10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36376

2U, INC.

(Exact name of registrant as specified in its charter)

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)

(301) 892-4350

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	TWOU	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No

As of November 3, 2022, there were 78,204,895 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021		4
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2022 and 2021		5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2022 and 2021		6
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2022 and 2021		8
Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION		57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
Signatures		60

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

•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;

•the impact of competition on our industry and innovations by competitors;

•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 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 expectations about the predictability, visibility and recurring nature of our business model;

•our ability to meet the anticipated launch dates of our degree programs, executive education offerings and boot camps;

•our ability to acquire new university clients and expand our degree programs, executive education offerings and boot camps with existing university clients;

•our ability to successfully integrate the operations of our acquisitions, including the edX Acquisition, to achieve the expected benefits of our acquisitions and manage, expand and grow the combined company;

•our ability to refinance our indebtedness on attractive terms, if at all, to better align with our focus on profitability;

•our ability to service our substantial indebtedness and comply with the covenants and conversion obligations contained in the Indenture (as defined below) governing our Notes (as defined below) and the Term Loan Agreement (as defined below) governing our Term Loan Facilities (as defined below);

•our ability to generate sufficient future operating cash flows from recent acquisitions to ensure related goodwill is not impaired;

•our ability to execute our growth strategy in the international, undergraduate and non-degree alternative markets;

•our ability to continue to recruit prospective students for our offerings;

•our ability to maintain or increase student retention rates in our degree programs;

•our ability to attract, hire and retain qualified employees;

•our expectations about the scalability of our cloud-based platform;

•potential changes in regulations applicable to us or our university clients;

•our expectations regarding the amount of time our cash balances and other available financial resources will be sufficient to fund our operations;

•the impact and cost of stockholder activism;

2

•the impact of the significant decline in the market price of our common stock, including the impairment of goodwill and indefinite-lived intangible assets;

•the timing, structure and expected impact of our 2022 Strategic Realignment Plan and the estimated savings and amounts expected to be incurred in connection therewith;

•the impact of any natural disasters or public health emergencies, such as the coronavirus disease 2019 (“COVID-19”) pandemic;

•our expectations regarding the effect of the capped call transactions and regarding actions of the option counterparties and/or their respective affiliates; and

•other factors beyond our control.

You should refer to the risks described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended and supplemented by Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. In this Quarterly Report on Form 10-Q, the terms “2U,” “our company,” “we,” “us,” and “our” refer to 2U, Inc. and its subsidiaries, unless the context indicates otherwise.

3

PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements

2U, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	September 30, 2022		December 31, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	170,165	$	232,932
Restricted cash	14,985		16,977
Accounts receivable, net	97,164		67,287
Other receivables, net	31,009		29,439
Prepaid expenses and other assets	81,538		47,217
Total current assets	394,861		393,852
Other receivables, net, non-current	21,007		21,568
Property and equipment, net	45,513		48,650
Right-of-use assets	74,175		76,841
Goodwill	732,586		834,539
Intangible assets, net	569,408		665,523
Other assets, non-current	72,006		68,033
Total assets	$	1,909,556	$	2,109,006
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	133,385	$	164,723
Deferred revenue	127,597		91,926
Lease liability	13,286		13,985
Accrued restructuring liability	13,551		1,735
Other current liabilities	95,252		61,138
Total current liabilities	383,071		333,507
Long-term debt	928,197		845,316
Deferred tax liabilities, net	359		1,726
Lease liability, non-current	102,221		98,666
Other liabilities, non-current	1,792		636
Total liabilities	1,415,640		1,279,851
Commitments and contingencies (Note 6)
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, 77,845,436 shares issued and outstanding as of September 30, 2022; 75,754,663 shares issued and outstanding as of December 31, 2021	78		76
Additional paid-in capital	1,683,860		1,735,628
Accumulated deficit	(1,168,129)		(890,638)
Accumulated other comprehensive loss	(21,893)		(15,911)
Total stockholders’ equity	493,916		829,155
Total liabilities and stockholders’ equity	$	1,909,556	$	2,109,006

See accompanying notes to condensed consolidated financial statements.

4

2U, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited, in thousands, except share and per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	232,238	$	232,376	$	727,031	$	702,058
Costs and expenses
Curriculum and teaching	31,558		30,869		96,933		98,805
Servicing and support	36,110		33,898		112,795		101,947
Technology and content development	43,976		43,106		140,649		128,539
Marketing and sales	94,311		118,300		341,643		346,181
General and administrative	39,388		44,341		131,146		137,128
Restructuring charges	11,632		5,395		29,172		7,214
Impairment charges	79,509		—		138,291		—
Total costs and expenses	336,484		275,909		990,629		819,814
Loss from operations	(104,246)		(43,533)		(263,598)		(117,756)
Interest income	269		474		767		1,188
Interest expense	(15,913)		(16,945)		(43,709)		(33,014)
Loss on debt extinguishment	—		—		—		(1,101)
Other income (expense), net	(1,845)		(425)		(4,242)		22,730
Loss before income taxes	(121,735)		(60,429)		(310,782)		(127,953)
Income tax benefit	59		319		474		448
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Net loss per share, basic and diluted	$	(1.57)	$	(0.80)	$	(4.03)	$	(1.72)
Weighted-average shares of common stock outstanding, basic and diluted	77,692,911		74,691,521		77,013,180		74,266,999
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax of $0 for all periods presented	(5,637)		(4,268)		(5,982)		(2,096)
Comprehensive loss	$	(127,313)	$	(64,378)	$	(316,290)	$	(129,601)

See accompanying notes to condensed consolidated financial statements.

5

2U, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited, in thousands, except share amounts)

	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2021	75,754,663	$	76	$	1,735,628	$	(890,638)	$	(15,911)	$	829,155
Cumulative effect of adoption of ASU No. 2020-06, net of taxes	—	—		(114,551)		32,817		—		(81,734)
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	577,416	1		(920)		—		—		(919)
Exercise of stock options	284,455	—		875		—		—		875
Stock-based compensation expense	—	—		24,424		—		—		24,424
Net loss	—	—		—		(125,780)		—		(125,780)
Foreign currency translation adjustment	—	—		—		—		7,329		7,329
Balance, March 31, 2022	76,616,534	$	77	$	1,645,456	$	(983,601)	$	(8,582)	$	653,350
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	464,984	—		(822)		—		—		(822)
Exercise of stock options	2,278	—		17		—		—		17
Issuance of common stock in connection with employee stock purchase plan	136,039	—		1,282		—		—		1,282
Stock-based compensation expense	—	—		22,349		—		—		22,349
Net loss	—	—		—		(62,852)		—		(62,852)
Foreign currency translation adjustment	—	—		—		—		(7,674)		(7,674)
Balance, June 30, 2022	77,219,835	$	77	$	1,668,282	$	(1,046,453)	$	(16,256)	$	605,650
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	595,369	1		(580)		—		—		(579)
Exercise of stock options	30,232	—		191		—		—		191
Stock-based compensation expense	—	—		15,967		—		—		15,967
Net loss	—	—		—		(121,676)		—		(121,676)
Foreign currency translation adjustment	—	—		—		—		(5,637)		(5,637)
Balance, September 30, 2022	77,845,436	$	78	$	1,683,860	$	(1,168,129)	$	(21,893)	$	493,916

See accompanying notes to condensed consolidated financial statements.

6

2U, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited, in thousands, except share amounts)

	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2020	72,451,521	$	72	$	1,646,574	$	(695,872)	$	(9,784)	$	940,990
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	1,404,971	2		(12,615)		—		—		(12,613)
Exercise of stock options	181,716	—		3,533		—		—		3,533
Stock-based compensation expense	—	—		24,947		—		—		24,947
Net loss	—	—		—		(45,564)		—		(45,564)
Foreign currency translation adjustment	—	—		—		—		(805)		(805)
Balance, March 31, 2021	74,038,208	$	74	$	1,662,439	$	(741,436)	$	(10,589)	$	910,488
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	390,976	1		(1,502)		—		—		(1,501)
Exercise of stock options	28,263	—		737		—		—		737
Issuance of common stock in connection with employee stock purchase plan	50,406	—		1,773		—		—		1,773
Stock-based compensation expense	—	—		24,776		—		—		24,776
Net loss	—	—		—		(21,831)		—		(21,831)
Foreign currency translation adjustment	—	—		—		—		2,977		2,977
Balance, June 30, 2021	74,507,853	$	75	$	1,688,223	$	(763,267)	$	(7,612)	$	917,419
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	171,486	—		(429)		—		—		(429)
Exercise of stock options	70,262	—		1,831		—		—		1,831
Stock-based compensation expense	—	—		25,022		—		—		25,022
Net loss	—	—		—		(60,110)		—		(60,110)
Foreign currency translation adjustment	—	—		—		—		(4,268)		(4,268)
Balance, September 30, 2021	74,749,601	$	75	$	1,714,647	$	(823,377)	$	(11,880)	$	879,465

See accompanying notes to condensed consolidated financial statements.

7

2U, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(310,308)	$	(127,505)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense	9,929		28,278
Depreciation and amortization expense	95,070		77,577
Stock-based compensation expense	62,740		74,745
Non-cash lease expense	16,507		13,518
Restructuring	9,523		4,845
Provision for credit losses	6,129		5,712
Loss on debt extinguishment	—		1,101
Gain on sale of investment	—		(27,762)
Impairment charges	138,291		—
Other	4,660		2,100
Changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable, net	(36,253)		(54,689)
Other receivables, net	(2,867)		(24,598)
Prepaid expenses and other assets	1,973		(6,639)
Accounts payable and accrued expenses	(12,964)		24,249
Deferred revenue	43,252		21,960
Other liabilities, net	(27,124)		(16,028)
Net cash used in operating activities	(1,442)		(3,136)
Cash flows from investing activities
Purchase of a business, net of cash acquired	5,010		—
Additions of amortizable intangible assets	(50,155)		(45,179)
Purchases of property and equipment	(8,777)		(5,397)
Purchase of investment	—		(1,000)
Proceeds from sale of investment	—		38,762
Advances made to university clients	(310)		—
Advances repaid by university clients	200		200
Other	(17)		56
Net cash used in investing activities	(54,049)		(12,558)
Cash flows from financing activities
Proceeds from debt	530		469,595
Payments on debt	(5,313)		(2,203)
Payment of debt issuance costs	—		(10,259)
Tax withholding payments associated with settlement of restricted stock units	(2,320)		(14,543)
Proceeds from exercise of stock options	1,083		6,101
Proceeds from employee stock purchase plan share purchases	1,282		1,773
Net cash (used in) provided by financing activities	(4,738)		450,464
Effect of exchange rate changes on cash	(4,530)		(2,312)
Net (decrease) increase in cash, cash equivalents and restricted cash	(64,759)		432,458
Cash, cash equivalents and restricted cash, beginning of period	249,909		518,866
Cash, cash equivalents and restricted cash, end of period	$	185,150	$	951,324

See accompanying notes to condensed consolidated financial statements.

8

2U, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.    Organization

2U, Inc. (together with its subsidiaries, the “Company”) is an online education platform company. The Company’s mission is to expand access to high-quality educational opportunities that unlock human potential.

On November 16, 2021, the Company completed the acquisition of edX (the “edX Acquisition”), including the edX brand, website, and marketplace. As a result of the edX Acquisition, the Company expanded its digital education offerings to include open courses and micro-credential offerings at the undergraduate and graduate levels and added an education consumer marketplace, edx.org, with over 46 million registered learners. Refer to Note 3 for further information about the edX Acquisition.

The Company serves more than 230 top-ranked global universities and other leading institutions, and offers more than 4,000 high-quality online learning opportunities, including open courses, executive education offerings, boot camps, micro-credentials, professional certificates as well as undergraduate and graduate degree programs. edX is the primary brand for the Company’s products and services and edx.org operates as its global online learning marketplace.

The Company is positioned as one of the world’s most comprehensive free-to-degree online learning platforms. The Company believes its platform and robust consumer marketplace provide clients with the digital infrastructure to launch world-class online education offerings and allow students to easily access high-quality, job-relevant education offerings without the barriers of cost or location.

The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment.

The Company’s Degree Program Segment provides the technology and services to nonprofit colleges and universities to enable the online delivery of degree programs. Students enrolled in these programs are generally seeking an undergraduate or graduate degree of the same quality they would receive on campus.

The Company’s Alternative Credential Segment provides premium online open courses, executive education programs and technical, skills-based boot camps through relationships with nonprofit colleges and universities. Students enrolled in these offerings are generally seeking to reskill or upskill through shorter duration, lower-priced offerings that are relevant to the needs of industry and society.

2.    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 (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “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, 2022 and 2021 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, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis.

Reclassifications

The Company has reclassified prior period amounts in the condensed consolidated statements of cash flows to conform to the current period’s presentation of other receivables. The Company reclassified $24.6 million from changes in prepaid

9

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

expenses and other assets to changes in other receivables. This reclassification had no impact on the previously reported operating cash flows. The Company has reclassified certain other prior period amounts in the consolidated statements of cash flows to conform to current period presentation. These reclassifications had no impact on previously reported operating, financing, or financing cash flows.

The Company has reclassified prior period amounts in the condensed consolidated balance sheet and condensed consolidated statement of operations to conform to the current period’s presentation restructuring charges. The Company reclassified $1.7 million from accounts payable and accrued liabilities to accrued restructuring liability. In addition, the Company reclassified $5.4 million and $7.2 million from general and administrative expense to restructuring charges for the three and nine months ended September 30, 2021, respectively.

Use of Estimates

The preparation of 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. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill and indefinite-lived intangible assets, deferred tax assets, and the fair value of the convertible senior notes. Due to the inherent uncertainty involved in making estimates, particularly in light of the COVID-19 pandemic, 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.

Fair Value Measurements

The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability.

U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 4 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows:

•Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

•Level 2—Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

•Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of September 30, 2022 and December 31, 2021. Refer to Note 9 for more information regarding the Company’s convertible senior notes.

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2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s condensed consolidated financial statements from the acquisition date.

Goodwill and Other Indefinite-lived Intangible Assets

The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, as of October 1, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value.

Goodwill

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit.

The Company determines the fair value of a reporting unit by utilizing a weighted combination of the income-based and market-based approaches.

The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, the selection of appropriate peer group companies, discount rates, terminal growth rates, and forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value.

Other Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible asset was acquired in November 2021 and represents the established edX trade name.

Interim Impairment Assessments

During both the first and third quarter of 2022, the Company experienced a significant decline in its market capitalization. Management deemed these declines triggering events related to the Company’s goodwill and indefinite-lived intangible asset. As a result, the Company performed interim impairment assessments as of March 1, 2022 and September 30, 2022.

For each of the interim impairment assessments, the Company utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and the income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements, terminal growth rates, and discount rates based upon each respective reporting unit’s or indefinite-lived intangible

11

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result.

For the interim impairment assessment performed as of March 1, 2022, management determined the carrying value for one of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, the Company recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

For the interim impairment assessment performed as of September 30, 2022, management determined the carrying value for two of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, the Company recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity’s own equity. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. This ASU is effective for fiscal years beginning after December 15, 2021.

The Company adopted this ASU on a modified retrospective basis in the first quarter of 2022, effective as of January 1, 2022. As a result of the adoption, long-term debt increased $81.7 million, additional paid-in capital decreased $114.6 million, deferred tax liabilities decreased $22.1 million, and the Company recorded a cumulative-effect adjustment to opening accumulated deficit of $32.8 million. Adoption of this ASU requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effective is more dilutive. There was no impact to the number of potentially dilutive shares as a result of the adoption. Adoption of this standard did not have a material impact on the Company’s liquidity or cash flows.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, Disclosures by Business Entities about Government Assistance. This ASU requires entities to disclose information about certain government assistance they receive, including the nature of the transactions and the related accounting policy, the line items on the balance sheet and statement of operations that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions. The

12

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

ASU is effective for fiscal years beginning after December 15, 2021 and the disclosure requirements are for annual periods only. The guidance under this ASU will be effective for the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2022. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU No 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13 and enhances the disclosure requirements for certain loan refinancings when borrowers are experiencing financial difficulty. In addition, the ASU requires the disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. This ASU is effective for fiscal years beginning after December 15, 2022. The Company is evaluating the impact of the new guidance on its disclosures but does not expect there to be a material impact on its consolidated financial statements.

3.    Business Combination

On November 16, 2021, pursuant to the Membership Interest Purchase Agreement, dated June 28, 2021 (the “Purchase Agreement”), by and among the Company, edX Inc., a Massachusetts nonprofit corporation (“edX Inc.”) and edX LLC (f/k/a Circuit Sub LLC), a Delaware limited liability company and a wholly owned subsidiary of edX Inc. (“edX”), edX Inc. contributed substantially all of its assets to edX and the Company acquired 100% of the outstanding membership interests of edX (the “edX Acquisition”) including the edX brand, website, and marketplace.

The total preliminary purchase price was $773.0 million in cash consideration, of which $23.0 million was distributed to an escrow account to satisfy indemnification claims and purchase price adjustments, as applicable. During the nine months ended September 30, 2022, the Company recorded working capital adjustments of $5.0 million, reducing the preliminary purchase price to $768.0 million. In addition, the Company adjusted its preliminary valuation of acquired assets and assumed liabilities based upon new information that was received pertaining to acquisition date fair values.

The transaction was accounted for under the acquisition method of accounting and revenue. Under the acquisition method of accounting, the total preliminary purchase price was allocated to edX’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of November 16, 2021. The allocation of the preliminary purchase price is pending the finalization of the fair value of acquired deferred revenue and other liabilities, deferred income tax assets and liabilities, and assumed non-income tax liabilities.

13

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following table summarizes the preliminary purchase price allocation based on the estimated fair value of the assets acquired and liabilities assumed and reflects the measurement period adjustments recorded during the nine months ended September 30, 2022:

	Estimated Useful Life (in years)	Purchase Price Allocation
		(in thousands)
Cash and cash equivalents		$	11,901
Accounts receivable		6,608
Prepaid expenses and other assets		13,098
Property and equipment, net		529
Right-of-use assets		2,355
Other assets, non-current		572
Accounts payable and accrued expenses		(10,057)
Deferred revenue		(17,000)
Lease liability		(2,512)
Other liabilities		(33,235)
Intangible assets:
Developed technology	3	15,400
University client relationships	10	104,000
Enterprise client relationships	10	14,300
Trade names	indefinite	255,000
Goodwill		407,050
		$	768,009

14

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

4.    Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Allocations		Adjustments		Impairment Charges		Foreign Currency Translation Adjustments		Balance as of September 30, 2022
	(in thousands)
Degree Program Segment
Gross goodwill		$	—	$	198,378	$	(5,519)	$	—	$	—	$	192,859
Accumulated impairments		—		—		—		—		—		—
Net goodwill		—		198,378		(5,519)		—		—		192,859
Alternative Credential Segment
Gross goodwill		$	481,366	$	225,174	$	(10,983)	$	—	$	(6,460)	$	689,097
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		410,987		225,174		(10,983)		(78,991)		(6,460)		539,727
Unallocated goodwill		$	423,552	$	(423,552)	$	—	$	—	$	—	$	—
Total
Gross goodwill		$	904,918	$	—	$	(16,502)	$	—	$	(6,460)	$	881,956
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		$	834,539	$	—	$	(16,502)	$	(78,991)	$	(6,460)	$	732,586

During the first quarter of 2022, the Company completed the allocation of the preliminary goodwill balance resulting from the edX Acquisition to the Company’s reporting units. The goodwill was assigned to the reporting units that are expected to drive synergies from the acquisition, which is each of the Company’s four reporting units. In addition, during the nine months ended September 30, 2022, the Company recorded working capital adjustments of $5.0 million, adjustments to the preliminary valuation of acquired assets and assumed liabilities of edX of $11.5 million, and goodwill impairment charges of $79.0 million. Refer to Note 2 for further information about the goodwill impairment charges.

15

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following tables present the components of intangible assets, net on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

		September 30, 2022						December 31, 2021
	Estimated Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Definite-lived intangible assets
Capitalized technology	3-5	$	218,666	$	(125,222)	$	93,444	$	199,766	$	(112,357)	$	87,409
Capitalized content development	4-5	262,418		(163,907)		98,511		243,687		(125,599)		118,088
University client relationships	9-10	209,016		(49,595)		159,421		211,680		(34,995)		176,685
Enterprise client relationships	10	14,300		(1,251)		13,049		14,300		(179)		14,121
Trade names and domain names	5-10	29,128		(19,845)		9,283		27,161		(12,941)		14,220
Total definite-lived intangible assets		$	733,528	$	(359,820)	$	373,708	$	696,594	$	(286,071)	$	410,523

		September 30, 2022						December 31, 2021
		Gross Carrying Amount		Accumulated Impairments*		Net Carrying Amount		Gross Carrying Amount		Accumulated Impairments		Net Carrying Amount
	(in thousands)
Indefinite-lived intangible assets
Trade names		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000
Total indefinite-lived intangible assets		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000

* During the three months ended March 31, 2022, the Company recorded a $30.0 million impairment charge related to its indefinite-lived intangible asset. During the three months ended September 30, 2022, the Company recorded a $29.3 million impairment charge related to its indefinite-lived intangible asset. Refer to Note 2 for further information about these impairment charges.

The amounts presented in the table above include $50.2 million and $46.3 million of in-process capitalized technology and content development as of September 30, 2022 and December 31, 2021, respectively.

The Company recorded amortization expense related to amortizable intangible assets of $26.6 million and $23.2 million for the three months ended September 30, 2022 and 2021, respectively. The Company recorded amortization expense related to amortizable intangible assets of $86.5 million and $68.0 million for the nine months ended September 30, 2022 and 2021, respectively.

16

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following table presents the estimated future amortization expense of the Company’s amortizable intangible assets placed in service as of September 30, 2022.

	Future Amortization Expense
	(in thousands)
Remainder of 2022	$	25,345
2023	83,559
2024	63,330
2025	42,680
2026	29,048
Thereafter	79,520
Total	$	323,482

5.    Other Balance Sheet Details

Prepaid expenses and other assets

As of September 30, 2022 and December 31, 2021, the Company had balances of $24.0 million and $23.0 million, respectively, of prepaid assets within prepaid expenses and other assets on the condensed consolidated balance sheets.

Other Assets, Non-current

As of September 30, 2022 and December 31, 2021, the Company had balances of $8.9 million and $7.0 million, respectively, of deferred expenses incurred to integrate the software associated with its cloud computing arrangements, within other assets, non-current on the condensed consolidated balance sheets. Such expenses are subject to amortization over the remaining contractual term of the associated cloud computing arrangement, with a useful life of between three to five years. The Company incurred $1.2 million and $0.7 million of such amortization for the three months ended September 30, 2022 and 2021, respectively. The Company incurred $1.9 million and $1.8 million of such amortization for the nine months ended September 30, 2022 and 2021, respectively.

Accounts Payable and Accrued Expenses

The following table presents the components of accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Accrued university and instructional staff compensation	$	27,420	$	36,806
Accrued marketing expenses	21,649		26,469
Accrued transaction and integration expenses	718		4,072
Accrued compensation and related benefits	26,409		49,143
Accounts payable and other accrued expenses	57,189		48,233
Total accounts payable and accrued expenses	$	133,385	$	164,723

For each of the three and nine months ended September 30, 2022 and 2021, expenses related to the Company’s marketing and advertising efforts of its own brands were not material.

17

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Other Current Liabilities

As of September 30, 2022 and December 31, 2021, the Company had balances of $18.6 million and $21.9 million, respectively, within other current liabilities on the condensed consolidated balance sheets, which represents proceeds received from students enrolled in certain of the Company’s alternative credential offerings that are payable to an associated university client.

In response to COVID-19, various government programs have been announced to provide financial relief for affected businesses. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted in the United States on March 27, 2020, the Company is allowed to defer payment of the employer’s share of Social Security taxes incurred from March 27, 2020 through December 31, 2020. In addition, the CARES Act provides eligible employers with an employee retention tax credit for employees whose services were impacted by COVID-19. As of September 30, 2022, the amount of payroll taxes subject to deferred payment, net of employee retention tax credits of $0.5 million, was approximately $5.0 million. The balance is recorded within other current liabilities on the condensed consolidated balance sheets.

6.    Commitments and Contingencies

Legal Contingencies

The Company is involved in various claims and legal proceedings arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. While the Company does not expect that the ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely), individually or in the aggregate, will have a material adverse effect on its financial position, an unfavorable outcome in some or all of these proceedings could have a material adverse impact on the results of operations or cash flows for a particular period. This assessment is based on the Company’s current understanding of relevant facts and circumstances. With respect to current legal proceedings, the Company does not believe it is probable a material loss exceeding amounts already recognized has been incurred as of the date of the balance sheets presented herein. As such, the Company’s view of these matters is subject to inherent uncertainties and may change in the future.

In re 2U, Inc., Securities Class Action

On August 7 and 9, 2019, Aaron Harper and Anne M. Chinn filed putative class action complaints against the Company, Christopher J. Paucek, the Company’s CEO, and Catherine A. Graham, the Company’s former CFO, in the United States District Court for the Southern District of New York, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. The district court transferred the cases to the United States District Court for the District of Maryland, consolidated them under docket number 8:19-cv-3455 (D. Md.), and appointed Fiyyaz Pirani as the lead plaintiff in the consolidated action. On July 30, 2020, Mr. Pirani filed a consolidated class action complaint (“CAC”), adding Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, as a defendant. The CAC also asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended, against Mr. Paucek, Ms. Graham, members of the Company’s board of directors, and the Company’s underwriters, based on allegations related to the Company’s secondary stock offering on May 23, 2018. The proposed class consists of all persons who acquired the Company’s securities between February 26, 2018 and July 30, 2019. On October 27, 2020, defendants filed a motion to dismiss. On August 5, 2021, the court largely denied the defendants’ motion to dismiss. On February 18, 2022, the court stayed discovery until April 19, 2022, pending mediation. On April 28, 2022, the parties informed the court that they had reached a settlement in principle. On June 2, 2022, Plaintiffs filed a motion for preliminary approval of the class action settlement and accompanying documents. On June 23, 2022, the Court entered an order preliminarily approving the settlement. The final approval hearing is set for December 9, 2022. The settlement payment is being funded by the Company's insurers. The $37.0 million payable under the proposed settlement and the related insurance proceeds are recorded within other current liabilities and prepaid expenses and other assets, respectively, on the condensed consolidated balance sheets.

Stockholder Derivative Suits

On April 30, 2020, Richard Theis filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, and the Company’s board of directors in the United States District Court for the Southern District of New York, with docket number 20-cv-3360. The complaint alleges claims for breaches of fiduciary duty, insider sales and misappropriation of information, unjust

18

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

enrichment, and violations of Section 14(a) of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On July 22, 2020, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 23, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On August 21, 2020, Thomas Lucey filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer and the Company’s board of directors in the United States District Court for the District of Maryland, with docket number 1:20-cv-02424-GLR. The complaint alleges claims for breaches of fiduciary duty, insider trading, and contribution for alleged violations of Sections 10(b) and 21D of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On September 3, 2020, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 22, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On November 30, 2020, Leo Shumacher filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, and the Company’s board of directors in the Court of Chancery of the State of Delaware, with docket number 2020-1019-AGB. The complaint alleges claims for breaches of fiduciary duty and unjust enrichment, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On January 6, 2021, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 23, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On September 14, 2022, Daniel Sebagh filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, our CEO, Catherine A. Graham, our former CFO, James Kenigsberg, our CTO, and our board of directors in the United States District Court for the District of Delaware, with docket number 1:22-cv-01205-UNA. The complaint alleges claims for breaches of fiduciary duty, unjust enrichment, waste of corporate assets, insider trading and alleged violations of Section 14(a) of the Exchange Act based upon allegedly false and misleading statements regarding our company’s business prospects and financial projections. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

Marketing and Sales Commitments

Certain agreements entered into between the Company and its university clients in the Degree Program Segment require the Company to commit to meet certain staffing and spending investment thresholds related to marketing and sales activities. In addition, certain agreements in the Degree 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 Degree 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, 2022, the future minimum payments due to university clients have 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, 2021.

