026, and the conditional loan with Prince George’s County, Maryland has a maturity date of June 22, 2027. The interest expense related to these loans for the three and nine months ended September 30, 2018 and 2017 is immaterial. |
Income Taxes |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the three and nine months ended September 30, 2018 and 2017 were based on estimated full-year effective tax rates, including the mix of income for the period between higher-taxed and lower-taxed jurisdictions, after giving effect to significant items related specifically to the interim periods, and loss-making entities for which it is not more likely than not that a tax benefit will be realized. The Company’s effective tax rate was approximately 4% and 6% for the three months ended September 30, 2018 and 2017, respectively. The Company’s effective tax rate was approximately 11% and 3% for the nine months ended September 30, 2018 and 2017, respectively. A one-time tax benefit of approximately $3.0 million related to an asset acquisition of certain third-party technologies is included in the Company’s income tax benefit for the nine months ended September 30, 2018. This benefit relates to the reversal of the Company’s tax valuation allowance that was no longer needed as a result of establishing a net deferred tax liability. Excluding the one-time tax benefit, the Company’s tax benefit of $0.4 million and $2.2 million for the three and nine months ended September 30, 2018, respectively, related to losses generated by operations and the amortization of acquired intangibles in the Short Course Segment that are expected to be realized through future reversing taxable temporary differences. The Company expects to continue to recognize a tax benefit in the future for the Short Course Segment to the extent that this segment continues to generate pre-tax losses while carrying deferred tax liabilities that are in excess of deferred tax assets. To date, the Company has not been required to pay U.S. federal income taxes because of current and accumulated net operating losses. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act of 2017 (“Tax Act”). As of September 30, 2018, the Company finalized its assessment of the Tax Act, including its determination that no transitional tax is required. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity On May 22, 2018 the Company sold 3,833,334 shares of its common stock to the public, including 500,000 shares sold pursuant to the underwriters’ over-allotment option. The Company received net proceeds of $330.8 million, which the Company intends to use for working capital and other general corporate purposes, including expenditures for graduate program and short course marketing, technology and content development, in connection with new graduate program and short course launches and growing existing graduate programs and short courses as well as the strategic acquisitions of, or investment in, complementary products, technologies, solutions or businesses. As of September 30, 2018, the Company was authorized to issue 205,000,000 total shares of capital stock, consisting of 200,000,000 shares of common stock and 5,000,000 shares of preferred stock. As of September 30, 2018, the Company had reserved a total of 12,431,835 of its authorized shares of common stock for future issuance as follows:
The shares available for future issuance increased by 2,625,292 and 2,357,579 on January 1, 2018 and 2017, respectively, pursuant to the automatic share reserve increase provision under the Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”). The Company has not declared or paid cash dividends on its common stock to date. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company provides equity-based compensation awards to employees, independent contractors and directors as an effective means for attracting, retaining and motivating such individuals. The Company maintains two share-based compensation plans: the 2014 Plan and the 2008 Stock Incentive Plan (the “2008 Plan”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards and began using the 2014 Plan for grants of new equity awards. Employee Stock Purchase Plan The Company’s 2017 Employee Stock Purchase Plan (the “ESPP”) provides (i) for two offering periods each year and (ii) that the purchase price for shares of the Company’s common stock purchased under the ESPP will be 90% of the lesser of the fair market value of 2U’s common stock on the purchase date or the fair market value of 2U’s common stock on the first day of the offering period. Participating eligible employees select a rate of payroll deduction between 1% and 15% of their salary or wage compensation received from the Company as in effect at the start of the offering period, subject to a maximum payroll deduction per calendar year of $25,000. Participation in the ESPP began on January 1, 2018. Stock-Based Compensation Expense Stock-based compensation expense related to stock-based awards, as well as the ESPP, is included in the following line items in the condensed consolidated statements of operations and comprehensive loss:
Stock Options The following is a summary of the stock option activity for the nine months ended September 30, 2018:
Restricted Stock Units The following is a summary of restricted stock unit activity for the nine months ended September 30, 2018:
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Net Loss per Share |
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Net Loss per Share | Net Loss per Share Diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive, given the Company’s net loss. The following securities have been excluded from the calculation of weighted-average shares of common stock outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2018 and 2017:
Basic and diluted net loss per share is calculated as follows:
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Segment and Geographic Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | Segment and Geographic Information The Company’s operations consist of two operating segments, which are also its two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals around the world through relationships with leading universities in the United States, the United Kingdom and South Africa. Graduate Program Segment For the three months ended September 30, 2018, three university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $24.0 million, $13.0 million and $10.8 million which equaled 22%, 12% and 10% of the Company’s consolidated revenue, respectively. For the three months ended September 30, 2017, four university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $19.6 million, $10.8 million, $7.2 million and $7.1 million, which equaled 28%, 15%, 10% and 10% of the Company’s consolidated revenue, respectively. For the nine months ended September 30, 2018, three university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $65.0 million, $39.5 million and $30.6 million, which equaled 22%, 13% and 10% of the Company’s consolidated revenue, respectively. For the nine months ended September 30, 2017, four university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $58.4 million, $34.6 million, $21.0 million and $20.3 million, which equaled 30%, 17%, 11% and 10% of the Company’s consolidated revenue, respectively. As of September 30, 2018, two university clients each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $13.4 million and $7.0 million, which equaled 27% and 14% of the Company’s consolidated accounts receivable, net balance, respectively. As of December 31, 2017, two university clients each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $9.4 million and $2.0 million, which equaled 67% and 14% of the Company’s consolidated accounts receivable, net balance, respectively. Short Course Segment For the three and nine months ended September 30, 2018 and 2017, there were no customers or individual university clients that had revenue associated with it that accounted for 10% or more of the Company’s consolidated revenue. In addition, as of September 30, 2018 and December 31, 2017, no customers had accounts receivable, net balances that accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as customers are individual students or third parties paying on their behalf, rather than university clients. For the three months ended September 30, 2018, offerings associated with four university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 91% of the segment’s revenue. For the three months ended September 30, 2017, offerings associated with two university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue. For the nine months ended September 30, 2018, offerings associated with three university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue. For the nine months ended September 30, 2017, offerings associated with two university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue. Segment Performance The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented:
The following table reconciles net loss to total segment profitability:
The Company’s total assets by segment are as follows:
Trade Accounts Receivable and Contract Liabilities The Company’s trade accounts receivable and contract liabilities in each segment are as follows:
For the Graduate Program Segment, revenue recognized during the three and nine months ended September 30, 2018 that was included in the deferred revenue balance at the beginning of the year was $0.0 million and $2.5 million, respectively. For the Short Course Segment, revenue recognized during the three and nine months ended September 30, 2018 that was included in the deferred revenue balance at the beginning of the year was $0.0 million and $4.5 million, respectively. Contract Acquisition Costs The Graduate Program Segment had $0.3 million of net capitalized contract acquisition costs as of September 30, 2018. For the three months ended September 30, 2018, the Company capitalized no amounts and recorded an immaterial amount of amortization expense in the Graduate Program Segment. For the nine months ended September 30, 2018, the Company capitalized $0.3 million and recorded an immaterial amount of amortization expense in the Graduate Program Segment. Geographical Information The Company’s non-U.S. revenue for the three and nine months ended September 30, 2018, determined based upon the currency of the country in which the university client primarily operates, was $8.8 million and $26.0 million, respectively, and was sourced entirely from the Short Course Segment’s operations outside of the U.S. The Company’s non-U.S. revenue for both the three and nine months ended September 30, 2017, determined based upon the currency of the country in which the university client primarily operates, was $3.0 million, and was sourced entirely from the Short Course Segment’s operations outside of the U.S. The Company’s long-lived assets in non-U.S. countries as of September 30, 2018 and December 31, 2017 totaled approximately $1.3 million and $0.7 million, respectively. |
Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and nine months ended September 30, 2018 and 2017 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. All significant intercompany accounts and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. |
Reclassifications | Reclassifications Certain immaterial prior period amounts on the condensed consolidated balance sheet and statement of cash flows have been reclassified to conform to the current period’s presentation. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. |
Short-Term Investments | Short-Term Investments The Company’s short-term investments relate to certificates of deposit with original maturities between three months and one year. As of September 30, 2018, the Company had a $25.0 million certificate of deposit included in short-term investments that qualifies as a Level 1 fair value measurement asset and was stated at cost, which approximates fair value. |