Contingent Payments

The Company has entered into agreements with certain of its university clients in the Degree Program Segment that require the Company to make future minimum payments in the event that certain program metrics are not achieved on an annual basis. The Company recognizes any estimated contingent payments under these agreements as contra revenue over the period to which they relate, and records a liability in other current liabilities on the condensed consolidated balance sheets.

19

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

In the first quarter of 2019, the Company entered into an agreement to make investments in an education technology company of up to $15.0 million, upon demand by the investee. During the second quarter of 2021, the Company sold its investment in this education technology company and was released from any further obligation to make additional investments.

7.    Restructuring Charges

2022 Strategic Realignment Plan

During the second quarter of 2022, the Company began implementing a plan to accelerate its transition to a platform company (the “2022 Strategic Realignment Plan”). The plan is designed to reorient the Company around a single platform allowing it to pursue a portfolio-based marketing strategy that drives traffic to the edX marketplace. As part of the plan, the Company has simplified its executive structure to reduce silos, reduced employee headcount, rationalized its real estate footprint and implemented steps to optimize marketing spend.

During the third quarter of 2022, the Company completed the planned headcount reductions and consolidated its in-person operations to its offices in Lanham, Maryland and Cape Town, South Africa.

The Company anticipates that it will incur aggregate restructuring charges associated with the 2022 Strategic Realignment Plan of approximately $35 million to $40 million. The Company recorded $11.3 million and $27.0 million in restructuring charges related to the 2022 Strategic Realignment Plan for each of the three and nine months ended September 30, 2022, respectively. The majority of the estimated remaining restructuring charges relate to leased facilities and will be recognized as expense over the remaining lease terms, ranging from 1 to 9 years.

The following table presents restructuring charges by reportable segment on the Company’s condensed consolidated statements of operations for the periods indicated.

	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
	Degree Program Segment		Alternative Credential Segment		Degree Program Segment		Alternative Credential Segment
2022 Strategic Realignment Plan
Severance and severance-related costs	$	—	$	—	$	8,772	$	6,431
Lease and lease-related charges*	8,972		298		8,972		298
Professional and other fees relating to restructuring activities	961		20		1,515		20
Other**	—		1,008		—		1,008
	9,933		1,326		19,259		7,757
Other restructuring charges***	362		11		1,977		179
Total restructuring charges	$	10,295	$	1,337	$	21,236	$	7,936

*	For the three and nine months ended September 30, 2022, includes $8.5 million of accelerated amortization of right-of-use assets and accelerated depreciation of leasehold improvements related to updates to the estimated useful lives of certain leased facilities and $0.8 million in rent expense associated with these facilities, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, and other variable lease costs. The liabilities associated with these leases continue to be presented within lease liability and lease liability, non-current on the Company’s condensed consolidated balance sheets.
**	Includes the acceleration of certain technology and content development costs.
***	Includes severance and severance-related costs and lease-related charges.

20

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The Company recorded restructuring charges of $5.4 million and $7.2 million for the three and nine months ended September 30, 2021, respectively.

Summary of Accrued Restructuring Liability

The following table presents the additions and adjustments to the accrued restructuring liability on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Additional Costs		Cash Payments		Balance as of September 30, 2022
	(in thousands)
2022 Strategic Realignment Plan
Severance and severance-related costs		$	—	$	14,542	$	(3,885)	$	10,657
Professional and other fees relating to restructuring activities		—		1,820		—		1,820
Lease and lease-related charges		—		212		—		212
Other severance and severance-related costs		1,735		728		(1,601)		862
Total restructuring		$	1,735	$	17,302	$	(5,486)	$	13,551

8.    Leases

The Company leases facilities under non-cancellable operating leases primarily in the United States, South Africa, and the United Kingdom. The Company’s operating leases have remaining lease terms of between less than one to 12 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. These options to extend the terms of the Company’s operating leases were not deemed to be reasonably certain of exercise as of lease commencement and are therefore not included in the determination of their respective non-cancellable lease terms. The future lease payments due under non-cancellable operating lease arrangements contain fixed rent increases over the term of the lease.

In October 2020, the Company entered into an agreement with an unrelated party to sublease a portion of the Company’s office space in the United States. In October 2021, the Company entered into an agreement with the same party to sublease additional office space in the same facility. The agreements are coterminous. As of September 30, 2022, the subleases were classified as operating leases and each had a remaining term of 1.1 years, with scheduled annual rent increases and no option to extend or renew the sublease term. Sublease income is recognized on a straight-line basis over the term of the subleases as a reduction to expense incurred by the Company under the associated head lease.

In August 2021, the Company entered into an agreement with an unrelated party to sublease a portion of the Company’s office space in Denver, Colorado, as part of its overall real estate management strategy. As of September 30, 2022, this sublease was classified as an operating lease and had a remaining term of 2.2 years with scheduled annual rent increases and no option to extend or renew the sublease term. Sublease income is recognized on a straight-line basis over the sublease term as a reduction to expense incurred by the Company under the associated master lease. In connection with the execution of this agreement, the Company recognized a non-cash loss on sublease of $4.8 million in the third quarter of 2021.

21

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following table presents the components of lease expense on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease expense	$	5,099	$	4,897	$	16,471	$	13,524
Short-term lease expense	139		66		407		120
Variable lease expense	1,811		1,713		5,180		4,742
Sublease income	(427)		(155)		(883)		(265)
Total lease expense	$	6,622	$	6,521	$	21,175	$	18,121

As of September 30, 2022, for the Company’s operating leases, the weighted-average remaining lease term was 7.1 years and the weighted-average discount rate was 10.7%. For the nine months ended September 30, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities was $18.8 million and $16.5 million, respectively. For each of the nine months ended September 30, 2022 and 2021, lease liabilities arising from obtaining right-of use assets were $15.5 million and $28.7 million, respectively.

The following table presents the maturities of the Company’s operating lease liabilities as of the date indicated, and excludes the impact of future sublease income totaling $3.5 million in aggregate.

	September 30, 2022
	(in thousands)
Remainder of 2022	$	5,769
2023	24,388
2024	24,349
2025	20,577
2026	21,136
Thereafter	72,212
Total lease payments	168,431
Less: imputed interest	(52,924)
Total lease liability	$	115,507

22

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

9.    Debt

The following table presents the components of outstanding long-term debt on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Term loan facilities	$	568,060	$	572,374
Convertible senior notes	380,000		380,000
Deferred government grant obligations	3,500		3,500
Other borrowings	3,950		4,423
Less: unamortized debt discount and issuance costs	(19,768)		(107,777)
Total debt	935,742		852,520
Less: current portion of long-term debt	(7,545)		(7,204)
Total long-term debt	$	928,197	$	845,316

The Company believes the carrying value of its long-term debt approximates the fair value of the debt as the terms and interest rates approximate the market rates, other than the 2.25% convertible senior notes due 2025 (the “Notes”), which had an estimated fair value of $283.5 million and $403.3 million as of September 30, 2022 and December 31, 2021, respectively. Each of the Company’s long-term debt instruments were classified as Level 2 within the fair value hierarchy.

Term Loan Credit and Guaranty Agreement

The Company entered into a Term Loan Credit and Guaranty Agreement, dated June 28, 2021 (the “Term Loan Agreement”), among the Company, as borrower, the subsidiaries of the Company party thereto, as guarantors, the lenders party thereto, and Alter Domus (US) LLC as administrative agent and collateral agent. Pursuant to the Term Loan Agreement, the lenders thereunder made term loans to the Company on June 29, 2021 (the “Funding Date”) in the aggregate principal amount of $475 million (the “Term Loan Facilities”). The Term Loan Facilities have an initial maturity date of December 28, 2024 (the “Maturity Date”). Commencing on the Funding Date, loans under the Term Loan Facilities will bear interest at a per annum rate equal to a base rate or adjusted Eurodollar rate, as applicable, plus the applicable margin of 4.75% in the case of the base rate loans and 5.75% in the case of the Eurodollar loans. The Term Loan Agreement requires the Company to make quarterly principal repayments equal to 0.25% of the $475 million aggregate principal amount, beginning September 2021. If the loans under the Term Loan Facilities are prepaid prior to the second anniversary, subject to certain customary exceptions, the Company shall pay the Applicable Premium (as defined in the Term Loan Agreement) on the amount of the loans so prepaid.

On November 4, 2021, the Company entered into a First Amendment to Term Loan Credit and Guaranty Agreement and a Joinder Agreement, which amended the Term Loan Agreement (collectively, the “Amended Term Loan Facility”) primarily to provide for an incremental facility to the Company in an original principal amount of $100 million. The Company is required to make quarterly principal repayments equal to 0.25% of this original principal amount beginning in December 2021. The proceeds of the Amended Term Loan Facility may be used for general corporate purposes.

The associated effective interest rate of the Amended Term Loan Facility for each of the three and nine months ended September 30, 2022 was approximately 9.00%. The associated interest expense was approximately $13.2 million and $35.4 million for the three and nine months ended September 30, 2022, respectively.

The obligations under the Term Loan Agreement are guaranteed by certain of the Company’s subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”). The obligations under the Term Loan Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a perfected security interest in all tangible and intangible assets of the Credit Parties, except for certain customary excluded assets.

23

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The Term Loan Agreement contains customary affirmative covenants, including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters. The Term Loan Agreement contains customary negative covenants, including, among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchases of equity interests in the Company and entering into affiliate transactions and asset sales. The Term Loan Agreement contains a financial covenant that requires the Company to maintain minimum Recurring Revenues (as defined in the Term Loan Agreement) as of the last day of any period of four consecutive fiscal quarters of the Company commencing with fiscal quarter ending September 30, 2021 through the Maturity Date. The Term Loan Agreement also provides for customary events of default, including, among others: non-payment of obligations; bankruptcy or insolvency event; failure to comply with covenants; breach of representations or warranties; defaults on other material indebtedness; impairment of any lien on any material portion of the Collateral (as defined in the Term Loan Agreement); failure of any material provision of the Term Loan Agreement or any guaranty to remain in full force and effect; a change of control of the Company; and material judgment defaults. The occurrence of an event of default could result in the acceleration of obligations under the Term Loan Agreement.

If an event of default under the Term Loan Agreement occurs and is continuing, then, at the request (or with the consent) of the lenders holding a majority of the commitments and loans under the Term Loan Agreement, upon notice by the administrative agent to the borrowers, the obligations under the Term Loan Agreement shall become immediately due and payable. In addition, if the Credit Parties become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Term Loan Agreement will automatically become immediately due and payable.

Credit Agreement

On June 25, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain other lenders party thereto that provided for $50 million in revolving loans (the “Loans”). The Credit Agreement allowed for incremental borrowings from time to time in an aggregate amount for all such incremental amounts not to exceed (i) the lesser of (x) $50 million and (y) an amount such that the aggregate principal amount of the lenders’ commitments under the revolving credit facility does not exceed $100 million, plus (ii) certain specified prepayments of indebtedness, plus (iii) an unlimited amount subject to satisfaction of a leverage ratio based compliance test.

The Loans bore interest, at the Company’s option, at variable rates based on (i) a customary base rate plus an applicable margin of 2.75% or (ii) an adjusted LIBOR rate (with a floor of 0.00%) for the interest period relevant to such borrowing plus an applicable margin of 3.75%. In connection with entering into the Term Loan Agreement in June 2021, the Company terminated the Credit Agreement and recognized a loss on debt extinguishment of $1.1 million in connection with the write-off of previously capitalized deferred financing costs and associated fees.

Convertible Senior Notes

In April 2020, the Company issued the Notes in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional Notes, in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. The net proceeds from the offering of the Notes were approximately $369.6 million after deducting the initial purchasers’ discounts, commissions and offering expenses payable by the Company.

The Notes are governed by an indenture (the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The Notes bear interest at a rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020. The Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted.

The Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s senior unsecured indebtedness, senior in right of payment to the Company’s indebtedness that is expressly subordinated to the Notes, effectively subordinated to the Company’s senior secured indebtedness (including indebtedness under the Term Loan Facilities), to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

24

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The net carrying amount of the Notes consists of the following as of each of the dates indicated:

	September 30, 2022		December 31, 2021
	(in thousands)
Principal	$	380,000	$	380,000
Unamortized debt discount for conversion option	—		(83,609)
Unamortized issuance costs	(5,419)		(5,104)
Net carrying amount	$	374,581	$	291,287

Issuance costs are being amortized to interest expense over the contractual term of the Notes. Subsequent to the adoption of ASU 2020-06, the effective interest rate used to amortize the issuance costs was 2.9%. The interest expense related to the Notes for the three months ended September 30, 2022 and 2021 was $2.7 million and $7.8 million, respectively. The interest expense related to the Notes for the nine months ended September 30, 2022 and 2021 was $8.0 million and $23.0 million, respectively.

Holders may convert their Notes at their option in the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock, exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

•upon the occurrence of certain corporate events or distributions on the Company’s common stock, as provided in the Indenture;

•if the Company calls such Notes for redemption; and

•at any time from, and including, November 1, 2024 until the close of business on the second scheduled trading day immediately before the maturity date.

The initial conversion rate for the Notes is 35.3773 shares of the Company’s common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $28.27 per share of the Company’s common stock, and is subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture. Upon conversion, the Company will pay or deliver, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. In the event of the Company calling the Notes for redemption or the holders of the Notes electing to convert their Notes, the Company will determine whether to settle in cash, common stock or a combination thereof. Upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. As of September 30, 2022, the if-converted value of the Notes did not exceed the principal amount.

In addition, upon the occurrence of a “fundamental change” (as defined in the Indenture), holders of the Notes may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 5, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a “make-whole fundamental change”

25

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if such Note is converted after it is called for redemption. No sinking fund is provided for the Notes.

As of September 30, 2022, the conditions allowing holders of the Notes to convert had not been met and the Company has the right under the Indenture to determine the method of settlement at the time of conversion. Therefore, the Notes are classified as non-current on the condensed consolidated balance sheets.

In connection with the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain counterparties. The Capped Call Transactions are generally expected to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $44.34 per share. The cost of the Capped Call Transactions was approximately $50.5 million.

In April 2020, the Company used a portion of the proceeds from the sale of the Notes to repay in full all amounts outstanding, and discharge all obligations in respect of, the $250 million senior secured term loan facility. The Company intends to use the remaining net proceeds from the sale of the Notes for working capital or other general corporate purposes, which may include capital expenditures, potential acquisitions and strategic transactions.

Deferred Government Grant Obligations

Government grants awarded to the Company in the form of forgivable loans are recorded within long-term debt on the Company’s condensed consolidated balance sheets until all contingencies are resolved and the grants are determined to be realized. 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 2U’s Lanham, Maryland headquarters.

In July 2020, the Company amended its conditional loan agreement with Prince George’s County to modify the terms of the employment level thresholds. The conditional loan with Prince George’s County has a maturity date of June 22, 2027.

In January 2021, the Company amended its conditional loan agreement with the State of Maryland to modify the terms of the employment level thresholds and extend the maturity date to June 30, 2028. The interest expense related to these loans for the three and nine months ended September 30, 2022 and 2021 was immaterial. As of September 30, 2022 and December 31, 2021, the Company’s combined accrued interest balance associated with the deferred government grant obligations was $0.6 million and $0.5 million, respectively.

Letters of Credit

Certain of the Company’s operating lease agreements entered into require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of September 30, 2022, the Company has entered into standby letters of credit totaling $14.2 million as security deposits for the applicable leased facilities and in connection with the deferred government grant obligations.

The Company maintains restricted cash as collateral for standby letters of credit for the Company’s leased facilities and in connection with the deferred government grant obligations.

26

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Future Principal Payments

Future principal payments under the Amended Term Loan Facility, the Notes, and the government grants, as of the date indicated are as follows:

	September 30, 2022
	(in thousands)
Remainder of 2022	$	1,438
2023	5,753
2024	560,869
2025	380,000
2026	—
Thereafter*	3,500
Total future principal payments	$	951,560

* Amounts represent conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters.

10.    Income Taxes

The Company’s income tax provisions for all periods consist of federal, state and foreign income taxes. The income tax provisions for the three and nine months ended September 30, 2022 and 2021 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 for each of the three and nine months ended September 30, 2022 and 2021 was less than 1%. The Company’s income tax benefit for the three months ended September 30, 2022 and 2021 was $0.1 million and $0.3 million, respectively. The Company’s income tax benefit for the nine months ended September 30, 2022 and 2021 was $0.5 million and $0.4 million, respectively. The income tax benefit is related to losses generated by operations and the amortization of acquired intangibles in the Alternative Credential Segment that are expected to be realized through future reversing taxable temporary differences. To date, the Company has not been required to pay U.S. federal income taxes because of current and accumulated net operating losses.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Currently, the Company does not expect this legislation will have a material impact on its consolidated financial statements.

11.    Stockholders’ Equity

Common Stock

As of September 30, 2022, 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, 2022, there

27

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

were 77,845,436 shares of common stock outstanding, and the Company had reserved a total of 29,411,807 of its authorized shares of common stock for future issuance as follows:

	Shares Reserved for Future Issuance
Outstanding restricted stock units	4,594,782
Outstanding performance restricted stock units	2,248,104
Outstanding stock options	5,428,679
Reserved for convertible senior notes	17,140,242
Total shares of common stock reserved for future issuance	29,411,807

On August 6, 2020, the Company sold 6,800,000 shares of the Company’s common stock to the public. The Company received net proceeds of $299.8 million, which the Company uses for working capital and other general corporate purposes, which may include capital expenditures, potential acquisitions, growth opportunities and strategic transactions.

Stock-Based Compensation

The Company maintains two stock-based compensation plans: the Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the 2008 Stock Incentive Plan (the “2008 Plan” and together with the 2014 Plan, the “Stock Plans”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards. The shares available for future issuance under the 2014 Plan increased by 3,782,719 and 3,619,344 on January 1, 2022 and 2021, respectively, pursuant to the automatic share reserve increase provision in the 2014 Plan.

The Company also has a 2017 Employee Stock Purchase Plan (the “ESPP”). As of September 30, 2022, 379,670 shares remained available for purchase under the ESPP.

The following table presents stock-based compensation expense related to the Stock Plans and the ESPP, contained on the following line items on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Curriculum and teaching	$	59	$	18	$	155	$	51
Servicing and support	3,061		3,856		11,741		11,669
Technology and content development	1,288		3,334		7,785		9,703
Marketing and sales	1,013		1,811		4,861		4,984
General and administrative	10,546		16,003		38,198		48,338
Total stock-based compensation expense	$	15,967	$	25,022	$	62,740	$	74,745

28

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Restricted Stock Units

The 2014 Plan provides for the issuance of restricted stock units (“RSUs”) to eligible participants. RSUs generally vest over a three- or four-year period. The following table presents a summary of the Company’s RSU activity for the period indicated.

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	2,613,063	$	32.29
Granted	4,464,951	10.67
Vested	(1,715,633)	25.77
Forfeited	(767,599)	18.29
Outstanding balance as of September 30, 2022	4,594,782	$	16.05

The total compensation expense related to the unvested RSUs not yet recognized as of September 30, 2022 was $49.4 million, and will be recognized over a weighted-average period of approximately 1.8 years.

Performance Restricted Stock Units

The 2014 Plan allows for the grant of performance restricted stock units (“PRSUs”) to eligible participants. The right to earn the PRSUs is subject to achievement of the defined performance metrics and continuous employment service. The performance metrics are defined and approved by the compensation committee of our board of directors. Earned PRSUs may be subject to additional time-based vesting.

During the first quarter of 2022, the PRSU awards granted as part of the Company’s 2020 annual equity award cycle with a performance period that began on January 1, 2021 and ended on December 31, 2021, which were subject to market-based vesting conditions, did not achieve the market-based targets for the second performance period, and 0% of the granted quantities vested. The PRSU awards granted as part of the Company’s 2021 annual equity award cycle with a performance period that began on January 1, 2021 and ended on December 31, 2021, which were subject to internal financial performance-based vesting targets, were earned at 112.7% of target.

The following tables present a summary of (i) the assumptions used for estimating the fair values of the PRSUs subject to market-based vesting conditions and (ii) the Company’s PRSU activity for the period indicated. As of September 30, 2022 and December 31, 2021, there were 1.1 million and 1.0 million outstanding PRSUs for which the performance metrics had not been defined as of each respective date. Accordingly, such awards are not considered granted for accounting purposes as of September 30, 2022 and December 31, 2021, and have been excluded from the tables below. No PRSUs were granted during each of the three months ended September 30, 2022 and 2021.

	Nine Months Ended September 30,
	2022	2021
Risk-free interest rate	0.39% – 1.88%	0.10% – 0.26%
Expected term (years)	1.00 – 3.00	1.00 – 3.00
Expected volatility	49% – 97%	85% – 89%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$18.67	$61.33

29

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	1,121,277	$	48.62
Granted	2,081,647	16.63
Vested	(12,597)	40.78
Forfeited	(942,223)	44.28
Outstanding balance as of September 30, 2022	2,248,104	$	21.45

The total compensation expense related to the unvested PRSUs not yet recognized as of September 30, 2022 was $15.8 million, and will be recognized over a weighted-average period of approximately 1.3 years.

Stock Options

The Stock Plans provide for the issuance of stock options to eligible participants. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed 10 years and generally vest over a three- or four-year period.

The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the period presented. No stock options were granted during the nine months ended September 30, 2021.

	Three Months Ended September 30, 2022	Nine Months Ended September 30, 2022
Risk-free interest rate	3.0%	1.9% - 3.0%
Expected term (years)	5.78	5.63 - 5.78
Expected volatility	79%	75% - 79%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$7.78	$7.02

The following table presents a summary of the Company’s stock option activity for the period indicated.

	Number of Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance as of December 31, 2021	3,477,439	$	36.13	3.87	$	16,246
Granted	3,149,620	10.78		7.50
Exercised	(316,965)	3.42		0.10
Forfeited	(585,842)	13.13
Expired	(295,573)	43.25
Outstanding balance as of September 30, 2022	5,428,679	25.43		5.95	97
Exercisable as of September 30, 2022	3,174,670	$	33.11	3.67	$	97

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2022 and 2021 was $3.2 million and $6.3 million, respectively.

The total compensation expense related to the unvested options not yet recognized as of September 30, 2022 was $17.5 million, and will be recognized over a weighted-average period of approximately 2.2 years.

30

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

12.    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 each of the periods indicated.

	Three and Nine Months Ended September 30,
	2022	2021
Stock options	5,428,679	3,538,522
Restricted stock units	4,594,782	2,681,579
Performance restricted stock units	2,248,104	1,558,149
Shares related to convertible senior notes	13,443,374	13,443,374
Total antidilutive securities	25,714,939	21,221,624

The following table presents the calculation of the Company’s basic and diluted net loss per share for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator (in thousands):
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Denominator:
Weighted-average shares of common stock outstanding, basic and diluted	77,692,911		74,691,521		77,013,180		74,266,999
Net loss per share, basic and diluted	$	(1.57)	$	(0.80)	$	(4.03)	$	(1.72)

13.    Segment and Geographic Information

The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment. The Company’s reportable segments are determined based on (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions. The Company’s Degree Program Segment includes the technology and services provided to nonprofit colleges and universities to enable the online delivery of degree programs. The Company’s Alternative Credential Segment includes the premium online executive education programs and technical skills-based boot camps provided through relationships with nonprofit colleges and universities.

Significant Customers

For the three and nine months ended September 30, 2022 and September 30, 2021, no university clients accounted for 10% or more of the Company’s consolidated revenue.

As of September 30, 2022, no university clients in the Degree Program Segment accounted for 10% or more of the Company’s consolidated accounts receivable, net balance. As of December 31, 2021, two university clients in the Degree Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $9.8 million and $8.8 million, or approximately 14% and 13% of the Company’s consolidated accounts receivable, net balance, respectively.

31

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Segment Performance

The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	137,242		$	147,795		$	434,499		$	439,884
Alternative Credential Segment	94,996			84,581			292,532			262,174
Total revenue	$	232,238		$	232,376		$	727,031		$	702,058
Segment profitability**
Degree Program Segment	$	44,907		$	32,925		$	120,264		$	86,786
Alternative Credential Segment	(12,389)			(18,185)			(53,564)			(41,186)
Total segment profitability	$	32,518		$	14,740		$	66,700		$	45,600
Segment profitability margin***
Degree Program Segment	32.7		%	22.3		%	27.7		%	19.7		%
Alternative Credential Segment	(13.0)			(21.5)			(18.3)			(15.7)
Total segment profitability margin	14.0		%	6.4		%	9.2		%	6.5		%

*	The Company has excluded immaterial amounts of intersegment revenues from each of the three and nine months ended September 30, 2022 and 2021.
**	The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, 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 the respective segment’s revenue.

32

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Adjustments:
Stock-based compensation expense	15,967		25,022		62,740		74,745
Other (income) expense, net	1,845		425		4,242		(22,730)
Net interest expense	15,644		16,471		42,942		31,826
Income tax benefit	(59)		(319)		(474)		(448)
Depreciation and amortization expense	29,313		26,168		95,070		77,577
Impairment charges	79,509		—		138,291		—
Loss on debt extinguishment	—		—		—		1,101
Restructuring charges	11,632		5,395		29,172		7,214
Other*	343		1,688		5,025		3,820
Total adjustments	154,194		74,850		377,008		173,105
Total segment profitability	$	32,518	$	14,740	$	66,700	$	45,600

* Includes (i) transaction and integration expense of $0.0 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $3.4 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $0.3 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table presents the Company’s total assets by segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Total assets
Degree Program Segment	$	518,292	$	546,572
Alternative Credential Segment	1,391,264		1,562,434
Total assets	$	1,909,556	$	2,109,006

Geographical Information

The Company’s non-U.S. revenue is based on the currency of the country in which the university client primarily operates. The Company’s non-U.S. revenue was $24.5 million and $24.7 million for the three months ended September 30, 2022 and 2021, respectively. The Company’s non-U.S. revenue was $79.8 million and $74.1 million for the nine months ended September 30, 2022 and 2021, respectively. Substantially all of the Company’s non-U.S. revenue for each of the aforementioned periods was sourced from the Alternative Credential Segment’s operations outside of the U.S. The Company’s long-lived tangible assets in non-U.S. countries as of September 30, 2022 and December 31, 2021 totaled approximately $3.1 million and $3.3 million, respectively.

33

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

14.    Receivables and Contract Liabilities

Trade Accounts Receivable

The Company’s trade accounts receivable balances relate to amounts due from students or customers occurring in the normal course of business. Trade accounts receivable balances have a term of less than one year and are included in accounts receivable, net on the Company’s condensed consolidated balance sheets. The following table presents the Company’s trade accounts receivable in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment accounts receivable	$	33,985	$	31,762
Degree Program Segment unbilled revenue	32,127		4,440
Alternative Credential Segment accounts receivable	47,364		42,771
Total	113,476		78,973
Less: Provision for credit losses	(16,312)		(11,686)
Trade accounts receivable, net	$	97,164	$	67,287

The following table presents the change in provision for credit losses for trade accounts receivable on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	11,686
Current period provision	5,097
Foreign currency translation adjustments	(70)
Other	(401)
Balance as of September 30, 2022	$	16,312

Other Receivables

The Company’s other receivables are comprised of amounts due under tuition payment plans with extended payment terms from students enrolled in certain of the Company’s alternative credential offerings. These payment plans, which are managed and serviced by third-party providers, are designed to assist students with paying tuition costs after all other student financial assistance and scholarships have been applied. The associated receivables generally have payment terms that range from 12 to 42 months and are recorded net of any implied pricing concessions, which are determined based on collections history, market data and any time value of money component. There are no fees or origination costs included in these receivables. The carrying value of these receivable balances approximate their fair value. The following table presents the components of the Company’s other receivables, net, as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Other receivables, amortized cost	$	54,379	$	52,428
Less: Provision for credit losses	(2,363)		(1,421)
Other receivables, net	$	52,016	$	51,007
Other receivables, net, current	$	31,009	$	29,439
Other receivables, net, non-current	$	21,007	$	21,568

34

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The following table presents the change in provision for credit losses for other receivables on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	1,421
Current period provision	1,031
Other	(89)
Balance as of September 30, 2022	$	2,363

The Company considers receivables to be past due when amounts contractually due under the extended payment plans have not been paid. As of September 30, 2022, 87% of other receivables, net due under extended payment plans were current.

At the time of origination, the Company categorizes its other receivables using a credit quality indicator based on the credit tier rankings obtained from the third-party providers that manage and service the payment plans. The third-party providers utilize credit rating agency data to determine the credit tier rankings. The Company monitors the collectability of its other receivables on an ongoing basis. The adequacy of the allowance for credit losses is determined through analysis of multiple factors, including industry trends, portfolio performance, and delinquency rates. The following tables present other receivables, at amortized cost including interest accretion, by credit quality indicator and year of origination, as of the dates indicated.

	September 30, 2022
	Year of Origination
	2022		2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	14,559	$	5,256	$	11	$	20	$	115	$	19,961
Mid	13,938		5,640		517		1,356		392		21,843
Low	5,399		3,774		1,142		1,930		330		12,575
Total	$	33,896	$	14,670	$	1,670	$	3,306	$	837	$	54,379

	December 31, 2021
	Year of Origination
	2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	18,466	$	1,635	$	24	$	115	$	20,240
Mid	14,352		2,992		1,312		392		19,048
Low	8,135		2,802		1,873		330		13,140
Total	$	40,953	$	7,429	$	3,209	$	837	$	52,428

35

2U, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Contract Liabilities

The Company’s deferred revenue represents contract liabilities. The Company generally receives payments from Degree Program Segment university clients early in each academic term and from Alternative Credential Segment 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. The following table presents the Company’s contract liabilities in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment deferred revenue	$	31,102	$	3,462
Alternative Credential Segment deferred revenue	96,495		88,464
Total contract liabilities	$	127,597	$	91,926

For the Degree Program Segment, during the three months ended September 30, 2022 and 2021 the Company recognized $0.1 million and no revenue related to its deferred revenue balances that existed at the end of each preceding year. Revenue recognized in this segment during the nine months ended September 30, 2022 and 2021 that was included in the deferred revenue balance that existed at the end of each preceding year was $1.5 million and $1.7 million, respectively.

For the Alternative Credential Segment, during the three months ended September 30, 2022 and 2021 the Company recognized $7.3 million and no revenue related to its deferred revenue balances that existed at the end of each preceding year. Revenue recognized in this segment during the nine months ended September 30, 2022 and 2021 that was included in the deferred revenue balance that existed at the end of each preceding year was $73.8 million and $71.9 million, respectively.

Contract Acquisition Costs

The Degree Program Segment had $0.5 million and $0.5 million of net capitalized contract acquisition costs recorded primarily within other assets, non-current on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. For each of the nine months ended September 30, 2022 and 2021, the Company capitalized an immaterial amount of contract acquisition costs and recorded an immaterial amount of associated amortization expense in the Degree Program Segment.

15.    Supplemental Cash Flow Information

The Company’s cash interest payments, net of amounts capitalized, were $35.2 million and $4.5 million for the nine months ended September 30, 2022 and 2021, respectively. The Company’s accrued but unpaid capital expenditures were $2.8 million and $4.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021. Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Many factors could cause or contribute to these differences, including those discussed in Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021, and our other filings with the Securities and Exchange Commission (the “SEC”). Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Unless the context otherwise requires, all references to “we,” “us” or “our” refer to 2U, Inc., together with its subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2021, which are included in our Annual Report on Form 10-K, filed with the SEC on March 1, 2022.

Overview

We are a leading online education platform company. Our mission is to expand access to high-quality educational opportunities that unlock human potential. In November 2021, we acquired substantially all of the assets of edX Inc. (the “edX Acquisition”), including the edX brand, website and marketplace. As a result of the edX Acquisition, we expanded our digital education offerings to include open courses and micro-credential offerings at the undergraduate and graduate levels and added an education consumer marketplace, edx.org, with over 46 million registered learners.

We serve more than 230 top-ranked global universities and other leading institutions, and offer more than 4,000 high-quality online learning opportunities, including open courses, executive education offerings, boot camps, micro-credentials, professional certificates as well as undergraduate and graduate degree programs.

We are positioned as one of the world’s most comprehensive free-to-degree online learning platforms. We believe our platform and robust consumer marketplace provide our clients with the digital infrastructure to launch world-class online education offerings and allow students to easily access high-quality, job-relevant education offerings without the barriers of cost or location.

We have two reportable segments: the Degree Program Segment and the Alternative Credential Segment.

In our Degree Program Segment, we provide the technology and services to nonprofit colleges and universities to enable the online delivery of degree programs. Students enrolled in these programs are generally seeking an undergraduate or graduate degree of the same quality they would receive on campus.

In our Alternative Credential Segment, we provide premium online open courses, executive education programs, technical, skills-based boot camps and micro-credential programs at the undergraduate and graduate levels through relationships with nonprofit colleges and universities and other leading institutions. Students enrolled in these offerings are generally seeking to reskill or upskill for career advancement or personal development through shorter duration, lower-priced offerings.

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Recent Developments

During the second quarter of 2022, we accelerated our planned transition to a platform company (the “2022 Strategic Realignment Plan”). This acceleration reflected our increasing confidence in our platform strategy combined with the macroeconomic environment that continued to be challenging. The plan is designed to reorient the company around a single platform allowing us to pursue a portfolio-based marketing strategy that drives traffic to the edX marketplace. As part of the plan, we have simplified our executive structure to reduce silos, reduced employee headcount, rationalized our real estate footprint and implemented steps to optimize marketing spend.

During the third quarter, we completed the planned headcount reduction and consolidated our in-person operations to our offices in Lanham, Maryland and Cape Town, South Africa. We expect to generate marketing efficiency and approximately $70 million in annualized cost savings, primarily due to savings associated with headcount reduction and reduced real estate costs. We anticipate that we will incur aggregate restructuring charges associated with the 2022 Strategic Realignment Plan of approximately $35 million to $40 million. We recorded $11.3 million and $27.0 million in restructuring charges related to the 2022 Strategic Realignment Plan for the three and nine months ended September 30, 2022, respectively. The majority of the estimated remaining restructuring charges relate to leased facilities, and will be recognized as expense over the remaining lease terms ranging from 1 to 9 years.

COVID-19 Update

The COVID-19 pandemic continues to have widespread impacts on society and the global economy. Our focus remains on ensuring the health and safety of our employees and clients, while ensuring the continuity of our business. We have adapted our business practices to allow our global workforce to continue to work from home on a voluntary basis. In addition, many of our in-person offerings and other campus-based experiences are offered in a virtual format, including the field placement components in certain of our clinical graduate programs. Our course production capabilities allow faculty to record studio-quality asynchronous content remotely.

We continue to closely monitor the impact of the COVID-19 pandemic on our business. The pandemic initially accelerated the need for online learning and training, but has also created new and different demand dynamics in the market. At the beginning of the pandemic, we experienced increased demand from new and existing university clients and students as universities moved classes online. As the pandemic continues, we have seen some of these pandemic-related trends subside in certain areas of our business. We have experienced fluctuations in our student retention rates, student enrollments and in our marketing costs. In addition, during the past year, competition for talent has increased, resulting in higher voluntary employee turnover and additional costs to attract and retain employees.

We cannot estimate the impact of COVID-19 on future demand or cost levels or on our business or economic conditions generally, due to numerous uncertainties, including uncertainties regarding the duration or reemergence of the outbreak in various regions, including the potential impact of variants of the virus, actions that may be taken by governmental authorities, future fluctuations in demand and cost levels and labor market conditions. For a discussion of additional risks related to COVID-19, see Part I, Item 1A. “Risk Factors.”

Our Business Model and Components of Operating Results

The key elements of our business model and components of our operating results are described below.

Revenue Drivers

In our Degree Program Segment, we derive substantially all of our revenue from revenue-share arrangements with our university clients under which we receive a contractually specified percentage of the amounts students pay them to enroll in degree programs. In our Alternative Credential Segment, we derive substantially all of our revenue from tuition and fees from students taking our executive education programs, boot camps, and premium online open courses. Revenue in each segment is primarily driven by the number of student enrollments in our offerings.

Operating Expense

Marketing and Sales

Our most significant expense relates to marketing and sales activities to attract students to our offerings across both of our segments. This includes the cost of Search Engine Optimization, Search Engine Marketing and Social Media Optimization, as well as personnel and personnel-related expense for our marketing and recruiting teams.

In our Degree Program Segment, our marketing and sales expense in any period generates student enrollments eight months later, on average. We then generate revenue as students progress through their programs, which generally occurs over a two-year period following initial enrollment. Accordingly, our marketing and sales expense in any period is an investment to

38

generate revenue in future periods. Therefore, we do not believe it is meaningful to directly compare current period revenue to current period marketing and sales expense. Further, in this segment we believe that our marketing and sales expense in future periods will generally decline as a percentage of the revenue reported in those same periods as our revenue base from returning students in existing programs increases.

In our Alternative Credential Segment, our marketing and sales expense in any period generates student enrollments as much as 24 weeks later. We then generate revenue as students progress through their courses, which typically occurs over a two- to six-month period following initial enrollment.

Curriculum and Teaching

Curriculum and teaching expense consists primarily of amounts due to universities for licenses to use their brand names and other trademarks in connection with our executive education and boot camp offerings. The payments are based on contractually specified percentages of the tuition and fees we receive from students in those offerings. Curriculum and teaching expense also includes personnel and personnel-related expense for our executive education and boot camp instructional staff.

Servicing and Support

Servicing and support expense consists primarily of personnel and personnel-related expense associated with the management and operations of our educational offerings, as well as supporting students and faculty members. Servicing and support expense also includes expenses to support our platform, facilitate in-program field placements and student immersions, and assist with compliance requirements.

Technology and Content Development

Technology and content development expense consists primarily of personnel and personnel-related expense associated with the ongoing improvement and maintenance of our platform, as well as hosting and licensing expenses. Technology and content expense also includes the amortization of capitalized technology and content.

General and Administrative

General and administrative expense consists primarily of personnel and personnel-related expense for our centralized functions, including executive management, legal, finance, human resources, and other departments that do not provide direct operational services. General and administrative expense also includes professional fees and other corporate expenses.

Restructuring charges

Restructuring charges consist of severance and severance-related costs, costs associated with the exit of facilities, and costs associated with professional services.

Net Interest Income (Expense)

Net interest income (expense) consists primarily of interest expense from our long-term debt and interest income from our cash and cash equivalents. Interest expense also includes the amortization of debt issuance costs.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency gains and losses, gains and losses related to the sale of investments and other non-operating income and expense.

Income Taxes

Our income tax provisions for all periods consist of U.S. federal, state and foreign income taxes. Our effective tax rate for the period is based on a mix of higher-taxed and lower-taxed jurisdictions. On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Currently, we do not believe this legislation will have a material impact on our consolidated financial statements.

39

Results of Operations

Consolidated Operating Results

Comparison of Three Months Ended September 30, 2022 and 2021

The following table presents selected condensed consolidated statement of operations and comprehensive loss data for each of the periods indicated.

	Three Months Ended September 30,
	2022				2021				Period-to-Period Change
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage
	(dollars in thousands)
Revenue	$	232,238	100.0	%	$	232,376	100.0	%	$	(138)	0.1	%
Costs and expenses
Curriculum and teaching	31,558		13.6		30,869		13.3		689		2.2
Servicing and support	36,110		15.5		33,898		14.6		2,212		6.5
Technology and content development	43,976		18.9		43,106		18.6		870		2.0
Marketing and sales	94,311		40.6		118,300		50.9		(23,989)		20.3
General and administrative	39,388		17.0		44,341		19.1		(4,953)		11.2
Restructuring charges	11,632		5.0		5,395		2.3		6,237		115.6
Impairment charges	79,509		34.2		—		—		79,509		*
Total costs and expenses	336,484		144.8		275,909		118.8		60,575		22.0
Loss from operations	(104,246)		(44.8)		(43,533)		(18.8)		(60,713)		139.5
Interest income	269		0.1		474		0.2		(205)		43.1
Interest expense	(15,913)		(6.9)		(16,945)		(7.3)		1,032		6.1
Other income (expense), net	(1,845)		(0.8)		(425)		(0.2)		(1,420)		333.4
Loss before income taxes	(121,735)		(52.4)		(60,429)		(26.1)		(61,306)		101.4
Income tax benefit	59		0.0		319		0.1		(260)		81.3
Net loss	$	(121,676)	(52.4)	%	$	(60,110)	(26.0)	%	$	(61,566)	102.4	%

* Not meaningful for comparative purposes.

Revenue. Revenue for the three months ended September 30, 2022 decreased $0.1 million, or 0.1%, to $232.2 million as compared to $232.4 million in 2021. Revenue for the three months ended September 30, 2022 includes $9.3 million of revenue from legacy edX offerings. The remaining change was due to a $13.9 million decrease in revenue from our Degree Program Segment, partially offset by a $4.5 million increase in revenue from our Alternative Credential Segment.

In the Degree Program Segment, average revenue per FCE enrollment decreased from $2,555 to $2,404, or 5.9%, and FCE enrollments decreased by 750, or 1.3%. In the Alternative Credential Segment, FCE enrollments increased by 2,954, or 14.6%, and average revenue per FCE enrollment decreased from $4,193 to $3,850, or 8.2%.

Curriculum and Teaching. Curriculum and teaching expense for the three months ended September 30, 2022 was $31.6 million, which was comparable to the three months ended September 30, 2021.

Servicing and Support. Servicing and support expense increased $2.2 million, or 6.5%, to $36.1 million as compared to $33.9 million in 2021. The 2022 expense includes $2.5 million of operating expense from edX.

Technology and Content Development. Technology and content development expense increased $0.9 million, or 2.0%, to $44.0 million as compared to $43.1 million in 2021. The 2022 expense includes $5.0 million of operating expense from edX. The remaining change was primarily due to a $1.8 million decrease in personnel and personnel-related expense and a $1.8 million decrease in depreciation and amortization expense. These decreases were partially offset by a $1.2 million increase in expenses to support our platform and software applications.

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Marketing and Sales. Marketing and sales expense decreased $24.0 million, or 20.3%, to $94.3 million as compared to $118.3 million in 2021. The 2022 expense includes $7.4 million of operating expense from edX. The remaining change was primarily due to a $28.6 million decrease in marketing expense from the implementation of a more efficient marketing framework in connection with the 2022 Strategic Realignment Plan and a $3.5 million decrease in personnel and personnel-related expense.

General and Administrative. General and administrative expense decreased $5.0 million, or 11.2%, to $39.4 million as compared to $44.3 million in 2021. The 2022 expense includes $1.7 million of operating expense from edX. The remaining change was primarily due to a $4.5 million decrease in personnel and personnel-related expense and a $1.3 million decrease in professional fees.

Impairment Charges. In the third quarter of 2022, we recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively.

Restructuring Charges. Restructuring charges increased $6.2 million, or 115.6%, to $11.6 million as compared to $5.4 million in 2021. Restructuring charges for the three months ended September 30, 2022 include $9.3 million in lease and facility exit costs, $1.0 million in acceleration of certain technology and content development costs, and $1.0 million in professional and other fees relating to restructuring activities, each in connection with the 2022 Strategic Realignment Plan. Restructuring charges for the three months ended September 30, 2021 include $5.3 million in lease and facility exit costs.

Net Interest Income (Expense). Net interest expense decreased $0.8 million, or 5.0%, to $15.6 million as compared to $16.5 million in 2021. This decrease was primarily due to a $5.1 million decrease in interest expense due to the adoption of ASU 2020-06, which eliminated the amortization of the debt discount previously associated with the Notes. This decrease was partially offset by a $4.4 million increase in interest expense incurred under our term loan facility.

Other Income (Expense), Net. Other expense, net was $1.8 million for the three months ended September 30, 2022, as compared to other expense, net of $0.4 million for the three months ended September 30, 2021. This change was primarily due to fluctuations in foreign currency rates impacting our operations in the Alternative Credential Segment.

Income Tax Benefit. For the three months ended September 30, 2022, we recognized an income tax benefit of $0.1 million, and our effective tax rate was less than 1%. For the three months ended September 30, 2021, we recognized an income tax benefit of $0.3 million, and our effective tax rate was approximately 1%. To date, we have not been required to pay U.S. federal income taxes because of our current and accumulated net operating losses.

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Comparison of Nine Months Ended September 30, 2022 and 2021

The following table presents selected condensed consolidated statement of operations and comprehensive loss data for each of the periods indicated.

	Nine Months Ended September 30,
	2022				2021				Period-to-Period Change
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage
	(dollars in thousands)
Revenue	$	727,031	100.0	%	$	702,058	100.0	%	$	24,973	3.6	%
Costs and expenses
Curriculum and teaching	96,933		13.3		98,805		14.1		(1,872)		1.9
Servicing and support	112,795		15.5		101,947		14.5		10,848		10.6
Technology and content development	140,649		19.3		128,539		18.3		12,110		9.4
Marketing and sales	341,643		47.0		346,181		49.3		(4,538)		1.3
General and administrative	131,146		18.0		137,128		19.5		(5,982)		4.4
Restructuring charges	29,172		4.0		7,214		1.0		21,958		304.4
Impairment charges	138,291		19.0		—		—		138,291		*
Total costs and expenses	990,629		136.1		819,814		116.7		170,815		20.8
Loss from operations	(263,598)		(36.1)		(117,756)		(16.7)		(145,842)		123.9
Interest income	767		0.1		1,188		0.2		(421)		35.4
Interest expense	(43,709)		(6.0)		(33,014)		(4.7)		(10,695)		32.4
Loss on debt extinguishment	—		0.0		(1,101)		(0.2)		1,101		*
Other income (expense), net	(4,242)		(0.6)		22,730		3.2		(26,972)		118.7
Loss before income taxes	(310,782)		(42.6)		(127,953)		(18.2)		(182,829)		142.9
Income tax benefit	474		0.1		448		0.1		26		5.9
Net loss	$	(310,308)	(42.5)	%	$	(127,505)	(18.1)	%	$	(182,803)	143.4	%

* Not meaningful for comparative purposes.

Revenue. Revenue for the nine months ended September 30, 2022 increased $25.0 million, or 3.6%, to $727.0 million as compared to $702.1 million in 2021. Revenue for the nine months ended September 30, 2022 includes $30.2 million of revenue from legacy edX offerings. The remaining change was due to a $14.3 million decrease in revenue from our Degree Program Segment, partially offset by a $9.0 million increase in revenue from our Alternative Credential Segment.

In the Degree Program Segment, average revenue per FCE enrollment decreased from $2,467 to $2,414, or 2.1% and FCE enrollments increased by 1,726, or 1.0%. In the Alternative Credential Segment, FCE enrollments increased by 4,304, or 6.6% and average revenue per FCE enrollment decreased from $4,038 to $3,917, or 3.0%.

Curriculum and Teaching. Curriculum and teaching expense decreased $1.9 million, or 1.9%, to $96.9 million as compared to $98.8 million in 2021. This decrease was primarily due to lower expense related to university clients resulting from lower revenue in certain offerings in our Alternative Credential Segment.

Servicing and Support. Servicing and support expense increased $10.8 million, or 10.6%, to $112.8 million as compared to $101.9 million in 2021. The 2022 expense includes $8.2 million of operating expense from edX. The remaining increase was primarily due to a $3.0 million increase in other student support costs.

Technology and Content Development. Technology and content development expense increased $12.1 million, or 9.4%, to $140.6 million as compared to $128.5 million in 2021. The 2022 expense includes $14.9 million of operating expense from edX. The remaining change was primarily due to a $4.3 million decrease in personnel and personnel-related expense, partially offset by a $2.0 million increase in expenses to support our platform and software applications.

Marketing and Sales. Marketing and sales expense decreased $4.5 million, or 1.3%, to $341.6 million as compared to $346.2 million in 2021. The 2022 expense includes $22.7 million of operating expense from edX. The remaining change was

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primarily due to a $24.5 million decrease in marketing expense from the implementation of a more efficient marketing framework in connection with the 2022 Strategic Realignment Plan, and a $7.5 million decrease in personnel and personnel-related expense. These decreases were partially offset by a $3.8 million increase in depreciation and amortization expense.

General and Administrative. General and administrative expense decreased $6.0 million, or 4.4%, to $131.1 million as compared to $137.1 million in 2021. The 2022 expense includes $6.1 million of operating expense from edX. The remaining change was primarily due to a $12.3 million decrease in personnel and personnel-related expense and a $2.5 million decrease in professional fees. These decreases were partially offset by a $2.0 million increase in other expenses.

Impairment Charges. In the first quarter of 2022, we recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively. In the third quarter of 2022, we recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively.

Restructuring Charges. Restructuring charges increased $22.0 million, or 304.4%, to $29.2 million as compared to $7.2 million in 2021. Restructuring charges for the nine months ended September 30, 2022 include $15.2 million in severance and severance-related expense, $9.3 million in lease and facility exit costs, $1.5 million in professional and other fees relating to restructuring activities, and $1.0 million in acceleration of certain technology and content development costs, each in connection with the 2022 Strategic Realignment Plan, and $2.2 million in other restructuring charges. Restructuring charges for the nine months ended September 30, 2021 include $5.9 million in lease and facility exit costs and $1.2 million in severance and severance-related expense.

Net Interest Income (Expense). Net interest expense increased $11.1 million, or 34.9%, to $42.9 million as compared to $31.8 million in 2021. This increase was primarily due to a $26.1 million increase in interest expense incurred under our term loan facility. This increase was partially offset by a $15.0 million decrease in interest expense due to the adoption of ASU 2020-06, which eliminated the amortization of the debt discount previously associated with the Notes.

Loss on Debt Extinguishment. The loss on debt extinguishment for the nine months ended September 30, 2021 was due to the write-off of deferred financing costs and fees paid in connection with the termination of our $50 million credit agreement in June 2021.

Other Income (Expense), Net. Other expense, net was $4.2 million for the nine months ended September 30, 2022, as compared to other income, net of $22.7 million for the nine months ended September 30, 2021. This change was primarily due to the gain recognized in connection with the sale of our investment in an education technology company during the nine months ended September 30, 2021.

Income Tax Benefit. For the nine months ended September 30, 2022, we recognized an income tax benefit of $0.5 million, and our effective tax rate was less than 1%. For the nine months ended September 30, 2021, we recognized an income tax benefit of $0.4 million, and our effective tax rate was less than 1%. To date, we have not been required to pay U.S. federal income taxes because of our current and accumulated net operating losses.

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Business Segment Operating Results

We define segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. Some of these items may not be applicable in any given reporting period and they may vary from period to period. Total segment profitability is a non-GAAP measure when presented outside of the financial statement footnotes. Total segment profitability is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, to develop short- and long-term operational plans and to compare our performance against that of other peer companies using similar measures. In particular, the exclusion of certain expenses in calculating total segment profitability can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that total segment profitability provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

The following table presents a reconciliation of total segment profitability to net loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Adjustments:
Stock-based compensation expense	15,967		25,022		62,740		74,745
Other (income) expense, net	1,845		425		4,242		(22,730)
Net interest expense	15,644		16,471		42,942		31,826
Income tax expense (benefit)	(59)		(319)		(474)		(448)
Depreciation and amortization expense	29,313		26,168		95,070		77,577
Loss on debt extinguishment	—		—		—		1,101
Impairment charges	79,509		—		138,291		—
Restructuring charges	11,632		5,395		29,172		7,214
Other*	343		1,688		5,025		3,820
Total adjustments	154,194		74,850		377,008		173,105
Total segment profitability	$	32,518	$	14,740	$	66,700	$	45,600

* Includes (i) transaction and integration expense of $0.0 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $3.4 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $0.3 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

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Three Months Ended September 30, 2022 and 2021

The following table presents revenue by segment and segment profitability for each of the periods indicated.

	Three Months Ended September 30,				Period-to-Period Change
	2022		2021		Amount		Percentage
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	137,242	$	147,795	$	(10,553)	(7.1)	%
Alternative Credential Segment	94,996		84,581		10,415		12.3
Total revenue	$	232,238	$	232,376	$	(138)	0.1	%
Segment profitability
Degree Program Segment	$	44,907	$	32,925	$	11,982	36.3	%
Alternative Credential Segment	(12,389)		(18,185)		5,796		31.9
Total segment profitability	$	32,518	$	14,740	$	17,778	120.3	%

* Immaterial amounts of intersegment revenue have been excluded from the above results for the three months ended September 30, 2022 and 2021.

Degree Program Segment profitability increased $12.0 million, or 36.3%, to $44.9 million as compared to $32.9 million in 2021. This increase was primarily due to operational efficiency initiatives and the implementation of the 2022 Strategic Realignment Plan.

Alternative Credential Segment profitability increased $5.8 million, or 31.9%, to $(12.4) million as compared to $(18.2) million in 2021. This increase was primarily due to revenue growth of $10.4 million, including $5.9 million from the addition of edX offerings, partially offset by higher operating expenses, including $16.3 million of operating expense from edX. This $16.3 million increase was partially offset by lower operating expenses primarily due to the implementation of the 2022 Strategic Realignment Plan.

Nine Months Ended September 30, 2022 and 2021

The following table presents revenue by segment and segment profitability for each of the periods indicated.

	Nine Months Ended September 30,				Period-to-Period Change
	2022		2021		Amount		Percentage
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	434,499	$	439,884	$	(5,385)	(1.2)	%
Alternative Credential Segment	292,532		262,174		30,358		11.6
Total revenue	$	727,031	$	702,058	$	24,973	3.6	%
Segment profitability
Degree Program Segment	$	120,264	$	86,786	$	33,478	38.6	%
Alternative Credential Segment	(53,564)		(41,186)		(12,378)		(30.1)
Total segment profitability	$	66,700	$	45,600	$	21,100	46.2	%

* Immaterial amounts of intersegment revenue have been excluded from the above results for the nine months ended September 30, 2022 and 2021.

Degree Program Segment profitability increased $33.5 million, or 38.6%, to $120.3 million as compared to $86.8 million in 2021. This increase was primarily due to operational efficiency initiatives and the implementation of the 2022 Strategic Realignment Plan, partially offset by a decline in revenue of $5.4 million.

Alternative Credential Segment profitability decreased $12.4 million, or 30.1%, to $(53.6) million as compared to $(41.2) million in 2021. This decrease was primarily due to higher operating expenses, including $50.7 million of operating

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expense from edX, partially offset by revenue growth of $30.4 million, including $21.3 million from the addition of edX offerings.

Liquidity and Capital Resources

As of September 30, 2022, our principal sources of liquidity were cash and cash equivalents totaling $170.2 million, which were held for working capital and general corporate purposes.

In April 2020, we issued the Notes in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional Notes, in a private placement to qualified institutional buyers under Rule 144A of the Securities Act. The Notes are governed by an indenture (the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The Notes bear interest at a rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020. The Notes mature on May 1, 2025, unless repurchased, redeemed or converted in accordance with their terms prior to such date. Prior to November 1, 2024, the Notes are convertible only upon satisfaction of certain conditions, and thereafter at any time until the close of business on the second scheduled trading date immediately before the maturity date. In connection with the Notes, we entered into privately negotiated capped call transactions with a premium cost of approximately $50.5 million. The capped call transactions are generally expected to reduce the potential dilution to our common stock upon any conversion of the Notes and/or to offset any cash payments we are required to make in excess of the principal amount of the converted Notes, with such reduction and/or offset subject to the cap. The net proceeds from the issuance of the Notes were $319.0 million after deducting the initial purchasers’ discount, offering expenses and the cost of the capped call transactions. As of September 30, 2022, the conditions allowing holders of the Notes to convert had not been met and we have the right under the Indenture to determine the method of settlement at the time of conversion, and the Notes, therefore, are classified as a non-current on the condensed consolidated balance sheets. Refer to Note 9 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding our Notes.