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts | Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments using the modified retrospective transition method and has concluded that doing so did not have a material impact on the amount and timing of either its revenue or costs. As part of its assessment, the Company completed reviews of its contracts and evaluated its costs, including costs of obtaining contracts with its university clients and costs associated with content development. Certain of these contract and content costs will be capitalized under the new standard. The adoption of ASU 2014-09 did not have a material impact as of January 1, 2018, and no cumulative adjustment was recorded. Further, the amounts reported as of September 30, 2018 on the condensed consolidated balance sheets and the results of operations for the three and nine months ended September 30, 2018 reported on the condensed consolidated statements of operations and comprehensive loss would not have been materially different than under legacy U.S. GAAP (i.e., Topic 605). The Company generates substantially all of its revenue from contractual arrangements with either its university clients or students to provide a comprehensive platform of tightly integrated technology and technology-enabled services that support its graduate programs and short courses. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Graduate Program Segment derives revenue primarily from contractually specified percentages of the amounts the Company’s university clients receive from their students in 2U-enabled graduate programs for tuition and fees, less credit card fees and other specified charges the Company has agreed to exclude in certain university client contracts. The Company’s contracts with university clients in this segment have 10 to 15 year initial terms and have a single performance obligation, as the promises to provide a platform of tightly integrated technology and services university clients need to attract, enroll, educate and support students are not distinct within the context of the contracts. The single performance obligation is delivered as the university clients receive and consume benefits, which occurs ratably over a series of academic terms. The amounts received from university clients over the term of the arrangement are variable in nature in that they are dependent upon the number of students that are enrolled in the program within each academic term. These amounts are allocated to and are recognized ratably over the related academic term, defined as the period beginning on the first day of classes through the last. A refund allowance is established for the Company’s share of tuition and fees ultimately uncollected by university clients. The Short Course Segment derives revenue directly from contracts with students for the tuition and fees paid to enroll in and progress through the Company’s short courses which run between six and 16 weeks. The Company’s contracts with students in this segment have multiple performance obligations as the delivery of the short course and student support services are each considered distinct performance obligations. These performance obligations are each satisfied ratably over the same short course presentation period, which is defined as the period beginning on the first day of the course through the last. The Company recognizes the gross proceeds received from the students and shares contractually specified percentages with its university clients, for providing short course content and certification, in the form of a royalty recognized as curriculum and teaching costs on the Company’s condensed consolidated statements of operations and comprehensive loss. The Company’s contracts with university clients in this segment are typically shorter and less restrictive than the Company’s contracts with university clients in the Graduate Program Segment. The Company does not disclose the value of unsatisfied performance obligations for the Graduate Program Segment because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company does not disclose the value of unsatisfied performance obligations for the Short Course Segment because the performance obligation is part of a contract that has an original duration of less than one year. Contract Acquisition Costs The Company pays commissions to certain of its employees to obtain contracts with university clients in the Graduate Program Segment. These costs are capitalized and recorded on a contract-by-contract basis and amortized using the straight-line method over the expected life, which is generally the length of the contract. With respect to contract acquisition costs in the Short Course Segment, the Company has elected to apply the practical expedient in ASC Topic 606 to expense these costs as incurred, as the terms of contracts with students in this segment are less than one year. Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients in exchange for contract extensions and various marketing and other rights. Generally, these amounts are capitalized and amortized as contra revenue over the life of the contract, commencing on the later of when payment is due or when contract revenue recognition begins. Accounts Receivable, Contract Assets and Liabilities Balance sheet items related to contracts consist of accounts receivable, net and deferred revenue on the Company’s condensed consolidated balance sheets. Included in accounts receivable, net are trade accounts receivable, which are comprised of billed and unbilled revenue. Accounts receivable, net is stated at net realizable value, and the Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. The Company’s estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable, net. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. The Company recognizes unbilled revenue when revenue recognition occurs in advance of billings. Unbilled revenue is recognized in the Graduate Program Segment because billings to university clients do not occur until after the academic term has commenced and final enrollment information is available. The Company’s unbilled revenue represents contract assets. Deferred revenue represents the excess of amounts billed or received as compared to amounts recognized in revenue on the condensed consolidated statements of operations and comprehensive loss as of the end of the reporting period, and such amounts are reflected as a current liability on the Company’s condensed consolidated balance sheets. The Company generally receives payments for its share of tuition and fees from graduate program university clients early in each academic term and from short course students, either in full upon registration for the course or in full before the end of the course based on a payment plan, prior to completion of the service period. These payments are recorded as deferred revenue until the services are delivered or until the Company’s obligations are otherwise met, at which time revenue is recognized. |