On April 23, 2020, we repaid our $250 million senior secured term loan facility in full (including interest and prepayment premium) and terminated our credit agreement with Owl Rock Capital Corporation. In connection with the extinguishment of our $250 million senior secured term loan facility, we recognized a charge of approximately $11.7 million in the second quarter of 2020.

On June 25, 2020, we entered into a $50 million credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain other lenders party thereto that provided for $50 million in revolving loans. In connection with entering into the Term Loan Agreement (as defined below) in June 2021, we terminated our $50 million credit agreement with Morgan Stanley Senior Funding, Inc. Refer to Note 9 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

On August 6, 2020, we sold 6,800,000 shares of our common stock to the public. We received net proceeds of $299.8 million, which we use for working capital and other general corporate purposes.

In June 2021, we entered into a Term Loan Credit and Guaranty Agreement, dated June 28, 2021 (“the Term Loan Agreement”), with Alter Domus (US) LLC as administrative agent and collateral agent, to make term loans to us in the aggregate principal amount of $475 million (the “Term Loan Facilities”), which have an initial maturity date of December 28, 2024. Loans under this facility bear interest at a per annum rate equal to a base rate or adjusted Eurodollar rate, as applicable, plus the applicable margin of 4.75% in the case of the base rate loans and 5.75% in the case of the Eurodollar loans. We used the proceeds of the Term Loan Facilities to fund a portion of the edX Acquisition and to pay related costs, fees and expenses. On November 4, 2021, we entered into a First Amendment to Term Loan Credit and Guaranty Agreement and a Joinder Agreement, which amended the Term Loan Agreement (collectively, the “Amended Term Loan Facility”) primarily to provide for an incremental facility to us in an original principal amount of $100 million. The proceeds of the Amended Term Loan Facility may be used for general corporate purposes. Refer to Note 9 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding our Amended Term Loan Facility.

We have financed our operations primarily through payments from university clients and students for our technology and services, the Amended Term Loan Facility, the Notes, and public and private equity financings. We believe that our existing cash and cash equivalents, together with cash generated from operations and available borrowing capacity under the Amended Term Loan Facility, will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months. We regularly evaluate our liquidity position, debt obligations, maturity schedule and anticipated cash needs, and may consider capital raising, refinancing and other market opportunities that may be available to us. We are currently evaluating options to opportunistically refinance our term loan in the short- to medium-term.

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Our operations require us to make capital expenditures for content development, capitalized technology, and property and equipment and to service our debt. During the nine months ended September 30, 2022 and 2021, our capital asset additions were $61.8 million and $54.9 million, respectively.

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands).

	Nine Months Ended September 30,
	2022		2021
Net cash used in operating activities	$	(1,442)	$	(3,136)
Net cash used in investing activities	(54,049)		(12,558)
Net cash (used in) provided by financing activities	(4,738)		450,464
Effect of exchange rate changes on cash	(4,530)		(2,312)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(64,759)	$	432,458

Operating Activities

Cash flows from operating activities have typically been generated from our net income (loss) and by changes in our operating assets and liabilities, adjusted for non-cash expense items such as depreciation and amortization expense, stock-based compensation expense and gain on sale of investment.

The following sections set forth the components of our $1.4 million of cash used in operating activities during the nine months ended September 30, 2022.

Net income (loss) (adjusted for non-cash charges)

The following table sets forth our net loss (adjusted for non-cash charges) during the nine months ended September 30, 2022 (in thousands):

Net loss	$	(310,308)
Non-cash interest expense	9,929
Depreciation and amortization expense	95,070
Stock-based compensation expense	62,740
Non-cash lease expense	16,507
Provision for credit losses	6,129
Impairment charges	138,291
Restructuring	9,523
Other	4,660
Net income (adjusted for non-cash charges)	$	32,541

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Changes in operating assets and liabilities, net of assets and liabilities acquired

The following table sets forth the net cash used in changes in operating assets and liabilities during the nine months ended September 30, 2022 (in thousands):

Changes in operating assets and liabilities, net of assets and liabilities acquired:
Cash used in accounts receivable, net and other receivables, net	$	(39,120)
Cash used in prepaid expenses, other assets, and other liabilities, net	(25,151)
Cash used in accounts payable and accrued expenses	(12,964)
Cash provided by deferred revenue	43,252
Net cash used in changes in operating assets and liabilities	$	(33,983)

From December 31, 2021 to September 30, 2022:

•Accounts receivable, net and other receivables, net increased $39.1 million and deferred revenue increased $43.3 million. These increases were primarily due to the timing of our Degree Program Segment clients’ academic terms.

•Accounts payable and accrued expenses decreased $13.0 million, primarily due to a decrease in accrued compensation and related benefits.

•Other liabilities decreased $27.1 million, primarily due to a decrease in our lease liability and payments made to university clients in certain of our alternative credential offerings.

Investing Activities

Our investing activities primarily consist of strategic acquisitions, divestitures and purchases of property and equipment to support the overall growth of our business. We expect our investing cash flows to be affected by the timing of payments we make for capital expenditures and the strategic acquisition or other growth opportunities we decide to pursue.

During the nine months ended September 30, 2022, net cash used in investing activities was $54.0 million. This use of cash was driven by cash outflows of $50.2 million for the addition of amortizable intangible assets and $8.8 million for purchases of property and equipment, partially offset by a purchase price adjustment related to a change in net working capital which reduced the preliminary purchase price of the edX Acquisition by $5.0 million.

Financing Activities

Our financing activities primarily consist of long-term debt borrowings, the repayment of principal on long-term debt, tax withholding payments associated with the settlement of restricted stock units, and cash proceeds from the exercise of stock options.

During the nine months ended September 30, 2022, net cash used in financing activities was $4.7 million. This use of cash was driven by cash outflows of $5.3 million for quarterly amortization payments on our Amended Term Loan Facility and $2.3 million for tax withholding payments associated with the settlement of restricted stock units, partially offset by a cash inflow of $2.4 million from cash proceeds received from employee stock purchase plan share purchases and the exercise of stock options.

Critical Accounting Policies and Estimates

Revenue Recognition, Receivables and Provision for Credit Losses

We generate substantially all of our revenue from contractual arrangements, with either our university clients or students, to provide a comprehensive platform of tightly integrated technology and technology-enabled services that support our offerings.

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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 transaction price is determined based on the consideration to which we will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period, and if necessary, we adjust our estimate of the overall transaction price. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

Our Degree Program Segment derives revenue primarily from contractually specified percentages of the amounts our university clients receive from their students in 2U-enabled degree programs for tuition and fees, less credit card fees and other specified charges we have agreed to exclude in certain university contracts. Our contracts with university clients in this segment typically have terms of 10 to 15 years and have a single performance obligation, as the promises to provide a platform of tightly integrated technology and services that 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. Revenue is recognized net of an allowance, which is established for our expected obligation to refund tuition and fees to university clients.

Our Alternative Credential Segment derives revenue primarily from contracts with students for the tuition and fees paid to enroll in, and progress through, our executive education programs and boot camps. Our executive education programs run between two and 16 weeks, while our boot camps run between 12 and 24 weeks. In this segment, our contracts with students include the delivery of the educational and related student support services and are treated as either a single performance obligation or multiple performance obligations, depending upon the offering being delivered. All performance obligations are satisfied ratably over the same presentation period, which is defined as the period beginning on the first day of the course through the last. We recognize the proceeds received, net of any applicable pricing concessions, from the students enrolled and share contractually specified amounts received from students with the associated university client, in exchange for licenses to use the university brand name and other university trademarks. These amounts are recognized as curriculum and teaching expenses on our condensed consolidated statements of operations and comprehensive loss. Our contracts with university clients in this segment are typically shorter and less restrictive than our contracts with university clients in our Degree Program Segment.

We do not disclose the value of unsatisfied performance obligations for our Degree 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. We do not disclose the value of unsatisfied performance obligations for our Alternative Credential Segment because the performance obligations are part of contracts that have original durations of less than one year.

Payments to University Clients

Pursuant to certain of our contracts in the Degree Program Segment, we have made, or are obligated to make, payments to university clients at either the execution of a contract or at the extension of a contract in exchange for various marketing and other rights. Generally, these amounts are capitalized as other assets on our condensed consolidated balance sheets, 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.

Receivables, Contract Assets and Liabilities

Balance sheet items related to contracts consist of accounts receivable, net, other receivables, net and deferred revenue on our condensed consolidated balance sheets. Accounts receivable, net includes trade accounts receivable, which are comprised of billed and unbilled revenue. Our trade accounts receivable balances have terms of less than one year. Accounts receivable, net is stated at amortized cost net of provision for credit losses. Our methodology to measure the provision for credit losses requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include current market conditions, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual

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customers. Our estimates are reviewed and revised periodically based on the ongoing evaluation of credit quality indicators. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates.

We recognize unbilled revenue when revenue recognition occurs in advance of billings. Unbilled revenue is recognized in our Degree Program Segment because billings to university clients do not occur until after the academic term has commenced and final enrollment information is available. Our unbilled revenue represents contract assets.

Other receivables, net are comprised of amounts due under tuition payment plans with extended payment terms from students enrolled in certain of our alternative credential offerings. These plans, which are managed and serviced by third-party providers, are designed to assist students with covering tuition costs after all other student financial assistance and scholarships have been applied. The associated receivables generally have payment terms that exceed one year and are recorded net of any implied pricing concessions, which are determined based on our collections history, market data and any time value of money component. There are no fees or origination costs included in these receivables.

Deferred revenue represents the excess of amounts billed or received as compared to amounts recognized in revenue on our 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 our condensed consolidated balance sheets. Our deferred revenue represents contract liabilities. We generally receive payments from Degree Program Segment university clients early in each academic term and from Alternative Credential Segment 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 our obligations are otherwise met, at which time revenue is recognized.

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on our condensed consolidated financial statements from the acquisition date.

The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions, and information obtained from management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. Unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.

On November 16, 2021, we completed the edX Acquisition for a preliminary purchase price of $773 million. Refer to Note 3 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding this transaction.

Long-Lived Assets

Amortizable Intangible Assets

Acquired Definite-lived Intangible Assets. We capitalize purchased definite-lived intangible assets, such as software, websites and domains, and amortize them on a straight-line basis over their estimated useful life. Historically, we have assessed the useful lives of these acquired intangible assets to be between three and 10 years.

Capitalized Technology. Capitalized technology includes certain purchased software and technology licenses, direct third-party costs, and internal payroll and payroll-related costs used in the creation of our internal-use software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of designing the application, coding, integrating our and the university’s networks and systems, and the testing of the software. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these amounts are amortized using the straight-line method over the estimated useful life of the software, which is generally three to five years.

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Capitalized Content Development. We develop content for each offering on a course-by-course basis in collaboration with university client faculty and industry experts. Depending upon the offering, we may use materials provided by university clients and their faculty, including curricula, case studies, presentations and other reading materials. We are responsible for the creation of materials suitable for delivery through our online learning platform, including all expenses associated with this effort. With respect to the Degree Program Segment, the development of content is part of our 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, we capitalize internal payroll and payroll-related expenses incurred to create and produce videos and other digital content utilized in the university clients’ offerings for delivery via our online learning platform. Capitalization ends when content has been fully developed by both us and the university client, at which time amortization of the capitalized content development begins. The capitalized costs for each offering are recorded on a course-by-course basis and included in amortizable intangible assets, net on our condensed consolidated balance sheets. These amounts 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.

Evaluation of Long-Lived Assets

We review long-lived assets, which consist of property and equipment, capitalized technology, capitalized content development and acquired finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. In order to assess the recoverability of the capitalized technology and content development, the amounts are grouped by the lowest level of independent cash flows. Recoverability of a long-lived asset is measured by a comparison of the carrying value of an asset or asset group to the future undiscounted net cash flows expected to be generated by that asset or asset group. If such assets are not recoverable, the impairment to be recognized is measured by the amount by which the carrying value of an asset exceeds the estimated fair value (discounted cash flow) of the asset or asset group. Our impairment analysis is based upon cumulative results and forecasted performance.

Goodwill and Other Indefinite-lived Intangible Assets

We review goodwill and other indefinite-lived intangible assets for impairment annually, as of October 1, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value.

Goodwill

We test our goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. We initially assess qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. We review goodwill for impairment using a quantitative approach if we decide to bypass the qualitative assessment or determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, we may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit.

We determine the fair value of a reporting unit by utilizing a weighted combination of the income-based and market-based approaches.

The income-based approach requires us to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, the selection of appropriate peer group companies, discount rates, terminal growth rates, and forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, we consider each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly-traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. We also make estimates and assumptions for market values to determine a reporting unit’s estimated fair value.

Changes in these estimates and assumptions could materially affect the determination of fair value and the goodwill impairment test result. As of September 30, 2022 and December 31, 2021, the goodwill balance was $732.6 million and $834.5

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million, respectively, and the indefinite-lived intangible asset balance was $195.7 million and $255.0 million, respectively. Refer to Note 4 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding this transaction and for more information regarding goodwill and our indefinite-lived intangible asset.

Other Indefinite-lived Intangible Assets

Our indefinite-lived intangible asset was acquired in November 2021 and represents the established edX trade name.

Interim Impairment Assessment

During both the first and third quarter of 2022, we experienced a significant decline in our market capitalization. Management deemed these declines triggering events related to our goodwill and indefinite-lived intangible asset. As a result, we performed interim impairment assessments as of March 1, 2022 and September 30, 2022.

For each of the interim impairment assessments, we utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and the income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements, terminal growth rates, and discount rates based upon each respective reporting unit’s or indefinite-lived intangible asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result.

For the interim impairment assessment performed as of March 1, 2022, we determined the carrying value for one of our reporting units within our Alternative Credential Segment and the carrying value of our indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, we recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively. These charges are included within operating expense on our condensed consolidated statements of operations. The estimated fair values of the remaining reporting units exceeded their respective carrying values by approximately 10% or more.

For the interim impairment assessment performed as of September 30, 2022, we determined the carrying value for two of the reporting units within our Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, we recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively, both within our Alternative Credential Segment. These charges are included within operating expense on our condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result. For one of the reporting units within the Alternative Credential Segment, which had a goodwill balance of $97.5 million as of September 30, 2022, we recorded goodwill impairment charges of $43.0 million and $71.8 million for the three and nine months ended September 30, 2022, respectively. For the impairment analysis performed as of September 30, 2022, a 1% increase or decrease to the discount rate, in isolation, would result in a $40.3 million decrease or a $53.5 million increase to the estimated fair value of the reporting unit, respectively, and a 1% decrease or increase to the terminal growth rate, in isolation, would result a $27.6 million decrease or a $36.6 million increase to the estimated fair value of the reporting unit, respectively.

For the other reporting unit within the Alternative Credential Segment, which had a goodwill balance of $56.4 million as of September 30, 2022, we recorded goodwill impairment charges of $7.2 million for each of the three and nine months ended September 30, 2022. For the impairment analysis performed as of September 30, 2022, a 1% increase or decrease to the discount rate, in isolation, would result in a $5.2 million decrease or a $6.7 million increase to the estimated fair value of the reporting unit, respectively, and a 1% decrease or increase to the terminal growth rate, in isolation, would result a $3.1 million decrease or a $3.9 million increase to the estimated fair value of the reporting unit, respectively.

For the indefinite-lived intangible asset within the Alternative Credential Segment, we recorded impairment charges of $29.3 million and $59.3 million for the three and nine months ended September 30, 2022, respectively. For the impairment analysis performed as of September 30, 2022, a 1% increase or decrease to the discount rate, in isolation, would result in a $51.6 million decrease or a $66.3 million increase to the estimated fair value of the reporting unit, respectively.

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Recent Accounting Pronouncements

Refer to Note 2 in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of the FASB’s recent accounting pronouncements and their effect on us.

Key Business and Financial Performance Metrics

We use a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. In addition to adjusted EBITDA (loss), which we discuss below, and revenue and the components of loss from operations in the section above entitled “Our Business Model and Components of Operating Results,” we utilize FCE enrollments as a key metric to evaluate the success of our business.

Full Course Equivalent Enrollments

We measure FCE enrollments for each of the courses offered during a particular period by taking the number of students enrolled in that course and multiplying it by the percentage of the course completed during that period. We add the FCE enrollments for each course within each segment to calculate the total FCE enrollments per segment. This metric allows us to consistently view period-over-period changes in enrollments by accounting for the fact that many courses we enable straddle multiple fiscal quarters. For example, if a course had 25 enrolled students and 40% of the course was completed during a particular period, we would count the course as having 10 FCE enrollments for that period. Any individual student may be enrolled in more than one course during a period.

Average revenue per FCE enrollment represents our weighted-average revenue per course across the mix of courses being offered during a period in each of our operating segments. This number is derived by dividing the total revenue for a period for each of our operating segments by the number of FCE enrollments within the applicable segment during that same period. This amount may vary from period to period depending on the academic calendars of our university clients, the relative growth rates of our degree programs, executive education programs, and boot camps, as applicable, and varying tuition levels, among other factors.

For the Degree Program Segment, FCE enrollments and average revenue per FCE enrollment include enrollments and revenue from edX bachelor’s and master’s degree offerings. For the Alternative Credential Segment, FCE enrollments and average revenue per FCE enrollment exclude enrollments and revenue from edX offerings due to the large number of learners taking free or low-cost courses. We believe excluding the impact of these enrollments and revenue is useful to investors because it facilitates a period-to-period comparison.

The following table presents the FCE enrollments and average revenue per FCE enrollment in our Degree Program Segment and Alternative Credential Segment for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Degree Program Segment*
FCE enrollments	57,092		57,842		180,004		178,278
Average revenue per FCE enrollment	$	2,404	$	2,555	$	2,414	$	2,467
Alternative Credential Segment**
FCE enrollments	23,128		20,174		69,235		64,931
Average revenue per FCE enrollment	$	3,850	$	4,193	$	3,917	$	4,038

*	FCE enrollments and average revenue per FCE include enrollments in edX degree offerings and revenue from these offerings of $3.4 million and zero for the three months ended September 30, 2022 and 2021, respectively, and $8.9 million and zero for the nine months ended September 30, 2022 and 2021, respectively.
**	FCE enrollments and average revenue per FCE exclude the impact of enrollments in edX offerings and the related revenue of $5.9 million and zero for the three months ended September 30, 2022 and 2021, respectively, and $21.3 million and zero for the nine months ended September 30, 2022 and 2021, respectively.

Adjusted EBITDA (Loss)

We define adjusted EBITDA (loss) as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for

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certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. Some of these items may not be applicable in any given reporting period and they may vary from period to period.

Adjusted EBITDA (loss) is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, to develop short- and long-term operational plans and to compare our performance against that of other peer companies using similar measures. In particular, the exclusion of certain expenses that are not reflective of our ongoing operating results in calculating adjusted EBITDA (loss) can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that adjusted EBITDA (loss) provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA (loss) is not a measure calculated in accordance with U.S. GAAP, and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with U.S. GAAP.

Our use of adjusted EBITDA (loss) has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of the limitations are:

•although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA (loss) does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•adjusted EBITDA (loss) does not reflect (i) changes in, or cash requirements for, our working capital needs; (ii) the impact of changes in foreign currency exchange rates; (iii) acquisition related gains or losses such as, but not limited to, post-acquisition changes in the value of contingent consideration reflected in operations; (iv) transaction and integration costs; (v) restructuring-related costs; (vi) impairment charges; (vii) stockholder activism costs; (viii) certain litigation-related costs; (ix) losses on debt extinguishment; (x) the impact of deferred revenue fair value adjustments; (xi) interest or tax payments that may represent a reduction in cash; or (xii) the non-cash expense or the potentially dilutive impact of equity-based compensation, which has been, and we expect will continue to be, an important part of our compensation plan; and

•other companies, including companies in our industry, may calculate adjusted EBITDA (loss) differently, which reduces its usefulness as a comparative measure.

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Because of these and other limitations, you should consider adjusted EBITDA (loss) alongside other U.S. GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other U.S. GAAP results. The following table presents a reconciliation of adjusted EBITDA (loss) to net loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Adjustments:
Stock-based compensation expense	15,967		25,022		62,740		74,745
Other (income) expense, net	1,845		425		4,242		(22,730)
Net interest expense	15,644		16,471		42,942		31,826
Income tax benefit	(59)		(319)		(474)		(448)
Depreciation and amortization expense	29,313		26,168		95,070		77,577
Loss on debt extinguishment	—		—		—		1,101
Impairment charges	79,509		—		138,291		—
Restructuring charges	11,632		5,395		29,172		7,214
Other*	343		1,688		5,025		3,820
Total adjustments	154,194		74,850		377,008		173,105
Adjusted EBITDA	$	32,518	$	14,740	$	66,700	$	45,600

* Includes (i) transaction and integration expense of $0.0 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $3.4 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $0.3 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to market risk from the information provided in Part II, Item 7A of our Annual Report on Form 10-K, filed with the SEC on March 1, 2022.

Foreign Currency Exchange Risk

We transact material business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates. Our primary exposures are related to non-U.S. dollar denominated revenue and operating expenses in South Africa and the United Kingdom. Accounts relating to foreign operations are translated into U.S. dollars using prevailing exchange rates at the relevant period end. As a result, we would experience increased revenue and operating expenses in our non-U.S. operations if there were a decline in the value of the U.S. dollar relative to these foreign currencies. Conversely, we would experience decreased revenue and operating expenses in our non-U.S. operations if there were an increase in the value of the U.S. dollar relative to these foreign currencies. Translation adjustments are included as a separate component of stockholders’ equity.

For the three months ended September 30, 2022 and 2021, our foreign currency translation adjustment losses were $5.6 million and $4.3 million, respectively. For the nine months ended September 30, 2022 and 2021, our foreign currency translation adjustment losses were $6.0 million and $2.1 million, respectively.

For the three months ended September 30, 2022 and 2021, we recognized foreign currency exchange losses of $1.8 million and $0.3 million, respectively, included on our condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, 2022 and 2021, we recognized foreign currency exchange losses of $4.6 million and $2.1 million, respectively, included on our condensed consolidated statements of operations and comprehensive loss.    

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The foreign exchange rate volatility of the trailing 12 months ended September 30, 2022 was 11% and 7% for the South African rand and British pound, respectively. The foreign exchange rate volatility of the trailing 12 months ended September 30, 2021 was 10% and 6% for the South African rand and British pound, respectively. A 10% fluctuation of foreign currency exchange rates would have had an immaterial effect on our results of operations and cash flows for all periods presented. The fluctuations of currencies in which we conduct business can both increase and decrease our overall revenue and expenses for any given fiscal period. Such volatility, even when it increases our revenue or decreases our expense, impacts our ability to accurately predict our future results and earnings.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations for the nine months ended September 30, 2022 and 2021, however, our business could be affected by inflation in the future. As inflation has accelerated in the U.S. and globally, we continue to monitor all inflation-driven costs, regardless of where they are incurred. If our costs were to become subject to significant inflationary pressures, the price increases implemented by our university clients and our own pricing strategies might not fully offset the higher costs, which could harm our business, financial condition and results of operations.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as promulgated under the Exchange Act and the rules and regulations thereunder. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of September 30, 2022 at a reasonable assurance level. The scope of management’s assessment of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022 includes all of the Company’s consolidated operations except for, as permitted by SEC guidance for newly acquired businesses, those disclosure controls and procedures of edX that are subsumed by internal control over financial reporting. We acquired edX on November 16, 2021 and their results of operations are included in our financial statements effective with the fourth quarter of 2021. As of September 30, 2022, the assets acquired in the edX acquisition constituted approximately 4% of the Company’s consolidated assets and revenues constituted approximately 3% of the Company’s revenues for each of the three and nine months ended September 30, 2022. Based on this evaluation, management concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

As part of our ongoing integration activities related to the edX Acquisition, we continue to implement our controls and procedures and augment our controls to reflect the risks inherent in the acquisition. Throughout the integration process, we monitor these efforts and take corrective action as needed to reinforce the application of our controls and procedures. Other than the foregoing, we made no changes in internal control over financial reporting during the three months ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

The information required by this Item is incorporated herein by reference to Note 6 in “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.    Risk Factors

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022. These risks do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. In addition, certain risks to our business from the impact of the impairment of certain intangible assets and goodwill are set forth below.

The impairment of intangible assets and goodwill arising from our acquisitions could continue to negatively impact and affect our net income and shareholders’ equity

When we acquire a business, a substantial portion of the purchase price of the acquisition may be allocated to goodwill and other indefinite-lived intangible assets. We review goodwill and other indefinite-lived intangible assets for impairment annually, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value. During the three months ended March 31, 2022, we recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively. During the three months ended September 30, 2022, we recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively.

Future declines in the results of our acquisitions and other factors could cause us to record an impairment of all or a portion of the relevant goodwill in the future. We may not be able to achieve our business targets for businesses we previously acquired or will acquire in the future, which could result in our incurring additional goodwill and other intangible assets impairment charges. Further declines in our market capitalization increase the risk that we may be required to perform another impairment analysis, which could result in an impairment of up to the entire balance of our goodwill and other intangible assets based on the quantitative assessment performed.

Implementation of our 2022 Strategic Realignment Plan may not be successful, which could affect our ability to increase our profitability.

On July 28, 2022, we announced a plan to accelerate our transition to a platform company (the “2022 Strategic Realignment Plan”). The plan is designed to reorient the company around a single platform allowing us to pursue a portfolio-based marketing strategy that drives traffic to the edX marketplace. As part of the plan, the Company expects to optimize marketing spend, simplify the current executive structure to reduce silos, reduce employee headcount, and rationalize its real estate footprint. We expect to record in the aggregate approximately $35 million to $40 million in restructuring charges associated with the 2022 Strategic Realignment Plan. A significant portion of these charges will result in future cash expenditures. The plan is expected to be substantially completed by December 31, 2022 with cash expenditures relating to the employee headcount reduction continuing through the first quarter of 2024 and cash expenditures related to real estate continuing through the duration of lease terms ranging from 1 to 9 years. Although we believe that the 2022 Strategic Realignment Plan will reduce overhead costs, enhance operational efficiency, and result in improved profitability, we cannot guarantee that the 2022 Strategic Realignment Plan will achieve or sustain the expected benefits, or that the benefits, even if achieved, will be adequate to meet our long-term profitability and operational expectations. Risks associated with the impact of the 2022 Strategic Realignment Plan also include additional unexpected costs and negative impacts on our cash flows from operations and liquidity, employee attrition beyond our intended reductions and adverse effects on employee morale, diversion of management attention, adverse effects to our reputation as an employer, which could make it more difficult for us to hire and retain employees in the future, and potential failure or delays to meet operational and growth targets due to the loss of qualified employees and the potential negative impact on our reputation among our university partners. If we do not realize the expected benefits or synergies of the 2022 Strategic Realignment Plan, our business, financial condition, cash flows and results of operations could be negatively impacted.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

None.

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(b) Use of Proceeds from Public Offerings of Common Stock

None.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.

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Item 6.    Exhibits

Exhibit Number	Description	Form	File No.	Exhibit Number	Filing Date	Filed/Furnished Herewith
3.1	Amended and Restated Certificate of Incorporation of the Registrant.	8-K	001-36376	3.1	June 10, 2022
3.2	Amended and Restated Bylaws of the Registrant.	8-K	001-36376	3.2	June 10, 2022
10.1†	Separation, Consulting and Release Agreement, dated as of July 27, 2022, by and between 2U, Inc. and Mark Chernis.	8-K	001-36376	10.1	July 28, 2022
31.1	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
31.2	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
32.1	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
32.2	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 - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL 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
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).					X

†	Indicates management contract or compensatory plan.
*	Portions of this exhibit have been omitted pursuant to Item 601(b) of Regulation S-K. The registrant hereby undertakes to supplementally furnish to the Securities and Exchange Commission copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	2U, Inc.
November 7, 2022	By:	/s/ Christopher J. Paucek
		Christopher J. Paucek
		Chief Executive Officer
November 7, 2022	By:	/s/ Paul S. Lalljie
		Paul S. Lalljie
		Chief Financial Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Christopher J. Paucek, certify that:

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; and

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 7, 2022	By:	/s/ Christopher J. Paucek
			Name:	Christopher J. Paucek
			Title:	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Paul S. Lalljie, certify that:

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; and

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 7, 2022	By:	/s/ Paul S. Lalljie
			Name:	Paul S. Lalljie
			Title:	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CEO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

    In connection with the Quarterly Report on Form 10-Q of 2U, Inc. (the “Company”) for the quarterly period ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Paucek, as Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(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 7, 2022	By:	/s/ Christopher J. Paucek
			Name:	Christopher J. Paucek
			Title:	Chief Executive Officer

    This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

    A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

    In connection with the Quarterly Report on Form 10-Q of 2U, Inc. (the “Company”) for the quarterly period ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul S. Lalljie, as Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(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 7, 2022	By:	/s/ Paul S. Lalljie
			Name:	Paul S. Lalljie
			Title:	Chief Financial Officer

    This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

    A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Nov. 03, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-36376
Entity Registrant Name	2U, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-2335939
Entity Address, Address Line One	7900 Harkins Road
Entity Address, City or Town	Lanham,
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	20706
City Area Code	301
Local Phone Number	892-4350
Title of 12(b) Security	Common stock, $0.001 par value per share
Trading Symbol	TWOU
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		78,204,895
Entity Central Index Key	0001459417
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 170,165	$ 232,932
Restricted cash	14,985	16,977
Accounts receivable, net	97,164	67,287
Other receivables, net	31,009	29,439
Prepaid expenses and other assets	81,538	47,217
Total current assets	394,861	393,852
Other receivables, net, non-current	21,007	21,568
Property and equipment, net	45,513	48,650
Right-of-use assets	74,175	76,841
Goodwill	732,586	834,539
Intangible assets, net	569,408	665,523
Other assets, non-current	72,006	68,033
Total assets	1,909,556	2,109,006
Current liabilities
Accounts payable and accrued expenses	133,385	164,723
Deferred revenue	127,597	91,926
Lease liability	13,286	13,985
Accrued restructuring liability	13,551	1,735
Other current liabilities	95,252	61,138
Total current liabilities	383,071	333,507
Long-term debt	928,197	845,316
Deferred tax liabilities, net	359	1,726
Lease liability, non-current	102,221	98,666
Other liabilities, non-current	1,792	636
Total liabilities	1,415,640	1,279,851
Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued	0	0
Common stock, $0.001 par value, 200,000,000 shares authorized, 77,845,436 shares issued and outstanding as of September 30, 2022; 75,754,663 shares issued and outstanding as of December 31, 2021	78	76
Additional paid-in capital	1,683,860	1,735,628
Accumulated deficit	(1,168,129)	(890,638)
Accumulated other comprehensive loss	(21,893)	(15,911)
Total stockholders’ equity	493,916	829,155
Total liabilities and stockholders’ equity	$ 1,909,556	$ 2,109,006

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
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
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)	77,845,436	75,754,663
Common stock, outstanding (in shares)	77,845,436	75,754,663

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Total revenue	$ 232,238	$ 232,376	$ 727,031	$ 702,058
Costs and expenses
Curriculum and teaching	31,558	30,869	96,933	98,805
Servicing and support	36,110	33,898	112,795	101,947
Technology and content development	43,976	43,106	140,649	128,539
Marketing and sales	94,311	118,300	341,643	346,181
General and administrative	39,388	44,341	131,146	137,128
Restructuring charges	11,632	5,395	29,172	7,214
Impairment charges	79,509	0	138,291	0
Total costs and expenses	336,484	275,909	990,629	819,814
Loss from operations	(104,246)	(43,533)	(263,598)	(117,756)
Interest income	269	474	767	1,188
Interest expense	(15,913)	(16,945)	(43,709)	(33,014)
Loss on debt extinguishment	0	0	0	(1,101)
Other income (expense), net	(1,845)	(425)	(4,242)	22,730
Loss before income taxes	(121,735)	(60,429)	(310,782)	(127,953)
Income tax benefit	59	319	474	448
Net loss	$ (121,676)	$ (60,110)	$ (310,308)	$ (127,505)
Net loss per share, basic (in dollars per share)	$ (1.57)	$ (0.80)	$ (4.03)	$ (1.72)
Net loss per share, diluted (in dollars per share)	$ (1.57)	$ (0.80)	$ (4.03)	$ (1.72)
Weighted-average shares of common stock outstanding, basic (in shares)	77,692,911	74,691,521	77,013,180	74,266,999
Weighted-average shares of common stock outstanding, diluted (in shares)	77,692,911	74,691,521	77,013,180	74,266,999
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax of $0 for all periods presented	$ (5,637)	$ (4,268)	$ (5,982)	$ (2,096)
Comprehensive loss	$ (127,313)	$ (64,378)	$ (316,290)	$ (129,601)

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Other comprehensive income (loss)
Foreign currency translation adjustments, tax	$ 0	$ 0	$ 0	$ 0

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-In Capital	Additional Paid-In Capital Cumulative Effect, Period of Adoption, Adjustment	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Loss
Beginning balance (in shares) at Dec. 31, 2020			72,451,521
Beginning balance at Dec. 31, 2020	$ 940,990		$ 72	$ 1,646,574		$ (695,872)		$ (9,784)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			1,404,971
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(12,613)		$ 2	(12,615)
Exercise of stock options (in shares)			181,716
Exercise of stock options	3,533			3,533
Stock-based compensation expense	24,947			24,947
Net loss	(45,564)					(45,564)
Foreign currency translation adjustment	(805)							(805)
Ending balance (in shares) at Mar. 31, 2021			74,038,208
Ending balance at Mar. 31, 2021	910,488		$ 74	1,662,439		(741,436)		(10,589)
Beginning balance (in shares) at Dec. 31, 2020			72,451,521
Beginning balance at Dec. 31, 2020	940,990		$ 72	1,646,574		(695,872)		(9,784)
Increase (Decrease) in Stockholders' Equity
Net loss	(127,505)
Foreign currency translation adjustment	(2,096)
Ending balance (in shares) at Sep. 30, 2021			74,749,601
Ending balance at Sep. 30, 2021	879,465		$ 75	1,714,647		(823,377)		(11,880)
Beginning balance (in shares) at Dec. 31, 2020			72,451,521
Beginning balance at Dec. 31, 2020	$ 940,990		$ 72	1,646,574		(695,872)		(9,784)
Ending balance (in shares) at Dec. 31, 2021	75,754,663		75,754,663
Ending balance at Dec. 31, 2021	$ 829,155	$ (81,734)	$ 76	1,735,628	$ (114,551)	(890,638)	$ 32,817	(15,911)
Increase (Decrease) in Stockholders' Equity
Accounting Standards Update [Extensible Enumeration]	Accounting Standards Update 2020-06
Beginning balance (in shares) at Mar. 31, 2021			74,038,208
Beginning balance at Mar. 31, 2021	$ 910,488		$ 74	1,662,439		(741,436)		(10,589)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			390,976
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(1,501)		$ 1	(1,502)
Exercise of stock options (in shares)			28,263
Exercise of stock options	$ 737			737
Issuance of common stock in connection with employee stock purchase plan (in shares)	50,406
Issuance of common stock in connection with employee stock purchase plan	$ 1,773			1,773
Stock-based compensation expense	24,776			24,776
Net loss	(21,831)					(21,831)
Foreign currency translation adjustment	2,977							2,977
Ending balance (in shares) at Jun. 30, 2021			74,507,853
Ending balance at Jun. 30, 2021	917,419		$ 75	1,688,223		(763,267)		(7,612)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			171,486
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(429)			(429)
Exercise of stock options (in shares)			70,262
Exercise of stock options	1,831			1,831
Stock-based compensation expense	25,022			25,022
Net loss	(60,110)					(60,110)
Foreign currency translation adjustment	(4,268)							(4,268)
Ending balance (in shares) at Sep. 30, 2021			74,749,601
Ending balance at Sep. 30, 2021	$ 879,465		$ 75	1,714,647		(823,377)		(11,880)
Beginning balance (in shares) at Dec. 31, 2021	75,754,663		75,754,663
Beginning balance at Dec. 31, 2021	$ 829,155	(81,734)	$ 76	1,735,628	(114,551)	(890,638)	32,817	(15,911)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			577,416
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(919)		$ 1	(920)
Exercise of stock options (in shares)			284,455
Exercise of stock options	875			875
Stock-based compensation expense	24,424			24,424
Net loss	(125,780)					(125,780)
Foreign currency translation adjustment	7,329							7,329
Ending balance (in shares) at Mar. 31, 2022			76,616,534
Ending balance at Mar. 31, 2022	$ 653,350		$ 77	1,645,456		(983,601)		(8,582)
Beginning balance (in shares) at Dec. 31, 2021	75,754,663		75,754,663
Beginning balance at Dec. 31, 2021	$ 829,155	$ (81,734)	$ 76	1,735,628	$ (114,551)	(890,638)	$ 32,817	(15,911)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)	316,965
Net loss	$ (310,308)
Foreign currency translation adjustment	$ (5,982)
Ending balance (in shares) at Sep. 30, 2022	77,845,436		77,845,436
Ending balance at Sep. 30, 2022	$ 493,916		$ 78	1,683,860		(1,168,129)		(21,893)
Beginning balance (in shares) at Mar. 31, 2022			76,616,534
Beginning balance at Mar. 31, 2022	653,350		$ 77	1,645,456		(983,601)		(8,582)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			464,984
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(822)			(822)
Exercise of stock options (in shares)			2,278
Exercise of stock options	17			17
Issuance of common stock in connection with employee stock purchase plan (in shares)			136,039
Issuance of common stock in connection with employee stock purchase plan	1,282			1,282
Stock-based compensation expense	22,349			22,349
Net loss	(62,852)					(62,852)
Foreign currency translation adjustment	(7,674)							(7,674)
Ending balance (in shares) at Jun. 30, 2022			77,219,835
Ending balance at Jun. 30, 2022	605,650		$ 77	1,668,282		(1,046,453)		(16,256)
Increase (Decrease) in Stockholders' Equity
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares)			595,369
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings	(579)		$ 1	(580)
Exercise of stock options (in shares)			30,232
Exercise of stock options	191			191
Stock-based compensation expense	15,967			15,967
Net loss	(121,676)					(121,676)
Foreign currency translation adjustment	$ (5,637)							(5,637)
Ending balance (in shares) at Sep. 30, 2022	77,845,436		77,845,436
Ending balance at Sep. 30, 2022	$ 493,916		$ 78	$ 1,683,860		$ (1,168,129)		$ (21,893)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Cash flows from operating activities
Net loss			$ (310,308)	$ (127,505)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense			9,929	28,278
Depreciation and amortization expense	$ 29,313	$ 26,168	95,070	77,577
Stock-based compensation expense	15,967	25,022	62,740	74,745
Non-cash lease expense			16,507	13,518
Restructuring			9,523	4,845
Provision for credit losses			6,129	5,712
Loss on debt extinguishment	0	0	0	1,101
Gain on sale of investment			0	(27,762)
Impairment charges	79,509	0	138,291	0
Other			4,660	2,100
Changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable, net			(36,253)	(54,689)
Other receivables, net			(2,867)	(24,598)	$ (24,600)
Prepaid expenses and other assets			1,973	(6,639)
Accounts payable and accrued expenses			(12,964)	24,249
Deferred revenue			43,252	21,960
Other liabilities, net			(27,124)	(16,028)
Net cash used in operating activities			(1,442)	(3,136)
Cash flows from investing activities
Purchase of a business, net of cash acquired			5,010	0
Additions of amortizable intangible assets			(50,155)	(45,179)
Purchases of property and equipment			(8,777)	(5,397)
Purchase of investment			0	(1,000)
Proceeds from sale of investment			0	38,762
Advances made to university clients			(310)	0
Advances repaid by university clients			200	200
Other			(17)	56
Net cash used in investing activities			(54,049)	(12,558)
Cash flows from financing activities
Proceeds from debt			530	469,595
Payments on debt			(5,313)	(2,203)
Payment of debt issuance costs			0	(10,259)
Tax withholding payments associated with settlement of restricted stock units			(2,320)	(14,543)
Proceeds from exercise of stock options			1,083	6,101
Proceeds from employee stock purchase plan share purchases			1,282	1,773
Net cash (used in) provided by financing activities			(4,738)	450,464
Effect of exchange rate changes on cash			(4,530)	(2,312)
Net (decrease) increase in cash, cash equivalents and restricted cash			(64,759)	432,458
Cash, cash equivalents and restricted cash, beginning of period			249,909	518,866	518,866
Cash, cash equivalents and restricted cash, end of period	$ 185,150	$ 951,324	$ 185,150	$ 951,324	$ 249,909

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Organization

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

2U, Inc. (together with its subsidiaries, the “Company”) is an online education platform company. The Company’s mission is to expand access to high-quality educational opportunities that unlock human potential.

On November 16, 2021, the Company completed the acquisition of edX (the “edX Acquisition”), including the edX brand, website, and marketplace. As a result of the edX Acquisition, the Company expanded its digital education offerings to include open courses and micro-credential offerings at the undergraduate and graduate levels and added an education consumer marketplace, edx.org, with over 46 million registered learners. Refer to Note 3 for further information about the edX Acquisition.

The Company serves more than 230 top-ranked global universities and other leading institutions, and offers more than 4,000 high-quality online learning opportunities, including open courses, executive education offerings, boot camps, micro-credentials, professional certificates as well as undergraduate and graduate degree programs. edX is the primary brand for the Company’s products and services and edx.org operates as its global online learning marketplace.

The Company is positioned as one of the world’s most comprehensive free-to-degree online learning platforms. The Company believes its platform and robust consumer marketplace provide clients with the digital infrastructure to launch world-class online education offerings and allow students to easily access high-quality, job-relevant education offerings without the barriers of cost or location.

The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment.

The Company’s Degree Program Segment provides the technology and services to nonprofit colleges and universities to enable the online delivery of degree programs. Students enrolled in these programs are generally seeking an undergraduate or graduate degree of the same quality they would receive on campus.

The Company’s Alternative Credential Segment provides premium online open courses, executive education programs and technical, skills-based boot camps through relationships with nonprofit colleges and universities. Students enrolled in these offerings are generally seeking to reskill or upskill through shorter duration, lower-priced offerings that are relevant to the needs of industry and society.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

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 (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “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, 2022 and 2021 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, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis.

Reclassifications

The Company has reclassified prior period amounts in the condensed consolidated statements of cash flows to conform to the current period’s presentation of other receivables. The Company reclassified $24.6 million from changes in prepaid

expenses and other assets to changes in other receivables. This reclassification had no impact on the previously reported operating cash flows. The Company has reclassified certain other prior period amounts in the consolidated statements of cash flows to conform to current period presentation. These reclassifications had no impact on previously reported operating, financing, or financing cash flows.

The Company has reclassified prior period amounts in the condensed consolidated balance sheet and condensed consolidated statement of operations to conform to the current period’s presentation restructuring charges. The Company reclassified $1.7 million from accounts payable and accrued liabilities to accrued restructuring liability. In addition, the Company reclassified $5.4 million and $7.2 million from general and administrative expense to restructuring charges for the three and nine months ended September 30, 2021, respectively.

Use of Estimates

The preparation of 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. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill and indefinite-lived intangible assets, deferred tax assets, and the fair value of the convertible senior notes. Due to the inherent uncertainty involved in making estimates, particularly in light of the COVID-19 pandemic, 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.

Fair Value Measurements

The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability.

U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 4 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows:

•Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

•Level 2—Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

•Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of September 30, 2022 and December 31, 2021. Refer to Note 9 for more information regarding the Company’s convertible senior notes.

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s condensed consolidated financial statements from the acquisition date.

Goodwill and Other Indefinite-lived Intangible Assets

The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, as of October 1, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value.

Goodwill

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit.

The Company determines the fair value of a reporting unit by utilizing a weighted combination of the income-based and market-based approaches.

The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, the selection of appropriate peer group companies, discount rates, terminal growth rates, and forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value.

Other Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible asset was acquired in November 2021 and represents the established edX trade name.

Interim Impairment Assessments

During both the first and third quarter of 2022, the Company experienced a significant decline in its market capitalization. Management deemed these declines triggering events related to the Company’s goodwill and indefinite-lived intangible asset. As a result, the Company performed interim impairment assessments as of March 1, 2022 and September 30, 2022.

For each of the interim impairment assessments, the Company utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and the income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements, terminal growth rates, and discount rates based upon each respective reporting unit’s or indefinite-lived intangible

asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result.

For the interim impairment assessment performed as of March 1, 2022, management determined the carrying value for one of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, the Company recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

For the interim impairment assessment performed as of September 30, 2022, management determined the carrying value for two of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, the Company recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity’s own equity. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. This ASU is effective for fiscal years beginning after December 15, 2021.

The Company adopted this ASU on a modified retrospective basis in the first quarter of 2022, effective as of January 1, 2022. As a result of the adoption, long-term debt increased $81.7 million, additional paid-in capital decreased $114.6 million, deferred tax liabilities decreased $22.1 million, and the Company recorded a cumulative-effect adjustment to opening accumulated deficit of $32.8 million. Adoption of this ASU requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effective is more dilutive. There was no impact to the number of potentially dilutive shares as a result of the adoption. Adoption of this standard did not have a material impact on the Company’s liquidity or cash flows.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, Disclosures by Business Entities about Government Assistance. This ASU requires entities to disclose information about certain government assistance they receive, including the nature of the transactions and the related accounting policy, the line items on the balance sheet and statement of operations that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions. The

ASU is effective for fiscal years beginning after December 15, 2021 and the disclosure requirements are for annual periods only. The guidance under this ASU will be effective for the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2022. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU No 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13 and enhances the disclosure requirements for certain loan refinancings when borrowers are experiencing financial difficulty. In addition, the ASU requires the disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. This ASU is effective for fiscal years beginning after December 15, 2022. The Company is evaluating the impact of the new guidance on its disclosures but does not expect there to be a material impact on its consolidated financial statements.

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Business Combination

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combination

Business Combination

On November 16, 2021, pursuant to the Membership Interest Purchase Agreement, dated June 28, 2021 (the “Purchase Agreement”), by and among the Company, edX Inc., a Massachusetts nonprofit corporation (“edX Inc.”) and edX LLC (f/k/a Circuit Sub LLC), a Delaware limited liability company and a wholly owned subsidiary of edX Inc. (“edX”), edX Inc. contributed substantially all of its assets to edX and the Company acquired 100% of the outstanding membership interests of edX (the “edX Acquisition”) including the edX brand, website, and marketplace.

The total preliminary purchase price was $773.0 million in cash consideration, of which $23.0 million was distributed to an escrow account to satisfy indemnification claims and purchase price adjustments, as applicable. During the nine months ended September 30, 2022, the Company recorded working capital adjustments of $5.0 million, reducing the preliminary purchase price to $768.0 million. In addition, the Company adjusted its preliminary valuation of acquired assets and assumed liabilities based upon new information that was received pertaining to acquisition date fair values.

The transaction was accounted for under the acquisition method of accounting and revenue. Under the acquisition method of accounting, the total preliminary purchase price was allocated to edX’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of November 16, 2021. The allocation of the preliminary purchase price is pending the finalization of the fair value of acquired deferred revenue and other liabilities, deferred income tax assets and liabilities, and assumed non-income tax liabilities.

The following table summarizes the preliminary purchase price allocation based on the estimated fair value of the assets acquired and liabilities assumed and reflects the measurement period adjustments recorded during the nine months ended September 30, 2022:

	Estimated Useful Life (in years)	Purchase Price Allocation
		(in thousands)
Cash and cash equivalents		$	11,901
Accounts receivable		6,608
Prepaid expenses and other assets		13,098
Property and equipment, net		529
Right-of-use assets		2,355
Other assets, non-current		572
Accounts payable and accrued expenses		(10,057)
Deferred revenue		(17,000)
Lease liability		(2,512)
Other liabilities		(33,235)
Intangible assets:
Developed technology	3	15,400
University client relationships	10	104,000
Enterprise client relationships	10	14,300
Trade names	indefinite	255,000
Goodwill		407,050
		$	768,009

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Allocations		Adjustments		Impairment Charges		Foreign Currency Translation Adjustments		Balance as of September 30, 2022
	(in thousands)
Degree Program Segment
Gross goodwill		$	—	$	198,378	$	(5,519)	$	—	$	—	$	192,859
Accumulated impairments		—		—		—		—		—		—
Net goodwill		—		198,378		(5,519)		—		—		192,859
Alternative Credential Segment
Gross goodwill		$	481,366	$	225,174	$	(10,983)	$	—	$	(6,460)	$	689,097
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		410,987		225,174		(10,983)		(78,991)		(6,460)		539,727
Unallocated goodwill		$	423,552	$	(423,552)	$	—	$	—	$	—	$	—
Total
Gross goodwill		$	904,918	$	—	$	(16,502)	$	—	$	(6,460)	$	881,956
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		$	834,539	$	—	$	(16,502)	$	(78,991)	$	(6,460)	$	732,586

During the first quarter of 2022, the Company completed the allocation of the preliminary goodwill balance resulting from the edX Acquisition to the Company’s reporting units. The goodwill was assigned to the reporting units that are expected to drive synergies from the acquisition, which is each of the Company’s four reporting units. In addition, during the nine months ended September 30, 2022, the Company recorded working capital adjustments of $5.0 million, adjustments to the preliminary valuation of acquired assets and assumed liabilities of edX of $11.5 million, and goodwill impairment charges of $79.0 million. Refer to Note 2 for further information about the goodwill impairment charges.

The following tables present the components of intangible assets, net on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

		September 30, 2022						December 31, 2021
	Estimated Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Definite-lived intangible assets
Capitalized technology	3-5	$	218,666	$	(125,222)	$	93,444	$	199,766	$	(112,357)	$	87,409
Capitalized content development	4-5	262,418		(163,907)		98,511		243,687		(125,599)		118,088
University client relationships	9-10	209,016		(49,595)		159,421		211,680		(34,995)		176,685
Enterprise client relationships	10	14,300		(1,251)		13,049		14,300		(179)		14,121
Trade names and domain names	5-10	29,128		(19,845)		9,283		27,161		(12,941)		14,220
Total definite-lived intangible assets		$	733,528	$	(359,820)	$	373,708	$	696,594	$	(286,071)	$	410,523

		September 30, 2022						December 31, 2021
		Gross Carrying Amount		Accumulated Impairments*		Net Carrying Amount		Gross Carrying Amount		Accumulated Impairments		Net Carrying Amount
	(in thousands)
Indefinite-lived intangible assets
Trade names		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000
Total indefinite-lived intangible assets		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000

* During the three months ended March 31, 2022, the Company recorded a $30.0 million impairment charge related to its indefinite-lived intangible asset. During the three months ended September 30, 2022, the Company recorded a $29.3 million impairment charge related to its indefinite-lived intangible asset. Refer to Note 2 for further information about these impairment charges.

The amounts presented in the table above include $50.2 million and $46.3 million of in-process capitalized technology and content development as of September 30, 2022 and December 31, 2021, respectively.

The Company recorded amortization expense related to amortizable intangible assets of $26.6 million and $23.2 million for the three months ended September 30, 2022 and 2021, respectively. The Company recorded amortization expense related to amortizable intangible assets of $86.5 million and $68.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table presents the estimated future amortization expense of the Company’s amortizable intangible assets placed in service as of September 30, 2022.

	Future Amortization Expense
	(in thousands)
Remainder of 2022	$	25,345
2023	83,559
2024	63,330
2025	42,680
2026	29,048
Thereafter	79,520
Total	$	323,482

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Other Balance Sheet Details

9 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

Other Balance Sheet Details

Other Balance Sheet Details

Prepaid expenses and other assets

As of September 30, 2022 and December 31, 2021, the Company had balances of $24.0 million and $23.0 million, respectively, of prepaid assets within prepaid expenses and other assets on the condensed consolidated balance sheets.

Other Assets, Non-current

As of September 30, 2022 and December 31, 2021, the Company had balances of $8.9 million and $7.0 million, respectively, of deferred expenses incurred to integrate the software associated with its cloud computing arrangements, within other assets, non-current on the condensed consolidated balance sheets. Such expenses are subject to amortization over the remaining contractual term of the associated cloud computing arrangement, with a useful life of between three to five years. The Company incurred $1.2 million and $0.7 million of such amortization for the three months ended September 30, 2022 and 2021, respectively. The Company incurred $1.9 million and $1.8 million of such amortization for the nine months ended September 30, 2022 and 2021, respectively.

Accounts Payable and Accrued Expenses

The following table presents the components of accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Accrued university and instructional staff compensation	$	27,420	$	36,806
Accrued marketing expenses	21,649		26,469
Accrued transaction and integration expenses	718		4,072
Accrued compensation and related benefits	26,409		49,143
Accounts payable and other accrued expenses	57,189		48,233
Total accounts payable and accrued expenses	$	133,385	$	164,723

For each of the three and nine months ended September 30, 2022 and 2021, expenses related to the Company’s marketing and advertising efforts of its own brands were not material.

Other Current Liabilities

As of September 30, 2022 and December 31, 2021, the Company had balances of $18.6 million and $21.9 million, respectively, within other current liabilities on the condensed consolidated balance sheets, which represents proceeds received from students enrolled in certain of the Company’s alternative credential offerings that are payable to an associated university client.

In response to COVID-19, various government programs have been announced to provide financial relief for affected businesses. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted in the United States on March 27, 2020, the Company is allowed to defer payment of the employer’s share of Social Security taxes incurred from March 27, 2020 through December 31, 2020. In addition, the CARES Act provides eligible employers with an employee retention tax credit for employees whose services were impacted by COVID-19. As of September 30, 2022, the amount of payroll taxes subject to deferred payment, net of employee retention tax credits of $0.5 million, was approximately $5.0 million. The balance is recorded within other current liabilities on the condensed consolidated balance sheets.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Contingencies

The Company is involved in various claims and legal proceedings arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. While the Company does not expect that the ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely), individually or in the aggregate, will have a material adverse effect on its financial position, an unfavorable outcome in some or all of these proceedings could have a material adverse impact on the results of operations or cash flows for a particular period. This assessment is based on the Company’s current understanding of relevant facts and circumstances. With respect to current legal proceedings, the Company does not believe it is probable a material loss exceeding amounts already recognized has been incurred as of the date of the balance sheets presented herein. As such, the Company’s view of these matters is subject to inherent uncertainties and may change in the future.

In re 2U, Inc., Securities Class Action

On August 7 and 9, 2019, Aaron Harper and Anne M. Chinn filed putative class action complaints against the Company, Christopher J. Paucek, the Company’s CEO, and Catherine A. Graham, the Company’s former CFO, in the United States District Court for the Southern District of New York, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. The district court transferred the cases to the United States District Court for the District of Maryland, consolidated them under docket number 8:19-cv-3455 (D. Md.), and appointed Fiyyaz Pirani as the lead plaintiff in the consolidated action. On July 30, 2020, Mr. Pirani filed a consolidated class action complaint (“CAC”), adding Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, as a defendant. The CAC also asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended, against Mr. Paucek, Ms. Graham, members of the Company’s board of directors, and the Company’s underwriters, based on allegations related to the Company’s secondary stock offering on May 23, 2018. The proposed class consists of all persons who acquired the Company’s securities between February 26, 2018 and July 30, 2019. On October 27, 2020, defendants filed a motion to dismiss. On August 5, 2021, the court largely denied the defendants’ motion to dismiss. On February 18, 2022, the court stayed discovery until April 19, 2022, pending mediation. On April 28, 2022, the parties informed the court that they had reached a settlement in principle. On June 2, 2022, Plaintiffs filed a motion for preliminary approval of the class action settlement and accompanying documents. On June 23, 2022, the Court entered an order preliminarily approving the settlement. The final approval hearing is set for December 9, 2022. The settlement payment is being funded by the Company's insurers. The $37.0 million payable under the proposed settlement and the related insurance proceeds are recorded within other current liabilities and prepaid expenses and other assets, respectively, on the condensed consolidated balance sheets.