Capitalized Content Development | Capitalized Content Development The Company develops content for each offering on a course-by-course basis in conjunction with the faculty for each graduate program and short course. University clients and their faculty generally provide materials used for the course in an on-campus setting, including curricula, case studies and other reading materials, and presentations. The Company is responsible for the conversion of the materials into a format suitable for delivery through its online learning platform, including all expenses associated with this effort. With regard to the Graduate Program Segment, the development of content is part of the Company’s single performance obligation and is considered a contract fulfillment cost. The content development costs that qualify for capitalization are third-party direct costs, such as videography, editing and other services associated with creating digital content. Additionally, the Company capitalizes internal payroll and payroll-related costs incurred to create and produce videos and other digital content utilized in the university clients’ offerings for delivery via the Company’s online learning platform. Capitalization ends when content has been fully developed by both the Company and the university client, at which time amortization of the capitalized content development costs begins. The capitalized costs for each offering are recorded on a course-by-course basis and included in capitalized content costs in amortizable intangible assets, net on the Company’s condensed consolidated balance sheets. These costs are amortized using the straight-line method over the estimated useful life of the respective course, which is generally four to five years. The estimated useful life corresponds with the planned curriculum refresh rate. This refresh rate is consistent with expected curriculum refresh rates as cited by faculty members for similar on-campus offerings. It is reasonably possible that developed content could be refreshed before the estimated useful lives are complete or be expensed immediately in the event that the development of a course is discontinued prior to launch. |
Marketing and Sales Costs | Marketing and Sales Costs The majority of the marketing and sales costs incurred by the Company are directly related to acquiring students for its university clients’ graduate programs, with lesser amounts related to acquiring students for its short courses and marketing and advertising efforts related to the Company’s own brand. For the three and nine months ended September 30, 2018 and 2017, costs related to the Company’s marketing and advertising of its own brand were not material. All such costs are expensed as incurred and reported in marketing and sales expense on the Company’s condensed consolidated statements of operations and comprehensive loss. As of September 30, 2018 and December 31, 2017, the Company had $16.1 million and $11.7 million, respectively, of accrued marketing costs included in accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets. |
Non-Cash Long-Lived Asset Additions | Non-Cash Long-Lived Asset Additions During the nine months ended September 30, 2018, the Company had capital asset additions of $70.7 million in property and equipment and capitalized technology and content development, of which $6.1 million consisted of non-cash capital expenditures, primarily related to the acquisition of certain long-lived assets for which a liability was accrued. During the nine months ended September 30, 2017, the Company had capital asset additions of $49.6 million in property and equipment and capitalized technology and content development, of which $12.3 million consisted of non-cash capital expenditures. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires customers in cloud computing arrangements that are service contracts to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU as of July 1, 2018 under the prospective method. Adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies and corrects unintended applications of guidance, and makes improvements to several Accounting Standards Codification topics. The applicable amendments in this ASU will be effective for the Company in annual periods beginning after December 15, 2018. The Company is currently evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that this standard will have on its consolidated financial position and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU were effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018. Adoption of this standard did not have a material impact on the Company’s condensed consolidated statements of cash flows and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and the Company will adopt this ASU in the first quarter of 2019. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-10 clarifies ambiguous or potentially conflicting guidance in ASU No. 2016-02, but is not expected to have a material impact on the Company. ASU No. 2018-11 provides entities with an additional transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new lease standard at the adoption date, rather than at the beginning of the earliest period presented, and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company expects to elect this transition method at the adoption date of January 1, 2019. A number of optional practical expedients may be applied in transition. The Company is currently in the process of evaluating if it will elect any of the other remaining practical expedient options. The Company does not intend to recognize right-of-use assets or lease liabilities for leases with a term of 12 months or less, as permitted by the short-term lease practical expedient. In transition, the Company plans to apply the package of practical expedients that permit entities to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for expired or existing leases, or (iii) whether previously capitalized initial direct costs would qualify for capitalization under the new standard. The Company plans to apply the practical expedient that permits a lessee to account for lease and non-lease components in a contract as a single lease component. In addition, the Company does not intend to use hindsight during transition. The Company is currently evaluating the effect that this ASU will have on its consolidated financial position and related disclosures and is in the process of considering changes to its systems and processes. The Company expects there will be an increase in assets and liabilities on the consolidated balance sheets upon adoption due to the recording of right-of-use assets and corresponding lease-related liabilities, which may be material. Refer to Note 7 in “Notes to Consolidated Financial Statements” included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for more information about the Company’s lease-related obligations. |