Stockholder Derivative Suits

On April 30, 2020, Richard Theis filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, and the Company’s board of directors in the United States District Court for the Southern District of New York, with docket number 20-cv-3360. The complaint alleges claims for breaches of fiduciary duty, insider sales and misappropriation of information, unjust

enrichment, and violations of Section 14(a) of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On July 22, 2020, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 23, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On August 21, 2020, Thomas Lucey filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer and the Company’s board of directors in the United States District Court for the District of Maryland, with docket number 1:20-cv-02424-GLR. The complaint alleges claims for breaches of fiduciary duty, insider trading, and contribution for alleged violations of Sections 10(b) and 21D of the Exchange Act, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On September 3, 2020, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 22, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On November 30, 2020, Leo Shumacher filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, the Company’s CEO, Catherine A. Graham, the Company’s former CFO, Harsha Mokkarala, the Company’s former Chief Marketing Officer and current Chief Revenue Officer, and the Company’s board of directors in the Court of Chancery of the State of Delaware, with docket number 2020-1019-AGB. The complaint alleges claims for breaches of fiduciary duty and unjust enrichment, based upon allegedly false and misleading statements regarding the Company’s business prospects and financial projections. On January 6, 2021, the court entered a joint stipulation staying the case pending resolution of the securities class action, which stay the court extended on multiple occasions to allow the parties to discuss settlement. The most recent stay concluded on September 23, 2022. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

On September 14, 2022, Daniel Sebagh filed a stockholder derivative complaint purportedly on behalf of the Company and against Christopher J. Paucek, our CEO, Catherine A. Graham, our former CFO, James Kenigsberg, our CTO, and our board of directors in the United States District Court for the District of Delaware, with docket number 1:22-cv-01205-UNA. The complaint alleges claims for breaches of fiduciary duty, unjust enrichment, waste of corporate assets, insider trading and alleged violations of Section 14(a) of the Exchange Act based upon allegedly false and misleading statements regarding our company’s business prospects and financial projections. Due to the complex nature of the legal and factual issues involved, the outcome of this matter is not presently determinable.

Marketing and Sales Commitments

Certain agreements entered into between the Company and its university clients in the Degree Program Segment require the Company to commit to meet certain staffing and spending investment thresholds related to marketing and sales activities. In addition, certain agreements in the Degree 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 Degree 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, 2022, the future minimum payments due to university clients have 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, 2021.

Contingent Payments

The Company has entered into agreements with certain of its university clients in the Degree Program Segment that require the Company to make future minimum payments in the event that certain program metrics are not achieved on an annual basis. The Company recognizes any estimated contingent payments under these agreements as contra revenue over the period to which they relate, and records a liability in other current liabilities on the condensed consolidated balance sheets.

In the first quarter of 2019, the Company entered into an agreement to make investments in an education technology company of up to $15.0 million, upon demand by the investee. During the second quarter of 2021, the Company sold its investment in this education technology company and was released from any further obligation to make additional investments.

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Restructuring Charges

9 Months Ended

Sep. 30, 2022

Restructuring and Related Activities [Abstract]

Restructuring Charges

Restructuring Charges

2022 Strategic Realignment Plan

During the second quarter of 2022, the Company began implementing a plan to accelerate its transition to a platform company (the “2022 Strategic Realignment Plan”). The plan is designed to reorient the Company around a single platform allowing it to pursue a portfolio-based marketing strategy that drives traffic to the edX marketplace. As part of the plan, the Company has simplified its executive structure to reduce silos, reduced employee headcount, rationalized its real estate footprint and implemented steps to optimize marketing spend.

During the third quarter of 2022, the Company completed the planned headcount reductions and consolidated its in-person operations to its offices in Lanham, Maryland and Cape Town, South Africa.

The Company anticipates that it will incur aggregate restructuring charges associated with the 2022 Strategic Realignment Plan of approximately $35 million to $40 million. The Company recorded $11.3 million and $27.0 million in restructuring charges related to the 2022 Strategic Realignment Plan for each of the three and nine months ended September 30, 2022, respectively. The majority of the estimated remaining restructuring charges relate to leased facilities and will be recognized as expense over the remaining lease terms, ranging from 1 to 9 years.

The following table presents restructuring charges by reportable segment on the Company’s condensed consolidated statements of operations for the periods indicated.

	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
	Degree Program Segment		Alternative Credential Segment		Degree Program Segment		Alternative Credential Segment
2022 Strategic Realignment Plan
Severance and severance-related costs	$	—	$	—	$	8,772	$	6,431
Lease and lease-related charges*	8,972		298		8,972		298
Professional and other fees relating to restructuring activities	961		20		1,515		20
Other**	—		1,008		—		1,008
	9,933		1,326		19,259		7,757
Other restructuring charges***	362		11		1,977		179
Total restructuring charges	$	10,295	$	1,337	$	21,236	$	7,936

*	For the three and nine months ended September 30, 2022, includes $8.5 million of accelerated amortization of right-of-use assets and accelerated depreciation of leasehold improvements related to updates to the estimated useful lives of certain leased facilities and $0.8 million in rent expense associated with these facilities, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, and other variable lease costs. The liabilities associated with these leases continue to be presented within lease liability and lease liability, non-current on the Company’s condensed consolidated balance sheets.
**	Includes the acceleration of certain technology and content development costs.
***	Includes severance and severance-related costs and lease-related charges.

The Company recorded restructuring charges of $5.4 million and $7.2 million for the three and nine months ended September 30, 2021, respectively.

Summary of Accrued Restructuring Liability

The following table presents the additions and adjustments to the accrued restructuring liability on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Additional Costs		Cash Payments		Balance as of September 30, 2022
	(in thousands)
2022 Strategic Realignment Plan
Severance and severance-related costs		$	—	$	14,542	$	(3,885)	$	10,657
Professional and other fees relating to restructuring activities		—		1,820		—		1,820
Lease and lease-related charges		—		212		—		212
Other severance and severance-related costs		1,735		728		(1,601)		862
Total restructuring		$	1,735	$	17,302	$	(5,486)	$	13,551

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Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Leases

The Company leases facilities under non-cancellable operating leases primarily in the United States, South Africa, and the United Kingdom. The Company’s operating leases have remaining lease terms of between less than one to 12 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. These options to extend the terms of the Company’s operating leases were not deemed to be reasonably certain of exercise as of lease commencement and are therefore not included in the determination of their respective non-cancellable lease terms. The future lease payments due under non-cancellable operating lease arrangements contain fixed rent increases over the term of the lease.

In October 2020, the Company entered into an agreement with an unrelated party to sublease a portion of the Company’s office space in the United States. In October 2021, the Company entered into an agreement with the same party to sublease additional office space in the same facility. The agreements are coterminous. As of September 30, 2022, the subleases were classified as operating leases and each had a remaining term of 1.1 years, with scheduled annual rent increases and no option to extend or renew the sublease term. Sublease income is recognized on a straight-line basis over the term of the subleases as a reduction to expense incurred by the Company under the associated head lease.

In August 2021, the Company entered into an agreement with an unrelated party to sublease a portion of the Company’s office space in Denver, Colorado, as part of its overall real estate management strategy. As of September 30, 2022, this sublease was classified as an operating lease and had a remaining term of 2.2 years with scheduled annual rent increases and no option to extend or renew the sublease term. Sublease income is recognized on a straight-line basis over the sublease term as a reduction to expense incurred by the Company under the associated master lease. In connection with the execution of this agreement, the Company recognized a non-cash loss on sublease of $4.8 million in the third quarter of 2021.

The following table presents the components of lease expense on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease expense	$	5,099	$	4,897	$	16,471	$	13,524
Short-term lease expense	139		66		407		120
Variable lease expense	1,811		1,713		5,180		4,742
Sublease income	(427)		(155)		(883)		(265)
Total lease expense	$	6,622	$	6,521	$	21,175	$	18,121

As of September 30, 2022, for the Company’s operating leases, the weighted-average remaining lease term was 7.1 years and the weighted-average discount rate was 10.7%. For the nine months ended September 30, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities was $18.8 million and $16.5 million, respectively. For each of the nine months ended September 30, 2022 and 2021, lease liabilities arising from obtaining right-of use assets were $15.5 million and $28.7 million, respectively.

The following table presents the maturities of the Company’s operating lease liabilities as of the date indicated, and excludes the impact of future sublease income totaling $3.5 million in aggregate.

	September 30, 2022
	(in thousands)
Remainder of 2022	$	5,769
2023	24,388
2024	24,349
2025	20,577
2026	21,136
Thereafter	72,212
Total lease payments	168,431
Less: imputed interest	(52,924)
Total lease liability	$	115,507

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Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

The following table presents the components of outstanding long-term debt on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Term loan facilities	$	568,060	$	572,374
Convertible senior notes	380,000		380,000
Deferred government grant obligations	3,500		3,500
Other borrowings	3,950		4,423
Less: unamortized debt discount and issuance costs	(19,768)		(107,777)
Total debt	935,742		852,520
Less: current portion of long-term debt	(7,545)		(7,204)
Total long-term debt	$	928,197	$	845,316

The Company believes the carrying value of its long-term debt approximates the fair value of the debt as the terms and interest rates approximate the market rates, other than the 2.25% convertible senior notes due 2025 (the “Notes”), which had an estimated fair value of $283.5 million and $403.3 million as of September 30, 2022 and December 31, 2021, respectively. Each of the Company’s long-term debt instruments were classified as Level 2 within the fair value hierarchy.

Term Loan Credit and Guaranty Agreement

The Company entered into a Term Loan Credit and Guaranty Agreement, dated June 28, 2021 (the “Term Loan Agreement”), among the Company, as borrower, the subsidiaries of the Company party thereto, as guarantors, the lenders party thereto, and Alter Domus (US) LLC as administrative agent and collateral agent. Pursuant to the Term Loan Agreement, the lenders thereunder made term loans to the Company on June 29, 2021 (the “Funding Date”) in the aggregate principal amount of $475 million (the “Term Loan Facilities”). The Term Loan Facilities have an initial maturity date of December 28, 2024 (the “Maturity Date”). Commencing on the Funding Date, loans under the Term Loan Facilities will bear interest at a per annum rate equal to a base rate or adjusted Eurodollar rate, as applicable, plus the applicable margin of 4.75% in the case of the base rate loans and 5.75% in the case of the Eurodollar loans. The Term Loan Agreement requires the Company to make quarterly principal repayments equal to 0.25% of the $475 million aggregate principal amount, beginning September 2021. If the loans under the Term Loan Facilities are prepaid prior to the second anniversary, subject to certain customary exceptions, the Company shall pay the Applicable Premium (as defined in the Term Loan Agreement) on the amount of the loans so prepaid.

On November 4, 2021, the Company entered into a First Amendment to Term Loan Credit and Guaranty Agreement and a Joinder Agreement, which amended the Term Loan Agreement (collectively, the “Amended Term Loan Facility”) primarily to provide for an incremental facility to the Company in an original principal amount of $100 million. The Company is required to make quarterly principal repayments equal to 0.25% of this original principal amount beginning in December 2021. The proceeds of the Amended Term Loan Facility may be used for general corporate purposes.

The associated effective interest rate of the Amended Term Loan Facility for each of the three and nine months ended September 30, 2022 was approximately 9.00%. The associated interest expense was approximately $13.2 million and $35.4 million for the three and nine months ended September 30, 2022, respectively.

The obligations under the Term Loan Agreement are guaranteed by certain of the Company’s subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”). The obligations under the Term Loan Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a perfected security interest in all tangible and intangible assets of the Credit Parties, except for certain customary excluded assets.

The Term Loan Agreement contains customary affirmative covenants, including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters. The Term Loan Agreement contains customary negative covenants, including, among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchases of equity interests in the Company and entering into affiliate transactions and asset sales. The Term Loan Agreement contains a financial covenant that requires the Company to maintain minimum Recurring Revenues (as defined in the Term Loan Agreement) as of the last day of any period of four consecutive fiscal quarters of the Company commencing with fiscal quarter ending September 30, 2021 through the Maturity Date. The Term Loan Agreement also provides for customary events of default, including, among others: non-payment of obligations; bankruptcy or insolvency event; failure to comply with covenants; breach of representations or warranties; defaults on other material indebtedness; impairment of any lien on any material portion of the Collateral (as defined in the Term Loan Agreement); failure of any material provision of the Term Loan Agreement or any guaranty to remain in full force and effect; a change of control of the Company; and material judgment defaults. The occurrence of an event of default could result in the acceleration of obligations under the Term Loan Agreement.

If an event of default under the Term Loan Agreement occurs and is continuing, then, at the request (or with the consent) of the lenders holding a majority of the commitments and loans under the Term Loan Agreement, upon notice by the administrative agent to the borrowers, the obligations under the Term Loan Agreement shall become immediately due and payable. In addition, if the Credit Parties become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Term Loan Agreement will automatically become immediately due and payable.

Credit Agreement

On June 25, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and certain other lenders party thereto that provided for $50 million in revolving loans (the “Loans”). The Credit Agreement allowed for incremental borrowings from time to time in an aggregate amount for all such incremental amounts not to exceed (i) the lesser of (x) $50 million and (y) an amount such that the aggregate principal amount of the lenders’ commitments under the revolving credit facility does not exceed $100 million, plus (ii) certain specified prepayments of indebtedness, plus (iii) an unlimited amount subject to satisfaction of a leverage ratio based compliance test.

The Loans bore interest, at the Company’s option, at variable rates based on (i) a customary base rate plus an applicable margin of 2.75% or (ii) an adjusted LIBOR rate (with a floor of 0.00%) for the interest period relevant to such borrowing plus an applicable margin of 3.75%. In connection with entering into the Term Loan Agreement in June 2021, the Company terminated the Credit Agreement and recognized a loss on debt extinguishment of $1.1 million in connection with the write-off of previously capitalized deferred financing costs and associated fees.

Convertible Senior Notes

In April 2020, the Company issued the Notes in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional Notes, in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. The net proceeds from the offering of the Notes were approximately $369.6 million after deducting the initial purchasers’ discounts, commissions and offering expenses payable by the Company.

The Notes are governed by an indenture (the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The Notes bear interest at a rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020. The Notes will mature on May 1, 2025, unless earlier repurchased, redeemed or converted.

The Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s senior unsecured indebtedness, senior in right of payment to the Company’s indebtedness that is expressly subordinated to the Notes, effectively subordinated to the Company’s senior secured indebtedness (including indebtedness under the Term Loan Facilities), to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The net carrying amount of the Notes consists of the following as of each of the dates indicated:

	September 30, 2022		December 31, 2021
	(in thousands)
Principal	$	380,000	$	380,000
Unamortized debt discount for conversion option	—		(83,609)
Unamortized issuance costs	(5,419)		(5,104)
Net carrying amount	$	374,581	$	291,287

Issuance costs are being amortized to interest expense over the contractual term of the Notes. Subsequent to the adoption of ASU 2020-06, the effective interest rate used to amortize the issuance costs was 2.9%. The interest expense related to the Notes for the three months ended September 30, 2022 and 2021 was $2.7 million and $7.8 million, respectively. The interest expense related to the Notes for the nine months ended September 30, 2022 and 2021 was $8.0 million and $23.0 million, respectively.

Holders may convert their Notes at their option in the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock, exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

•upon the occurrence of certain corporate events or distributions on the Company’s common stock, as provided in the Indenture;

•if the Company calls such Notes for redemption; and

•at any time from, and including, November 1, 2024 until the close of business on the second scheduled trading day immediately before the maturity date.

The initial conversion rate for the Notes is 35.3773 shares of the Company’s common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $28.27 per share of the Company’s common stock, and is subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture. Upon conversion, the Company will pay or deliver, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. In the event of the Company calling the Notes for redemption or the holders of the Notes electing to convert their Notes, the Company will determine whether to settle in cash, common stock or a combination thereof. Upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. As of September 30, 2022, the if-converted value of the Notes did not exceed the principal amount.

In addition, upon the occurrence of a “fundamental change” (as defined in the Indenture), holders of the Notes may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 5, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a “make-whole fundamental change”

with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if such Note is converted after it is called for redemption. No sinking fund is provided for the Notes.

As of September 30, 2022, the conditions allowing holders of the Notes to convert had not been met and the Company has the right under the Indenture to determine the method of settlement at the time of conversion. Therefore, the Notes are classified as non-current on the condensed consolidated balance sheets.

In connection with the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain counterparties. The Capped Call Transactions are generally expected to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $44.34 per share. The cost of the Capped Call Transactions was approximately $50.5 million.

In April 2020, the Company used a portion of the proceeds from the sale of the Notes to repay in full all amounts outstanding, and discharge all obligations in respect of, the $250 million senior secured term loan facility. The Company intends to use the remaining net proceeds from the sale of the Notes for working capital or other general corporate purposes, which may include capital expenditures, potential acquisitions and strategic transactions.

Deferred Government Grant Obligations

Government grants awarded to the Company in the form of forgivable loans are recorded within long-term debt on the Company’s condensed consolidated balance sheets until all contingencies are resolved and the grants are determined to be realized. 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 2U’s Lanham, Maryland headquarters.

In July 2020, the Company amended its conditional loan agreement with Prince George’s County to modify the terms of the employment level thresholds. The conditional loan with Prince George’s County has a maturity date of June 22, 2027.

In January 2021, the Company amended its conditional loan agreement with the State of Maryland to modify the terms of the employment level thresholds and extend the maturity date to June 30, 2028. The interest expense related to these loans for the three and nine months ended September 30, 2022 and 2021 was immaterial. As of September 30, 2022 and December 31, 2021, the Company’s combined accrued interest balance associated with the deferred government grant obligations was $0.6 million and $0.5 million, respectively.

Letters of Credit

Certain of the Company’s operating lease agreements entered into require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of September 30, 2022, the Company has entered into standby letters of credit totaling $14.2 million as security deposits for the applicable leased facilities and in connection with the deferred government grant obligations.

The Company maintains restricted cash as collateral for standby letters of credit for the Company’s leased facilities and in connection with the deferred government grant obligations.

Future Principal Payments

Future principal payments under the Amended Term Loan Facility, the Notes, and the government grants, as of the date indicated are as follows:

	September 30, 2022
	(in thousands)
Remainder of 2022	$	1,438
2023	5,753
2024	560,869
2025	380,000
2026	—
Thereafter*	3,500
Total future principal payments	$	951,560

* Amounts represent conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters.

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Income Taxes

9 Months Ended

Sep. 30, 2022

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 income tax provisions for the three and nine months ended September 30, 2022 and 2021 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 for each of the three and nine months ended September 30, 2022 and 2021 was less than 1%. The Company’s income tax benefit for the three months ended September 30, 2022 and 2021 was $0.1 million and $0.3 million, respectively. The Company’s income tax benefit for the nine months ended September 30, 2022 and 2021 was $0.5 million and $0.4 million, respectively. The income tax benefit is related to losses generated by operations and the amortization of acquired intangibles in the Alternative Credential Segment that are expected to be realized through future reversing taxable temporary differences. To date, the Company has not been required to pay U.S. federal income taxes because of current and accumulated net operating losses.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Currently, the Company does not expect this legislation will have a material impact on its consolidated financial statements.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

As of September 30, 2022, 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, 2022, there

were 77,845,436 shares of common stock outstanding, and the Company had reserved a total of 29,411,807 of its authorized shares of common stock for future issuance as follows:

	Shares Reserved for Future Issuance
Outstanding restricted stock units	4,594,782
Outstanding performance restricted stock units	2,248,104
Outstanding stock options	5,428,679
Reserved for convertible senior notes	17,140,242
Total shares of common stock reserved for future issuance	29,411,807

On August 6, 2020, the Company sold 6,800,000 shares of the Company’s common stock to the public. The Company received net proceeds of $299.8 million, which the Company uses for working capital and other general corporate purposes, which may include capital expenditures, potential acquisitions, growth opportunities and strategic transactions.

Stock-Based Compensation

The Company maintains two stock-based compensation plans: the Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the 2008 Stock Incentive Plan (the “2008 Plan” and together with the 2014 Plan, the “Stock Plans”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards. The shares available for future issuance under the 2014 Plan increased by 3,782,719 and 3,619,344 on January 1, 2022 and 2021, respectively, pursuant to the automatic share reserve increase provision in the 2014 Plan.

The Company also has a 2017 Employee Stock Purchase Plan (the “ESPP”). As of September 30, 2022, 379,670 shares remained available for purchase under the ESPP.

The following table presents stock-based compensation expense related to the Stock Plans and the ESPP, contained on the following line items on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Curriculum and teaching	$	59	$	18	$	155	$	51
Servicing and support	3,061		3,856		11,741		11,669
Technology and content development	1,288		3,334		7,785		9,703
Marketing and sales	1,013		1,811		4,861		4,984
General and administrative	10,546		16,003		38,198		48,338
Total stock-based compensation expense	$	15,967	$	25,022	$	62,740	$	74,745

Restricted Stock Units

The 2014 Plan provides for the issuance of restricted stock units (“RSUs”) to eligible participants. RSUs generally vest over a three- or four-year period. The following table presents a summary of the Company’s RSU activity for the period indicated.

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	2,613,063	$	32.29
Granted	4,464,951	10.67
Vested	(1,715,633)	25.77
Forfeited	(767,599)	18.29
Outstanding balance as of September 30, 2022	4,594,782	$	16.05

The total compensation expense related to the unvested RSUs not yet recognized as of September 30, 2022 was $49.4 million, and will be recognized over a weighted-average period of approximately 1.8 years.

Performance Restricted Stock Units

The 2014 Plan allows for the grant of performance restricted stock units (“PRSUs”) to eligible participants. The right to earn the PRSUs is subject to achievement of the defined performance metrics and continuous employment service. The performance metrics are defined and approved by the compensation committee of our board of directors. Earned PRSUs may be subject to additional time-based vesting.

During the first quarter of 2022, the PRSU awards granted as part of the Company’s 2020 annual equity award cycle with a performance period that began on January 1, 2021 and ended on December 31, 2021, which were subject to market-based vesting conditions, did not achieve the market-based targets for the second performance period, and 0% of the granted quantities vested. The PRSU awards granted as part of the Company’s 2021 annual equity award cycle with a performance period that began on January 1, 2021 and ended on December 31, 2021, which were subject to internal financial performance-based vesting targets, were earned at 112.7% of target.

The following tables present a summary of (i) the assumptions used for estimating the fair values of the PRSUs subject to market-based vesting conditions and (ii) the Company’s PRSU activity for the period indicated. As of September 30, 2022 and December 31, 2021, there were 1.1 million and 1.0 million outstanding PRSUs for which the performance metrics had not been defined as of each respective date. Accordingly, such awards are not considered granted for accounting purposes as of September 30, 2022 and December 31, 2021, and have been excluded from the tables below. No PRSUs were granted during each of the three months ended September 30, 2022 and 2021.

	Nine Months Ended September 30,
	2022	2021
Risk-free interest rate	0.39% – 1.88%	0.10% – 0.26%
Expected term (years)	1.00 – 3.00	1.00 – 3.00
Expected volatility	49% – 97%	85% – 89%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$18.67	$61.33

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	1,121,277	$	48.62
Granted	2,081,647	16.63
Vested	(12,597)	40.78
Forfeited	(942,223)	44.28
Outstanding balance as of September 30, 2022	2,248,104	$	21.45

The total compensation expense related to the unvested PRSUs not yet recognized as of September 30, 2022 was $15.8 million, and will be recognized over a weighted-average period of approximately 1.3 years.

Stock Options

The Stock Plans provide for the issuance of stock options to eligible participants. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed 10 years and generally vest over a three- or four-year period.

The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the period presented. No stock options were granted during the nine months ended September 30, 2021.

	Three Months Ended September 30, 2022	Nine Months Ended September 30, 2022
Risk-free interest rate	3.0%	1.9% - 3.0%
Expected term (years)	5.78	5.63 - 5.78
Expected volatility	79%	75% - 79%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$7.78	$7.02

The following table presents a summary of the Company’s stock option activity for the period indicated.

	Number of Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance as of December 31, 2021	3,477,439	$	36.13	3.87	$	16,246
Granted	3,149,620	10.78		7.50
Exercised	(316,965)	3.42		0.10
Forfeited	(585,842)	13.13
Expired	(295,573)	43.25
Outstanding balance as of September 30, 2022	5,428,679	25.43		5.95	97
Exercisable as of September 30, 2022	3,174,670	$	33.11	3.67	$	97

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2022 and 2021 was $3.2 million and $6.3 million, respectively.

The total compensation expense related to the unvested options not yet recognized as of September 30, 2022 was $17.5 million, and will be recognized over a weighted-average period of approximately 2.2 years.

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Net Loss per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

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 each of the periods indicated.

	Three and Nine Months Ended September 30,
	2022	2021
Stock options	5,428,679	3,538,522
Restricted stock units	4,594,782	2,681,579
Performance restricted stock units	2,248,104	1,558,149
Shares related to convertible senior notes	13,443,374	13,443,374
Total antidilutive securities	25,714,939	21,221,624

The following table presents the calculation of the Company’s basic and diluted net loss per share for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator (in thousands):
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Denominator:
Weighted-average shares of common stock outstanding, basic and diluted	77,692,911		74,691,521		77,013,180		74,266,999
Net loss per share, basic and diluted	$	(1.57)	$	(0.80)	$	(4.03)	$	(1.72)

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Segment and Geographic Information

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment and Geographic Information

Segment and Geographic Information

The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment. The Company’s reportable segments are determined based on (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions. The Company’s Degree Program Segment includes the technology and services provided to nonprofit colleges and universities to enable the online delivery of degree programs. The Company’s Alternative Credential Segment includes the premium online executive education programs and technical skills-based boot camps provided through relationships with nonprofit colleges and universities.

Significant Customers

For the three and nine months ended September 30, 2022 and September 30, 2021, no university clients accounted for 10% or more of the Company’s consolidated revenue.

As of September 30, 2022, no university clients in the Degree Program Segment accounted for 10% or more of the Company’s consolidated accounts receivable, net balance. As of December 31, 2021, two university clients in the Degree Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $9.8 million and $8.8 million, or approximately 14% and 13% of the Company’s consolidated accounts receivable, net balance, respectively.

Segment Performance

The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	137,242		$	147,795		$	434,499		$	439,884
Alternative Credential Segment	94,996			84,581			292,532			262,174
Total revenue	$	232,238		$	232,376		$	727,031		$	702,058
Segment profitability**
Degree Program Segment	$	44,907		$	32,925		$	120,264		$	86,786
Alternative Credential Segment	(12,389)			(18,185)			(53,564)			(41,186)
Total segment profitability	$	32,518		$	14,740		$	66,700		$	45,600
Segment profitability margin***
Degree Program Segment	32.7		%	22.3		%	27.7		%	19.7		%
Alternative Credential Segment	(13.0)			(21.5)			(18.3)			(15.7)
Total segment profitability margin	14.0		%	6.4		%	9.2		%	6.5		%

*	The Company has excluded immaterial amounts of intersegment revenues from each of the three and nine months ended September 30, 2022 and 2021.
**	The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, 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 the respective segment’s revenue.

The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Adjustments:
Stock-based compensation expense	15,967		25,022		62,740		74,745
Other (income) expense, net	1,845		425		4,242		(22,730)
Net interest expense	15,644		16,471		42,942		31,826
Income tax benefit	(59)		(319)		(474)		(448)
Depreciation and amortization expense	29,313		26,168		95,070		77,577
Impairment charges	79,509		—		138,291		—
Loss on debt extinguishment	—		—		—		1,101
Restructuring charges	11,632		5,395		29,172		7,214
Other*	343		1,688		5,025		3,820
Total adjustments	154,194		74,850		377,008		173,105
Total segment profitability	$	32,518	$	14,740	$	66,700	$	45,600

* Includes (i) transaction and integration expense of $0.0 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $3.4 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $0.3 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table presents the Company’s total assets by segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Total assets
Degree Program Segment	$	518,292	$	546,572
Alternative Credential Segment	1,391,264		1,562,434
Total assets	$	1,909,556	$	2,109,006

Geographical Information

The Company’s non-U.S. revenue is based on the currency of the country in which the university client primarily operates. The Company’s non-U.S. revenue was $24.5 million and $24.7 million for the three months ended September 30, 2022 and 2021, respectively. The Company’s non-U.S. revenue was $79.8 million and $74.1 million for the nine months ended September 30, 2022 and 2021, respectively. Substantially all of the Company’s non-U.S. revenue for each of the aforementioned periods was sourced from the Alternative Credential Segment’s operations outside of the U.S. The Company’s long-lived tangible assets in non-U.S. countries as of September 30, 2022 and December 31, 2021 totaled approximately $3.1 million and $3.3 million, respectively.

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Receivables and Contract Liabilities

9 Months Ended

Sep. 30, 2022

Receivables And Contract Liabilities Disclosure [Abstract]

Receivables and Contract Liabilities

Receivables and Contract Liabilities

Trade Accounts Receivable

The Company’s trade accounts receivable balances relate to amounts due from students or customers occurring in the normal course of business. Trade accounts receivable balances have a term of less than one year and are included in accounts receivable, net on the Company’s condensed consolidated balance sheets. The following table presents the Company’s trade accounts receivable in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment accounts receivable	$	33,985	$	31,762
Degree Program Segment unbilled revenue	32,127		4,440
Alternative Credential Segment accounts receivable	47,364		42,771
Total	113,476		78,973
Less: Provision for credit losses	(16,312)		(11,686)
Trade accounts receivable, net	$	97,164	$	67,287

The following table presents the change in provision for credit losses for trade accounts receivable on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	11,686
Current period provision	5,097
Foreign currency translation adjustments	(70)
Other	(401)
Balance as of September 30, 2022	$	16,312

Other Receivables

The Company’s other receivables are comprised of amounts due under tuition payment plans with extended payment terms from students enrolled in certain of the Company’s alternative credential offerings. These payment plans, which are managed and serviced by third-party providers, are designed to assist students with paying tuition costs after all other student financial assistance and scholarships have been applied. The associated receivables generally have payment terms that range from 12 to 42 months and are recorded net of any implied pricing concessions, which are determined based on collections history, market data and any time value of money component. There are no fees or origination costs included in these receivables. The carrying value of these receivable balances approximate their fair value. The following table presents the components of the Company’s other receivables, net, as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Other receivables, amortized cost	$	54,379	$	52,428
Less: Provision for credit losses	(2,363)		(1,421)
Other receivables, net	$	52,016	$	51,007
Other receivables, net, current	$	31,009	$	29,439
Other receivables, net, non-current	$	21,007	$	21,568

The following table presents the change in provision for credit losses for other receivables on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	1,421
Current period provision	1,031
Other	(89)
Balance as of September 30, 2022	$	2,363

The Company considers receivables to be past due when amounts contractually due under the extended payment plans have not been paid. As of September 30, 2022, 87% of other receivables, net due under extended payment plans were current.

At the time of origination, the Company categorizes its other receivables using a credit quality indicator based on the credit tier rankings obtained from the third-party providers that manage and service the payment plans. The third-party providers utilize credit rating agency data to determine the credit tier rankings. The Company monitors the collectability of its other receivables on an ongoing basis. The adequacy of the allowance for credit losses is determined through analysis of multiple factors, including industry trends, portfolio performance, and delinquency rates. The following tables present other receivables, at amortized cost including interest accretion, by credit quality indicator and year of origination, as of the dates indicated.

	September 30, 2022
	Year of Origination
	2022		2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	14,559	$	5,256	$	11	$	20	$	115	$	19,961
Mid	13,938		5,640		517		1,356		392		21,843
Low	5,399		3,774		1,142		1,930		330		12,575
Total	$	33,896	$	14,670	$	1,670	$	3,306	$	837	$	54,379

	December 31, 2021
	Year of Origination
	2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	18,466	$	1,635	$	24	$	115	$	20,240
Mid	14,352		2,992		1,312		392		19,048
Low	8,135		2,802		1,873		330		13,140
Total	$	40,953	$	7,429	$	3,209	$	837	$	52,428

Contract Liabilities

The Company’s deferred revenue represents contract liabilities. The Company generally receives payments from Degree Program Segment university clients early in each academic term and from Alternative Credential Segment 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. The following table presents the Company’s contract liabilities in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment deferred revenue	$	31,102	$	3,462
Alternative Credential Segment deferred revenue	96,495		88,464
Total contract liabilities	$	127,597	$	91,926

For the Degree Program Segment, during the three months ended September 30, 2022 and 2021 the Company recognized $0.1 million and no revenue related to its deferred revenue balances that existed at the end of each preceding year. Revenue recognized in this segment during the nine months ended September 30, 2022 and 2021 that was included in the deferred revenue balance that existed at the end of each preceding year was $1.5 million and $1.7 million, respectively.

For the Alternative Credential Segment, during the three months ended September 30, 2022 and 2021 the Company recognized $7.3 million and no revenue related to its deferred revenue balances that existed at the end of each preceding year. Revenue recognized in this segment during the nine months ended September 30, 2022 and 2021 that was included in the deferred revenue balance that existed at the end of each preceding year was $73.8 million and $71.9 million, respectively.

Contract Acquisition Costs

The Degree Program Segment had $0.5 million and $0.5 million of net capitalized contract acquisition costs recorded primarily within other assets, non-current on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. For each of the nine months ended September 30, 2022 and 2021, the Company capitalized an immaterial amount of contract acquisition costs and recorded an immaterial amount of associated amortization expense in the Degree Program Segment.

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Supplemental Cash Flow Information	9 Months Ended
	Sep. 30, 2022
Supplemental Cash Flow Elements [Abstract]
Supplemental Cash Flow Information	Supplemental Cash Flow InformationThe Company’s cash interest payments, net of amounts capitalized, were $35.2 million and $4.5 million for the nine months ended September 30, 2022 and 2021, respectively. The Company’s accrued but unpaid capital expenditures were $2.8 million and $4.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

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 (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “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, 2022 and 2021 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, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet data as of December 31, 2021 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

The Company has reclassified prior period amounts in the condensed consolidated statements of cash flows to conform to the current period’s presentation of other receivables. The Company reclassified $24.6 million from changes in prepaid

expenses and other assets to changes in other receivables. This reclassification had no impact on the previously reported operating cash flows. The Company has reclassified certain other prior period amounts in the consolidated statements of cash flows to conform to current period presentation. These reclassifications had no impact on previously reported operating, financing, or financing cash flows. The Company has reclassified prior period amounts in the condensed consolidated balance sheet and condensed consolidated statement of operations to conform to the current period’s presentation restructuring charges.

Use of Estimates

Use of Estimates

The preparation of 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. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill and indefinite-lived intangible assets, deferred tax assets, and the fair value of the convertible senior notes. Due to the inherent uncertainty involved in making estimates, particularly in light of the COVID-19 pandemic, 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.

Fair Value Measurements

Fair Value Measurements

The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability.

U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 4 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows:

•Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

•Level 2—Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

•Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of September 30, 2022 and December 31, 2021.

Business Combinations

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s condensed consolidated financial statements from the acquisition date.

Goodwill

Goodwill

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit.

The Company determines the fair value of a reporting unit by utilizing a weighted combination of the income-based and market-based approaches.

The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, the selection of appropriate peer group companies, discount rates, terminal growth rates, and forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value.

Other Indefinite-lived Intangible Assets

Other Indefinite-lived Intangible AssetsThe Company’s indefinite-lived intangible asset was acquired in November 2021 and represents the established edX trade name.

Interim Impairment Assessment

Interim Impairment Assessments

During both the first and third quarter of 2022, the Company experienced a significant decline in its market capitalization. Management deemed these declines triggering events related to the Company’s goodwill and indefinite-lived intangible asset. As a result, the Company performed interim impairment assessments as of March 1, 2022 and September 30, 2022.

For each of the interim impairment assessments, the Company utilized a weighted combination of the income-based approach and market-based approach to determine the fair value of each reporting unit and the income-based approach to determine the fair value of its long-lived intangible asset. Key assumptions used in the income-based approach included forecasts of revenue, operating income, depreciation and amortization expense, capital expenditures and future working capital requirements, terminal growth rates, and discount rates based upon each respective reporting unit’s or indefinite-lived intangible

asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result.

For the interim impairment assessment performed as of March 1, 2022, management determined the carrying value for one of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended March 31, 2022, the Company recorded impairment charges of $28.8 million and $30.0 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

For the interim impairment assessment performed as of September 30, 2022, management determined the carrying value for two of the reporting units within the Company’s Alternative Credential Segment and the carrying value of an indefinite-lived intangible asset exceeded their respective estimated fair value. As a result, during the three months ended September 30, 2022, the Company recorded impairment charges of $50.2 million and $29.3 million to goodwill and the indefinite-lived intangible asset, respectively, both within the Company’s Alternative Credential Segment. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity’s own equity. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. This ASU is effective for fiscal years beginning after December 15, 2021.

The Company adopted this ASU on a modified retrospective basis in the first quarter of 2022, effective as of January 1, 2022. As a result of the adoption, long-term debt increased $81.7 million, additional paid-in capital decreased $114.6 million, deferred tax liabilities decreased $22.1 million, and the Company recorded a cumulative-effect adjustment to opening accumulated deficit of $32.8 million. Adoption of this ASU requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effective is more dilutive. There was no impact to the number of potentially dilutive shares as a result of the adoption. Adoption of this standard did not have a material impact on the Company’s liquidity or cash flows.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, Disclosures by Business Entities about Government Assistance. This ASU requires entities to disclose information about certain government assistance they receive, including the nature of the transactions and the related accounting policy, the line items on the balance sheet and statement of operations that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions. The

ASU is effective for fiscal years beginning after December 15, 2021 and the disclosure requirements are for annual periods only. The guidance under this ASU will be effective for the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2022. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU No 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13 and enhances the disclosure requirements for certain loan refinancings when borrowers are experiencing financial difficulty. In addition, the ASU requires the disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. This ASU is effective for fiscal years beginning after December 15, 2022. The Company is evaluating the impact of the new guidance on its disclosures but does not expect there to be a material impact on its consolidated financial statements.

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Business Combination (Tables)

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Schedule of estimated fair values of the assets acquired and liabilities assumed

The following table summarizes the preliminary purchase price allocation based on the estimated fair value of the assets acquired and liabilities assumed and reflects the measurement period adjustments recorded during the nine months ended September 30, 2022:

	Estimated Useful Life (in years)	Purchase Price Allocation
		(in thousands)
Cash and cash equivalents		$	11,901
Accounts receivable		6,608
Prepaid expenses and other assets		13,098
Property and equipment, net		529
Right-of-use assets		2,355
Other assets, non-current		572
Accounts payable and accrued expenses		(10,057)
Deferred revenue		(17,000)
Lease liability		(2,512)
Other liabilities		(33,235)
Intangible assets:
Developed technology	3	15,400
University client relationships	10	104,000
Enterprise client relationships	10	14,300
Trade names	indefinite	255,000
Goodwill		407,050
		$	768,009

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The following table presents the changes in the carrying amount of goodwill by reportable segment on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Allocations		Adjustments		Impairment Charges		Foreign Currency Translation Adjustments		Balance as of September 30, 2022
	(in thousands)
Degree Program Segment
Gross goodwill		$	—	$	198,378	$	(5,519)	$	—	$	—	$	192,859
Accumulated impairments		—		—		—		—		—		—
Net goodwill		—		198,378		(5,519)		—		—		192,859
Alternative Credential Segment
Gross goodwill		$	481,366	$	225,174	$	(10,983)	$	—	$	(6,460)	$	689,097
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		410,987		225,174		(10,983)		(78,991)		(6,460)		539,727
Unallocated goodwill		$	423,552	$	(423,552)	$	—	$	—	$	—	$	—
Total
Gross goodwill		$	904,918	$	—	$	(16,502)	$	—	$	(6,460)	$	881,956
Accumulated impairments		(70,379)		—		—		(78,991)		—		(149,370)
Net goodwill		$	834,539	$	—	$	(16,502)	$	(78,991)	$	(6,460)	$	732,586

Schedule of amortizable intangible assets

The following tables present the components of intangible assets, net on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

		September 30, 2022						December 31, 2021
	Estimated Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Definite-lived intangible assets
Capitalized technology	3-5	$	218,666	$	(125,222)	$	93,444	$	199,766	$	(112,357)	$	87,409
Capitalized content development	4-5	262,418		(163,907)		98,511		243,687		(125,599)		118,088
University client relationships	9-10	209,016		(49,595)		159,421		211,680		(34,995)		176,685
Enterprise client relationships	10	14,300		(1,251)		13,049		14,300		(179)		14,121
Trade names and domain names	5-10	29,128		(19,845)		9,283		27,161		(12,941)		14,220
Total definite-lived intangible assets		$	733,528	$	(359,820)	$	373,708	$	696,594	$	(286,071)	$	410,523

		September 30, 2022						December 31, 2021
		Gross Carrying Amount		Accumulated Impairments*		Net Carrying Amount		Gross Carrying Amount		Accumulated Impairments		Net Carrying Amount
	(in thousands)
Indefinite-lived intangible assets
Trade names		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000
Total indefinite-lived intangible assets		$	255,000	$	(59,300)	$	195,700	$	255,000	$	—	$	255,000

* During the three months ended March 31, 2022, the Company recorded a $30.0 million impairment charge related to its indefinite-lived intangible asset. During the three months ended September 30, 2022, the Company recorded a $29.3 million impairment charge related to its indefinite-lived intangible asset. Refer to Note 2 for further information about these impairment charges.

Schedule of estimated future amortization expense for amortizable intangible assets

The following table presents the estimated future amortization expense of the Company’s amortizable intangible assets placed in service as of September 30, 2022.

	Future Amortization Expense
	(in thousands)
Remainder of 2022	$	25,345
2023	83,559
2024	63,330
2025	42,680
2026	29,048
Thereafter	79,520
Total	$	323,482

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Other Balance Sheet Details (Tables)

9 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

Schedule of accrued expenses

The following table presents the components of accounts payable and accrued expenses on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Accrued university and instructional staff compensation	$	27,420	$	36,806
Accrued marketing expenses	21,649		26,469
Accrued transaction and integration expenses	718		4,072
Accrued compensation and related benefits	26,409		49,143
Accounts payable and other accrued expenses	57,189		48,233
Total accounts payable and accrued expenses	$	133,385	$	164,723

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Restructuring Charges (Tables)

9 Months Ended

Sep. 30, 2022

Restructuring and Related Activities [Abstract]

Schedule of restructuring charges by reportable segment

The following table presents restructuring charges by reportable segment on the Company’s condensed consolidated statements of operations for the periods indicated.

	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
	Degree Program Segment		Alternative Credential Segment		Degree Program Segment		Alternative Credential Segment
2022 Strategic Realignment Plan
Severance and severance-related costs	$	—	$	—	$	8,772	$	6,431
Lease and lease-related charges*	8,972		298		8,972		298
Professional and other fees relating to restructuring activities	961		20		1,515		20
Other**	—		1,008		—		1,008
	9,933		1,326		19,259		7,757
Other restructuring charges***	362		11		1,977		179
Total restructuring charges	$	10,295	$	1,337	$	21,236	$	7,936

*	For the three and nine months ended September 30, 2022, includes $8.5 million of accelerated amortization of right-of-use assets and accelerated depreciation of leasehold improvements related to updates to the estimated useful lives of certain leased facilities and $0.8 million in rent expense associated with these facilities, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, and other variable lease costs. The liabilities associated with these leases continue to be presented within lease liability and lease liability, non-current on the Company’s condensed consolidated balance sheets.
**	Includes the acceleration of certain technology and content development costs.
***	Includes severance and severance-related costs and lease-related charges.

Schedule of adjustments to the accrued restructuring liability

The following table presents the additions and adjustments to the accrued restructuring liability on the Company’s condensed consolidated balance sheets for the periods indicated.

		Balance as of December 31, 2021		Additional Costs		Cash Payments		Balance as of September 30, 2022
	(in thousands)
2022 Strategic Realignment Plan
Severance and severance-related costs		$	—	$	14,542	$	(3,885)	$	10,657
Professional and other fees relating to restructuring activities		—		1,820		—		1,820
Lease and lease-related charges		—		212		—		212
Other severance and severance-related costs		1,735		728		(1,601)		862
Total restructuring		$	1,735	$	17,302	$	(5,486)	$	13,551

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Leases (Tables)

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Schedule of lease cost

The following table presents the components of lease expense on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease expense	$	5,099	$	4,897	$	16,471	$	13,524
Short-term lease expense	139		66		407		120
Variable lease expense	1,811		1,713		5,180		4,742
Sublease income	(427)		(155)		(883)		(265)
Total lease expense	$	6,622	$	6,521	$	21,175	$	18,121

Schedule of maturities of operating lease liabilities

The following table presents the maturities of the Company’s operating lease liabilities as of the date indicated, and excludes the impact of future sublease income totaling $3.5 million in aggregate.

	September 30, 2022
	(in thousands)
Remainder of 2022	$	5,769
2023	24,388
2024	24,349
2025	20,577
2026	21,136
Thereafter	72,212
Total lease payments	168,431
Less: imputed interest	(52,924)
Total lease liability	$	115,507

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Debt (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of long-term debt

The following table presents the components of outstanding long-term debt on the Company’s condensed consolidated balance sheets as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Term loan facilities	$	568,060	$	572,374
Convertible senior notes	380,000		380,000
Deferred government grant obligations	3,500		3,500
Other borrowings	3,950		4,423
Less: unamortized debt discount and issuance costs	(19,768)		(107,777)
Total debt	935,742		852,520
Less: current portion of long-term debt	(7,545)		(7,204)
Total long-term debt	$	928,197	$	845,316

The net carrying amount of the Notes consists of the following as of each of the dates indicated:

	September 30, 2022		December 31, 2021
	(in thousands)
Principal	$	380,000	$	380,000
Unamortized debt discount for conversion option	—		(83,609)
Unamortized issuance costs	(5,419)		(5,104)
Net carrying amount	$	374,581	$	291,287

Schedule of maturities of long-term debt

Future principal payments under the Amended Term Loan Facility, the Notes, and the government grants, as of the date indicated are as follows:

	September 30, 2022
	(in thousands)
Remainder of 2022	$	1,438
2023	5,753
2024	560,869
2025	380,000
2026	—
Thereafter*	3,500
Total future principal payments	$	951,560

* Amounts represent conditional loan obligations that may be forgiven, provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters.

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

Schedule of shares of common stock reserved for future issuance

As of September 30, 2022, there

were 77,845,436 shares of common stock outstanding, and the Company had reserved a total of 29,411,807 of its authorized shares of common stock for future issuance as follows:

	Shares Reserved for Future Issuance
Outstanding restricted stock units	4,594,782
Outstanding performance restricted stock units	2,248,104
Outstanding stock options	5,428,679
Reserved for convertible senior notes	17,140,242
Total shares of common stock reserved for future issuance	29,411,807

Schedule of stock-based compensation expense included in the consolidated statements of operations and comprehensive loss

The following table presents stock-based compensation expense related to the Stock Plans and the ESPP, contained on the following line items on the Company’s condensed consolidated statements of operations and comprehensive loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Curriculum and teaching	$	59	$	18	$	155	$	51
Servicing and support	3,061		3,856		11,741		11,669
Technology and content development	1,288		3,334		7,785		9,703
Marketing and sales	1,013		1,811		4,861		4,984
General and administrative	10,546		16,003		38,198		48,338
Total stock-based compensation expense	$	15,967	$	25,022	$	62,740	$	74,745

Schedule of restricted and performance restricted stock unit activity

The following table presents a summary of the Company’s RSU activity for the period indicated.

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	2,613,063	$	32.29
Granted	4,464,951	10.67
Vested	(1,715,633)	25.77
Forfeited	(767,599)	18.29
Outstanding balance as of September 30, 2022	4,594,782	$	16.05

	Number of Units	Weighted- Average Grant Date Fair Value per Share
Outstanding balance as of December 31, 2021	1,121,277	$	48.62
Granted	2,081,647	16.63
Vested	(12,597)	40.78
Forfeited	(942,223)	44.28
Outstanding balance as of September 30, 2022	2,248,104	$	21.45

Schedule of assumptions used for estimating the fair value of the stock options granted

The following tables present a summary of (i) the assumptions used for estimating the fair values of the PRSUs subject to market-based vesting conditions and (ii) the Company’s PRSU activity for the period indicated. As of September 30, 2022 and December 31, 2021, there were 1.1 million and 1.0 million outstanding PRSUs for which the performance metrics had not been defined as of each respective date. Accordingly, such awards are not considered granted for accounting purposes as of September 30, 2022 and December 31, 2021, and have been excluded from the tables below. No PRSUs were granted during each of the three months ended September 30, 2022 and 2021.

	Nine Months Ended September 30,
	2022	2021
Risk-free interest rate	0.39% – 1.88%	0.10% – 0.26%
Expected term (years)	1.00 – 3.00	1.00 – 3.00
Expected volatility	49% – 97%	85% – 89%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$18.67	$61.33

The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the period presented. No stock options were granted during the nine months ended September 30, 2021.

	Three Months Ended September 30, 2022	Nine Months Ended September 30, 2022
Risk-free interest rate	3.0%	1.9% - 3.0%
Expected term (years)	5.78	5.63 - 5.78
Expected volatility	79%	75% - 79%
Dividend yield	0%	0%
Weighted-average grant date fair value per share	$7.78	$7.02

Schedule of stock option activity

The following table presents a summary of the Company’s stock option activity for the period indicated.

	Number of Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance as of December 31, 2021	3,477,439	$	36.13	3.87	$	16,246
Granted	3,149,620	10.78		7.50
Exercised	(316,965)	3.42		0.10
Forfeited	(585,842)	13.13
Expired	(295,573)	43.25
Outstanding balance as of September 30, 2022	5,428,679	25.43		5.95	97
Exercisable as of September 30, 2022	3,174,670	$	33.11	3.67	$	97

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Net Loss per Share (Tables)

9 Months Ended

Sep. 30, 2022

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 each of the periods indicated.

	Three and Nine Months Ended September 30,
	2022	2021
Stock options	5,428,679	3,538,522
Restricted stock units	4,594,782	2,681,579
Performance restricted stock units	2,248,104	1,558,149
Shares related to convertible senior notes	13,443,374	13,443,374
Total antidilutive securities	25,714,939	21,221,624

Schedule of calculation of basic and diluted net loss per share

The following table presents the calculation of the Company’s basic and diluted net loss per share for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator (in thousands):
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Denominator:
Weighted-average shares of common stock outstanding, basic and diluted	77,692,911		74,691,521		77,013,180		74,266,999
Net loss per share, basic and diluted	$	(1.57)	$	(0.80)	$	(4.03)	$	(1.72)

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Segment and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Schedule of revenue, segment profitability and segment profitability margin by segment

The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	137,242		$	147,795		$	434,499		$	439,884
Alternative Credential Segment	94,996			84,581			292,532			262,174
Total revenue	$	232,238		$	232,376		$	727,031		$	702,058
Segment profitability**
Degree Program Segment	$	44,907		$	32,925		$	120,264		$	86,786
Alternative Credential Segment	(12,389)			(18,185)			(53,564)			(41,186)
Total segment profitability	$	32,518		$	14,740		$	66,700		$	45,600
Segment profitability margin***
Degree Program Segment	32.7		%	22.3		%	27.7		%	19.7		%
Alternative Credential Segment	(13.0)			(21.5)			(18.3)			(15.7)
Total segment profitability margin	14.0		%	6.4		%	9.2		%	6.5		%

*	The Company has excluded immaterial amounts of intersegment revenues from each of the three and nine months ended September 30, 2022 and 2021.
**	The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), other income (expense), net, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, 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 the respective segment’s revenue.

Schedule of reconciliation of net loss to total segment profitability

The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
Net loss	$	(121,676)	$	(60,110)	$	(310,308)	$	(127,505)
Adjustments:
Stock-based compensation expense	15,967		25,022		62,740		74,745
Other (income) expense, net	1,845		425		4,242		(22,730)
Net interest expense	15,644		16,471		42,942		31,826
Income tax benefit	(59)		(319)		(474)		(448)
Depreciation and amortization expense	29,313		26,168		95,070		77,577
Impairment charges	79,509		—		138,291		—
Loss on debt extinguishment	—		—		—		1,101
Restructuring charges	11,632		5,395		29,172		7,214
Other*	343		1,688		5,025		3,820
Total adjustments	154,194		74,850		377,008		173,105
Total segment profitability	$	32,518	$	14,740	$	66,700	$	45,600

* Includes (i) transaction and integration expense of $0.0 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $3.4 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively, and (ii) stockholder activism and litigation-related (recoveries) expense of $0.3 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Schedule of total assets by segment

The following table presents the Company’s total assets by segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Total assets
Degree Program Segment	$	518,292	$	546,572
Alternative Credential Segment	1,391,264		1,562,434
Total assets	$	1,909,556	$	2,109,006

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Receivables and Contract Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

Receivables And Contract Liabilities Disclosure [Abstract]

Schedule of receivables

The following table presents the Company’s trade accounts receivable in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment accounts receivable	$	33,985	$	31,762
Degree Program Segment unbilled revenue	32,127		4,440
Alternative Credential Segment accounts receivable	47,364		42,771
Total	113,476		78,973
Less: Provision for credit losses	(16,312)		(11,686)
Trade accounts receivable, net	$	97,164	$	67,287

The following table presents the components of the Company’s other receivables, net, as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Other receivables, amortized cost	$	54,379	$	52,428
Less: Provision for credit losses	(2,363)		(1,421)
Other receivables, net	$	52,016	$	51,007
Other receivables, net, current	$	31,009	$	29,439
Other receivables, net, non-current	$	21,007	$	21,568

Schedule of accounts receivable, allowance for credit loss

The following table presents the change in provision for credit losses for trade accounts receivable on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	11,686
Current period provision	5,097
Foreign currency translation adjustments	(70)
Other	(401)
Balance as of September 30, 2022	$	16,312

Schedule of other receivable, allowance for credit loss

The following table presents the change in provision for credit losses for other receivables on the Company’s condensed consolidated balance sheets for the period indicated.

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2021	$	1,421
Current period provision	1,031
Other	(89)
Balance as of September 30, 2022	$	2,363

Schedule of other receivable credit quality indicators

The following tables present other receivables, at amortized cost including interest accretion, by credit quality indicator and year of origination, as of the dates indicated.

	September 30, 2022
	Year of Origination
	2022		2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	14,559	$	5,256	$	11	$	20	$	115	$	19,961
Mid	13,938		5,640		517		1,356		392		21,843
Low	5,399		3,774		1,142		1,930		330		12,575
Total	$	33,896	$	14,670	$	1,670	$	3,306	$	837	$	54,379

	December 31, 2021
	Year of Origination
	2021		2020		2019		2018		Total
	(in thousands)
Credit Quality Tier
High	$	18,466	$	1,635	$	24	$	115	$	20,240
Mid	14,352		2,992		1,312		392		19,048
Low	8,135		2,802		1,873		330		13,140
Total	$	40,953	$	7,429	$	3,209	$	837	$	52,428

Schedule of contract liabilities by segment

The following table presents the Company’s contract liabilities in each segment as of each of the dates indicated.