Business Combination (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||
Schedule of unaudited pro forma combined revenue and net loss | The following table presents the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share for the nine months ended September 30, 2017 as if the acquisition of GetSmarter had occurred on January 1, 2017:
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Goodwill and Amortizable Intangible Assets (Tables) |
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Schedule of changes in goodwill | The table below summarizes the changes in the carrying amount of goodwill by reportable segment:
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Schedule of amortizable intangible assets | Amortizable intangible assets consisted of the following as of:
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Schedule of estimated future amortization expense for amortizable intangible assets | As of September 30, 2018, the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands):
|
Stockholders' Equity (Tables) |
9 Months Ended | |||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||
Schedule of shares of common stock reserved for future issuance | As of September 30, 2018, the Company had reserved a total of 12,431,835 of its authorized shares of common stock for future issuance as follows:
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock-based compensation expense included in the consolidated statements of operations and comprehensive loss | Stock-based compensation expense related to stock-based awards, as well as the ESPP, is included in the following line items in the condensed consolidated statements of operations and comprehensive loss:
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Schedule of stock option activity | The following is a summary of the stock option activity for the nine months ended September 30, 2018:
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Schedule of restricted stock unit activity | The following is a summary of restricted stock unit activity for the nine months ended September 30, 2018:
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Net Loss per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of potential dilutive securities that would have been anti-dilutive due to net loss | The following securities have been excluded from the calculation of weighted-average shares of common stock outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2018 and 2017:
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Schedule of calculation of basic and diluted net loss per share | Basic and diluted net loss per share is calculated as follows:
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Segment and Geographic Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenue, segment profitability and segment profitability margin by segment | The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented:
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Schedule of reconciliation of net loss to total segment profitability | The following table reconciles net loss to total segment profitability:
|
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Schedule of total assets by segment | The Company’s total assets by segment are as follows:
|
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Schedule of contract assets and liabilities | The Company’s trade accounts receivable and contract liabilities in each segment are as follows:
|
Organization (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments (in segments) | 2 |
Number of reportable segments (in segments) | 2 |
Business Combination (Details) - GetSmarter - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | |
---|---|---|
Jul. 01, 2017 |
Sep. 30, 2017 |
|
Acquisition | ||
Cash consideration | $ 98,700 | |
Potential earn-out payment | $ 20,000 | |
Pro forma revenue | $ 207,768 | |
Pro forma net loss | $ (34,306) | |
Pro forma net loss per share, basic and diluted (in dollars per share) | $ (0.72) |
Debt (Details) |
Sep. 30, 2018
USD ($)
agreement
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Lines of Credit | ||
Aggregate borrowing base | $ 25,000,000.0 | |
Amount outstanding | 0 | $ 0 |
Security deposit | $ 15,000,000 | |
Government Grants | ||
Number of conditional loan agreements (in agreements) | agreement | 2 | |
Amount of loan | $ 3,500,000 | 3,500,000 |
Prince George's County, Maryland | ||
Government Grants | ||
Loan interest rate | 3.00% | |
Department of Commerce | ||
Government Grants | ||
Loan interest rate | 3.00% | |
Standby letters of credit | ||
Lines of Credit | ||
Aggregate borrowing base | $ 10,000,000.0 | |
Revolving working capital facility | Short Course Segment | ||
Lines of Credit | ||
Aggregate borrowing base | $ 1,900,000.0 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
U.S. statutory federal income tax rate | 4.00% | 6.00% | 11.00% | 3.00% |
Tax benefit related to asset acquisition | $ 3.0 | $ 3.0 | ||
Tax benefit, difference in operating losses and amortization of acquired intangibles | $ (0.4) | $ 2.2 |
Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Numerator: | ||||
Net loss | $ (9,944) | $ (14,739) | $ (43,162) | $ (29,932) |
Denominator: | ||||
Weighted-average shares of common stock outstanding, basic and diluted (in shares) | 57,663,361 | 48,961,914 | 55,128,845 | 47,962,201 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.17) | $ (0.30) | $ (0.78) | $ (0.62) |
Stock options (in shares) | ||||
Potential dilutive securities that would have been anti-dilutive | ||||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 4,097,480 | 4,912,509 | 4,097,480 | 4,912,509 |
Restricted stock units (in shares) | ||||
Potential dilutive securities that would have been anti-dilutive | ||||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 1,217,161 | 1,435,180 | 1,217,161 | 1,435,180 |
Segment and Geographic Information - Geographical Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Geographical Information | |||||
Revenue | $ 106,963 | $ 70,250 | $ 296,674 | $ 200,074 | |
Short Course Segment | |||||
Geographical Information | |||||
Revenue | 17,244 | 4,326 | 45,187 | 4,326 | |
Short Course Segment | Non-US | |||||
Geographical Information | |||||
Revenue | 8,800 | 26,000 | |||
Long-lived assets | $ 1,300 | $ 3,000 | $ 1,300 | $ 3,000 | $ 700 |
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