	September 30, 2022		December 31, 2021
	(in thousands)
Degree Program Segment deferred revenue	$	31,102	$	3,462
Alternative Credential Segment deferred revenue	96,495		88,464
Total contract liabilities	$	127,597	$	91,926

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Organization (Details) learner in Millions	9 Months Ended
	Sep. 30, 2022 segment university learner learningOpportunity
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of registered learners | learner	46
Number of universities the company serves | university	230
Number of learning opportunities offered | learningOpportunity	4,000
Number of reportable segments (in segments) | segment	2

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Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Jan. 01, 2022
Property and Equipment, Net
Increase (decrease) in other receivables				$ 2,867	$ 24,598	$ 24,600
Accrued restructuring liability	$ 13,551			13,551		1,735
Restructuring charges	11,632		$ 5,395	29,172	$ 7,214
Goodwill impairment charge	50,200	$ 28,800		78,991
Impairment of intangible assets, indefinite-lived (excluding goodwill)	29,300	$ 30,000
Reporting units, percentage of fair value in excess of carrying amount		10.00%
Long-term debt	935,742			935,742		852,520
Additional paid-in capital	(1,683,860)			(1,683,860)		(1,735,628)
Deferred tax liabilities, net	(359)			(359)		(1,726)
Accumulated deficit	$ (1,168,129)			$ (1,168,129)		$ (890,638)
Accounting Standards Update 2020-06 | Cumulative Effect, Period of Adoption, Adjustment
Property and Equipment, Net
Long-term debt							$ 81,700
Additional paid-in capital							114,600
Deferred tax liabilities, net							22,100
Accumulated deficit							$ 32,800

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Business Combination - Narrative (Details) - edX - USD ($) $ in Thousands		9 Months Ended
	Nov. 16, 2021	Sep. 30, 2022
Business Acquisition [Line Items]
Membership Interests (as a percent)	100.00%
Net purchase price	$ 773,000
Escrow deposit	23,000
Working capital adjustment		$ 5,000
Preliminary purchase price	$ 768,009

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Business Combination - Estimated Fair Value (Details) - USD ($) $ in Thousands		9 Months Ended
	Nov. 16, 2021	Sep. 30, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Goodwill		$ 732,586	$ 834,539
Enterprise client relationships
Business Acquisition [Line Items]
Estimated Useful Life (in years)		10 years
edX
Business Acquisition [Line Items]
Cash and cash equivalents	$ 11,901
Accounts receivable	6,608
Prepaid expenses and other assets	13,098
Property and equipment, net	529
Right-of-use assets	2,355
Other assets, non-current	572
Accounts payable and accrued expenses	(10,057)
Deferred revenue	(17,000)
Lease liability	(2,512)
Other liabilities	(33,235)
Goodwill	407,050
Total	768,009
edX | Trade names and domain names
Business Acquisition [Line Items]
Identifiable-lived intangible assets	255,000
edX | Capitalized technology
Business Acquisition [Line Items]
Amortizable intangible asset	$ 15,400
Estimated Useful Life (in years)	3 years
edX | University client relationships
Business Acquisition [Line Items]
Amortizable intangible asset	$ 104,000
Estimated Useful Life (in years)	10 years
edX | Enterprise client relationships
Business Acquisition [Line Items]
Amortizable intangible asset	$ 14,300
Estimated Useful Life (in years)	10 years

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Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022
Goodwill [Roll Forward]
Goodwill, gross, beginning balance		$ 904,918	$ 904,918
Goodwill, accumulated impairment loss, beginning balance		(70,379)	(70,379)
Goodwill, beginning balance		834,539	834,539
Allocations			0
Adjustments			(16,502)
Impairment Charges	$ (50,200)	(28,800)	(78,991)
Foreign Currency Translation Adjustments			(6,460)
Goodwill, gross, ending balance	881,956		881,956
Goodwill, accumulated impairment loss, ending balance	(149,370)		(149,370)
Goodwill, ending balance	732,586		732,586
Unallocated goodwill
Goodwill [Roll Forward]
Goodwill, beginning balance		423,552	423,552
Allocations			(423,552)
Adjustments			0
Impairment Charges			0
Foreign Currency Translation Adjustments			0
Goodwill, ending balance	0		0
Degree Program Segment deferred revenue | Operating Segments
Goodwill [Roll Forward]
Goodwill, gross, beginning balance		0	0
Goodwill, accumulated impairment loss, beginning balance		0	0
Goodwill, beginning balance		0	0
Allocations			198,378
Adjustments			(5,519)
Impairment Charges			0
Foreign Currency Translation Adjustments			0
Goodwill, gross, ending balance	192,859		192,859
Goodwill, accumulated impairment loss, ending balance	0		0
Goodwill, ending balance	192,859		192,859
Alternative Credential Segment accounts receivable | Operating Segments
Goodwill [Roll Forward]
Goodwill, gross, beginning balance		481,366	481,366
Goodwill, accumulated impairment loss, beginning balance		(70,379)	(70,379)
Goodwill, beginning balance		$ 410,987	410,987
Allocations			225,174
Adjustments			(10,983)
Impairment Charges			(78,991)
Foreign Currency Translation Adjustments			(6,460)
Goodwill, gross, ending balance	689,097		689,097
Goodwill, accumulated impairment loss, ending balance	(149,370)		(149,370)
Goodwill, ending balance	$ 539,727		$ 539,727

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Goodwill and Intangible Assets - Narrative (Details) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2022 USD ($)	Mar. 31, 2022 USD ($) reportingUnit	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Finite-Lived Intangible Assets [Line Items]
Number of reporting units | reportingUnit		4
Goodwill impairment charge	$ 50,200	$ 28,800		$ 78,991
Net carrying amount	373,708			373,708		$ 410,523
Amortization expense	26,600		$ 23,200	86,500	$ 68,000
In Process Capitalized Technology and Content Development
Finite-Lived Intangible Assets [Line Items]
Net carrying amount	$ 50,200			50,200		$ 46,300
edX
Finite-Lived Intangible Assets [Line Items]
Working capital adjustment				(5,000)
Acquired assets and assumed liabilities of edX				$ 11,500

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Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Amortizable Intangible Assets
Gross Carrying Amount	$ 733,528		$ 733,528	$ 696,594
Accumulated Amortization	(359,820)		(359,820)	(286,071)
Net Carrying Amount	373,708		373,708	410,523
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Indefinite-lived intangible assets	255,000		255,000	255,000
Accumulated Impairments*	(59,300)		(59,300)	0
Net Carrying Amount	195,700		195,700	255,000
Impairment of intangible assets, indefinite-lived (excluding goodwill)	29,300	$ 30,000
Trade names
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Indefinite-lived intangible assets	255,000		255,000	255,000
Accumulated Impairments*	(59,300)		(59,300)	0
Net Carrying Amount	195,700		195,700	255,000
Capitalized technology
Amortizable Intangible Assets
Gross Carrying Amount	218,666		218,666	199,766
Accumulated Amortization	(125,222)		(125,222)	(112,357)
Net Carrying Amount	93,444		$ 93,444	87,409
Capitalized technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			3 years
Capitalized technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			5 years
Capitalized content development
Amortizable Intangible Assets
Gross Carrying Amount	262,418		$ 262,418	243,687
Accumulated Amortization	(163,907)		(163,907)	(125,599)
Net Carrying Amount	98,511		$ 98,511	118,088
Capitalized content development | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			4 years
Capitalized content development | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			5 years
University client relationships
Amortizable Intangible Assets
Gross Carrying Amount	209,016		$ 209,016	211,680
Accumulated Amortization	(49,595)		(49,595)	(34,995)
Net Carrying Amount	159,421		$ 159,421	176,685
University client relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			9 years
University client relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			10 years
Enterprise client relationships
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			10 years
Amortizable Intangible Assets
Gross Carrying Amount	14,300		$ 14,300	14,300
Accumulated Amortization	(1,251)		(1,251)	(179)
Net Carrying Amount	13,049		13,049	14,121
Trade names and domain names
Amortizable Intangible Assets
Gross Carrying Amount	29,128		29,128	27,161
Accumulated Amortization	(19,845)		(19,845)	(12,941)
Net Carrying Amount	$ 9,283		$ 9,283	$ 14,220
Trade names and domain names | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			5 years
Trade names and domain names | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Average Useful Life (in years)			10 years

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Goodwill and Intangible Assets - Estimated Future Amortization Expense and License agreement (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Future amortization expense
Net Carrying Amount	$ 373,708	$ 410,523
Excluding in process capitalized technology and content development
Future amortization expense
Remainder of 2022	25,345
2023	83,559
2024	63,330
2025	42,680
2026	29,048
Thereafter	79,520
Net Carrying Amount	$ 323,482

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Other Balance Sheet Details - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Prepaid assets	$ 24.0		$ 24.0		$ 23.0
Deferred expenses incurred to integrate software	8.9		8.9		7.0
Amortization of capitalized software implementation costs	1.2	$ 0.7	1.9	$ 1.8
Due to university client	18.6		18.6		$ 21.9
Employee retention tax credits	0.5		0.5
Accrued payroll taxes CARES Act	$ 5.0		$ 5.0
Minimum | Capitalized technology
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Estimated useful life of intangible assets (in years)			3 years
Maximum | Capitalized technology
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Estimated useful life of intangible assets (in years)			5 years

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Other Balance Sheet Details - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Accrued university and instructional staff compensation	$ 27,420	$ 36,806
Accrued marketing expenses	21,649	26,469
Accrued transaction and integration expenses	718	4,072
Accrued compensation and related benefits	26,409	49,143
Accounts payable and other accrued expenses	57,189	48,233
Total accounts payable and accrued expenses	$ 133,385	$ 164,723

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Commitments and Contingencies (Details) - USD ($) $ in Millions	Sep. 30, 2022	Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Loss contingency accrual	$ 37.0
Additional investment In educational technology, contingent payment		$ 15.0

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Restructuring Charges - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 11,632	$ 5,395	$ 29,172	$ 7,214
2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Restructuring charges	11,300		27,000
2022 Strategic Realignment Plan | Minimum
Restructuring Cost and Reserve [Line Items]
Additional restructuring charges	$ 35,000		$ 35,000
Estimated remaining costs (in years)	1 year		1 year
2022 Strategic Realignment Plan | Maximum
Restructuring Cost and Reserve [Line Items]
Additional restructuring charges	$ 40,000		$ 40,000
Estimated remaining costs (in years)	9 years		9 years

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Restructuring Charges - Schedule of Restructuring Charges by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Accelerated Amortization Of ROU Assets And Accelerated Depreciation | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	$ 8,500	$ 8,500
Rent Expense | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	800	800
Degree Program Segment deferred revenue
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	10,295	21,236
Degree Program Segment deferred revenue | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	9,933	19,259
Degree Program Segment deferred revenue | Severance and severance-related costs | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	0	8,772
Degree Program Segment deferred revenue | Lease and lease-related charges | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	8,972	8,972
Degree Program Segment deferred revenue | Professional and other fees relating to restructuring activities | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	961	1,515
Degree Program Segment deferred revenue | Other | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	0	0
Degree Program Segment deferred revenue | Other restructuring charges
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	362	1,977
Alternative Credential Segment accounts receivable
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	1,337	7,936
Alternative Credential Segment accounts receivable | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	1,326	7,757
Alternative Credential Segment accounts receivable | Severance and severance-related costs | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	0	6,431
Alternative Credential Segment accounts receivable | Lease and lease-related charges | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	298	298
Alternative Credential Segment accounts receivable | Professional and other fees relating to restructuring activities | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	20	20
Alternative Credential Segment accounts receivable | Other | 2022 Strategic Realignment Plan
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	1,008	1,008
Alternative Credential Segment accounts receivable | Other restructuring charges
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	$ 11	$ 179

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Restructuring Charges - Schedule of Adjustments to the Accrued Restructuring Liability (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Restructuring Reserve [Roll Forward]
Balance as of December 31, 2021	$ 1,735
Additional Costs	17,302
Cash Payments	(5,486)
Balance as of September 30, 2022	13,551
Other severance and severance-related costs
Restructuring Reserve [Roll Forward]
Balance as of December 31, 2021	1,735
Additional Costs	728
Cash Payments	(1,601)
Balance as of September 30, 2022	862
2022 Strategic Realignment Plan | Severance and severance-related costs
Restructuring Reserve [Roll Forward]
Balance as of December 31, 2021	0
Additional Costs	14,542
Cash Payments	(3,885)
Balance as of September 30, 2022	10,657
2022 Strategic Realignment Plan | Professional and other fees relating to restructuring activities
Restructuring Reserve [Roll Forward]
Balance as of December 31, 2021	0
Additional Costs	1,820
Cash Payments	0
Balance as of September 30, 2022	1,820
2022 Strategic Realignment Plan | Lease and lease-related charges
Restructuring Reserve [Roll Forward]
Balance as of December 31, 2021	0
Additional Costs	212
Cash Payments	0
Balance as of September 30, 2022	$ 212

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Leases - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Lessee, Lease, Description [Line Items]
Renewal term (in years)		5 years
Option to terminate, term (in years)		1 year
Loss on sublease	$ 4.8
Weighted average remaining lease term (in years)		7 years 1 month 6 days
Weighted average discount rate (as a percent)		10.70%
Operating lease payments		$ 18.8	$ 16.5
Lease liabilities arising from obtaining right-of-use assets		15.5	$ 28.7
Future sublease income expected to be earned		$ 3.5
Sublease Of Office Space
Lessee, Lease, Description [Line Items]
Remaining lease term (in years)		1 year 1 month 6 days
Sublease Of Office Space, Denver, Colorado
Lessee, Lease, Description [Line Items]
Remaining lease term (in years)		2 years 2 months 12 days
Minimum
Lessee, Lease, Description [Line Items]
Contract term (in years)		1 year
Maximum
Lessee, Lease, Description [Line Items]
Contract term (in years)		12 years

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Leases [Abstract]
Operating lease expense	$ 5,099	$ 4,897	$ 16,471	$ 13,524
Short-term lease expense	139	66	407	120
Variable lease expense	1,811	1,713	5,180	4,742
Sublease income	(427)	(155)	(883)	(265)
Total lease expense	$ 6,622	$ 6,521	$ 21,175	$ 18,121

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Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Leases [Abstract]
Remainder of 2022	$ 5,769
2023	24,388
2024	24,349
2025	20,577
2026	21,136
Thereafter	72,212
Total lease payments	168,431
Less: imputed interest	(52,924)
Total lease liability	$ 115,507

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Debt - Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Less: unamortized debt discount and issuance costs	$ (19,768)	$ (107,777)
Total debt	935,742	852,520
Less: current portion of long-term debt	(7,545)	(7,204)
Total long-term debt	928,197	845,316
Term loan facilities
Debt Instrument [Line Items]
Net carrying amount	568,060	572,374
Convertible senior notes
Debt Instrument [Line Items]
Net carrying amount	380,000	380,000
Deferred government grant obligations
Debt Instrument [Line Items]
Net carrying amount	3,500	3,500
Other borrowings
Debt Instrument [Line Items]
Net carrying amount	$ 3,950	$ 4,423

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Debt - Narrative (Details)				1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 25, 2020 USD ($)	Apr. 30, 2020 USD ($) $ / shares	Apr. 23, 2020	Apr. 30, 2020 USD ($) day $ / shares	Sep. 30, 2022 USD ($) agreement	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) agreement	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)	Nov. 04, 2021 USD ($)	Jun. 29, 2021 USD ($)
Debt Instrument [Line Items]
Loss on debt extinguishment					$ 0	$ 0	$ 0	$ (1,101,000)
Proceeds from debt							530,000	469,595,000
Standby Letters of Credit
Debt Instrument [Line Items]
Borrowing capacity terminated					$ 14,200,000		$ 14,200,000
Prince Georges County Maryland
Debt Instrument [Line Items]
Interest rate (as a percent)					3.00%		3.00%
Number of contracts (in contracts) | agreement					2		2
Convertible senior notes
Debt Instrument [Line Items]
Net carrying amount					$ 380,000,000		$ 380,000,000		$ 380,000,000
Deferred government grant obligations
Debt Instrument [Line Items]
Net carrying amount					3,500,000		3,500,000		3,500,000
Interest payable					600,000		600,000		500,000
Deferred government grant obligations | Prince Georges County Maryland
Debt Instrument [Line Items]
Net carrying amount					$ 3,500,000		$ 3,500,000
Term Loan Agreement | Line of Credit
Debt Instrument [Line Items]
Aggregate principal amount										$ 100,000,000	$ 475,000,000
Principal repayments (as a percent)										0.25%	0.25%
Debt instrument, effective interest rate (as a percent)					9.00%		9.00%
Interest expense					$ 13,200,000		$ 35,400,000
Term Loan Agreement | Line of Credit | Base rate
Debt Instrument [Line Items]
Interest rate (as a percent)											4.75%
Term Loan Agreement | Line of Credit | Eurodollar
Debt Instrument [Line Items]
Interest rate (as a percent)											5.75%
Credit Agreement | Letter of Credit
Debt Instrument [Line Items]
Borrowing capacity terminated	$ 50,000,000
Debt instrument, principal amount of the lenders' commitments	100,000,000
Loss on debt extinguishment	$ 1,100,000
Credit Agreement | Letter of Credit | Base rate
Debt Instrument [Line Items]
Variable rate, applicable margin (as a percent)	2.75%
Credit Agreement | Letter of Credit | LIBOR
Debt Instrument [Line Items]
Variable rate, applicable margin (as a percent)	3.75%
Credit Agreement | Letter of Credit | LIBOR | Minimum
Debt Instrument [Line Items]
Variable rate, applicable margin (as a percent)	0.00%
The Notes | Convertible senior notes
Debt Instrument [Line Items]
Interest rate (as a percent)		2.25%		2.25%	2.25%		2.25%
Aggregate principal amount		$ 380,000,000		$ 380,000,000	$ 380,000,000		$ 380,000,000		380,000,000
Proceeds from debt				$ 369,600,000
Debt instrument, effective interest rate (as a percent)					2.90%		2.90%
Debt issuance costs					$ 2,700,000	$ 7,800,000	$ 8,000,000	$ 23,000,000
Debt instrument, convertible, threshold percentage of stock price trigger (as a percent)				130.00%
Debt instrument, convertible, threshold trading days | day				20
Debt instrument, convertible, threshold consecutive trading days (in days) | day				30
Debt instrument, convertible, threshold consecutive trading days, sale price per share (in days) | day				5
Debt instrument, convertible, measurement period (in days) | day				10
Debt instrument, threshold percentage of sales price per share (as a percent)				98.00%
Debt instrument, convertible, conversion ratio			0.0353773
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares		$ 28.27		$ 28.27
Capped call, cap price (in dollars per share) | $ / shares		$ 44.34
Purchases of capped calls in connection with convertible senior notes		$ 50,500,000
Net carrying amount					374,581,000		374,581,000		291,287,000
Senior Secured Term Loan Facility | Line of Credit
Debt Instrument [Line Items]
Senior secured term loan facility				$ 250,000,000
Fair Value, Inputs, Level 2 | Convertible senior notes
Debt Instrument [Line Items]
Fair value					$ 283,500,000		$ 283,500,000		$ 403,300,000

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Debt - Net Carrying Amount (Details) - Convertible senior notes - USD ($)	Sep. 30, 2022	Dec. 31, 2021	Apr. 30, 2020
Debt Instrument [Line Items]
Net carrying amount	$ 380,000,000	$ 380,000,000
The Notes
Debt Instrument [Line Items]
Principal	380,000,000	380,000,000	$ 380,000,000
Unamortized debt discount for conversion option	0	(83,609,000)
Unamortized issuance costs	(5,419,000)	(5,104,000)
Net carrying amount	$ 374,581,000	$ 291,287,000

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Debt - Future Principal Payments (Details) - Term Loan Facility, Convertible Notes And Government Grants $ in Thousands	Sep. 30, 2022 USD ($)
Debt Instrument [Line Items]
Remainder of 2022	$ 1,438
2023	5,753
2024	560,869
2025	380,000
2026	0
Thereafter	3,500
Net carrying amount	$ 951,560

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
U.S. statutory federal income tax rate (as a percent)	1.00%	1.00%	1.00%	1.00%
Income tax benefit	$ 59	$ 319	$ 474	$ 448

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Stockholders' Equity - Common Stock and Stock-based Compensation (Details) $ in Millions	Aug. 06, 2020 USD ($) shares	Sep. 30, 2022 plan shares	Jun. 30, 2022 shares	Mar. 31, 2022 shares	Jan. 01, 2022 shares	Dec. 31, 2021 shares	Sep. 30, 2021 shares	Jun. 30, 2021 shares	Mar. 31, 2021 shares	Jan. 01, 2021 shares	Dec. 31, 2020 shares
Stockholders' Equity
Authorized shares of capital stock (in shares)		205,000,000
Authorized shares of common stock (in shares)		200,000,000				200,000,000
Authorized shares of preferred stock (in shares)		5,000,000				5,000,000
Common stock, issued (in shares)		77,845,436				75,754,663
Common stock, outstanding (in shares)		77,845,436				75,754,663
Available shares of common stock reserved for future issuance (in shares)		29,411,807
Net proceeds | $	$ 299.8
Number of stock-based compensation plans | plan		2
Outstanding restricted stock units
Stockholders' Equity
Available shares of common stock reserved for future issuance (in shares)		4,594,782
Outstanding performance restricted stock units
Stockholders' Equity
Available shares of common stock reserved for future issuance (in shares)		2,248,104
Outstanding stock options
Stockholders' Equity
Available shares of common stock reserved for future issuance (in shares)		5,428,679
Reserved for convertible senior notes
Stockholders' Equity
Available shares of common stock reserved for future issuance (in shares)		17,140,242
Employee Stock
Stockholders' Equity
Available shares of common stock reserved for future issuance (in shares)		379,670
Equity Incentive Plan 2014
Stockholders' Equity
Increase in shares in available for future issuance					3,782,719					3,619,344
Common Stock
Stockholders' Equity
Common stock, outstanding (in shares)		77,845,436	77,219,835	76,616,534		75,754,663	74,749,601	74,507,853	74,038,208		72,451,521
Sale of common stock (in shares)	6,800,000

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Stockholders' Equity - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	$ 15,967	$ 25,022	$ 62,740	$ 74,745
Curriculum and teaching
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	59	18	155	51
Servicing and support
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	3,061	3,856	11,741	11,669
Technology and content development
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	1,288	3,334	7,785	9,703
Marketing and sales
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	1,013	1,811	4,861	4,984
General and administrative
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations
Total stock-based compensation expense	$ 10,546	$ 16,003	$ 38,198	$ 48,338

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Stockholders' Equity - Restricted and Performance Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to unvested RSUs	$ 49.4		$ 49.4
Weighted average period for recognition of compensation cost (in years)			1 year 9 months 18 days
Number of awards outstanding (in shares)	4,594,782		4,594,782		2,613,063
Restricted Stock Units [Roll Forward]
Outstanding balance at the beginning of the period (in shares)			2,613,063
Granted (in shares)			4,464,951
Vested (in shares)			(1,715,633)
Forfeited (in shares)			(767,599)
Outstanding balance at the end of the period (in shares)	4,594,782		4,594,782		2,613,063
Grant Date Fair Value [Roll Forward]
Outstanding at the beginning of the period (in dollars per share)			$ 32.29
Granted (in dollars per share)			10.67
Vested (in dollars per share)			25.77
Forfeited (in dollars per share)			18.29
Outstanding at the end of the period (in dollars per share)	$ 16.05		$ 16.05		$ 32.29
Restricted stock units | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)			3 years
Restricted stock units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)			4 years
Performance restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to unvested RSUs	$ 15.8		$ 15.8
Weighted average period for recognition of compensation cost (in years)			1 year 3 months 18 days
Number of awards outstanding (in shares)	2,248,104		2,248,104		1,121,277
Restricted Stock Units [Roll Forward]
Outstanding balance at the beginning of the period (in shares)			1,121,277
Granted (in shares)			2,081,647
Vested (in shares)			(12,597)
Forfeited (in shares)			(942,223)
Outstanding balance at the end of the period (in shares)	2,248,104		2,248,104		1,121,277
Grant Date Fair Value [Roll Forward]
Outstanding at the beginning of the period (in dollars per share)			$ 48.62
Granted (in dollars per share)			16.63
Vested (in dollars per share)			40.78
Forfeited (in dollars per share)			44.28
Outstanding at the end of the period (in dollars per share)	$ 21.45		$ 21.45		$ 48.62
Performance Restricted Stock Units, 2020 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (as a percent)			0.00%
Performance Restricted Stock Units, 2021 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (as a percent)					112.70%
Performance Restricted Stock Units, Performance Metrics Not Yet Defined
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards outstanding (in shares)	1,100,000		1,100,000		1,000,000
Restricted Stock Units [Roll Forward]
Outstanding balance at the beginning of the period (in shares)			1,000,000
Granted (in shares)	0	0	0	0
Outstanding balance at the end of the period (in shares)	1,100,000		1,100,000		1,000,000

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Stockholders' Equity - Fair Value Assumptions (Details) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Sep. 30, 2021
Performance restricted stock units
Fair value assumptions and methodology
Risk-free interest rate minimum		0.39%	0.10%
Risk-free interest rate maximum		1.88%	0.26%
Expected volatility minimum		49.00%	85.00%
Expected volatility maximum		97.00%	89.00%
Dividend yield		0.00%	0.00%
Weighted average grant date fair value (in dollars per share)	$ 18.67	$ 18.67	$ 61.33
Performance restricted stock units | Minimum
Fair value assumptions and methodology
Expected term (years)		1 year	1 year
Performance restricted stock units | Maximum
Fair value assumptions and methodology
Expected term (years)		3 years	3 years
Stock options
Fair value assumptions and methodology
Risk-free interest rate minimum		1.90%
Risk-free interest rate maximum	3.00%	3.00%
Expected term (years)	5 years 9 months 10 days
Expected volatility minimum		75.00%
Expected volatility maximum	79.00%	79.00%
Dividend yield	0.00%	0.00%
Weighted average grant date fair value (in dollars per share)	$ 7.78	$ 7.02
Stock options | Minimum
Fair value assumptions and methodology
Expected term (years)		5 years 7 months 17 days
Stock options | Maximum
Fair value assumptions and methodology
Expected term (years)		5 years 9 months 10 days

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Stockholders' Equity - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Number of Options
Outstanding balance at the beginning of the period (in shares)	3,477,439
Granted (in shares)	3,149,620	0
Exercised (in shares)	(316,965)
Forfeited (in shares)	(585,842)
Expired (in shares)	(295,573)
Outstanding balance at the end of the period (in shares)	5,428,679		3,477,439
Exercisable at the end of the period (in shares)	3,174,670
Weighted-Average Exercise Price per Share
Outstanding balance at the beginning of the period (in dollars per share)	$ 36.13
Granted (in dollars per share)	10.78
Exercised (in dollars per share)	3.42
Forfeited (in dollars per share)	13.13
Expired (in dollars per share)	43.25
Outstanding balance at the end of the period (in dollars per share)	25.43		$ 36.13
Exercisable at the end of the period (in dollars per share)	$ 33.11
Weighted-Average Remaining Contractual Term (in years)
Outstanding balance (in years)	5 years 11 months 12 days		3 years 10 months 13 days
Granted (in years)	7 years 6 months
Exercised (in years)	1 month 6 days
Weighted-average remaining contractual term of options exercisable at the end of the period (in years)	3 years 8 months 1 day
Aggregate Intrinsic Value (in thousands)
Outstanding balance at the end of the period	$ 97		$ 16,246
Exercisable at the end of the period	$ 97

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Stockholders' Equity - Stock Option Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Stock-Based Compensation
Granted (in shares)	3,149,620	0
Stock options
Stock-Based Compensation
Expiration period (in years)	10 years
Intrinsic value of options exercisable at the end of the period	$ 3.2	$ 6.3
Compensation cost related to the nonvested awards not yet recognized	$ 17.5
Weighted average period for recognition of compensation cost (in years)	2 years 2 months 12 days
Stock options | Minimum
Stock-Based Compensation
Vesting period (in years)	3 years
Stock options | Maximum
Stock-Based Compensation
Vesting period (in years)	4 years

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Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Potential dilutive securities that would have been anti-dilutive
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares)	25,714,939	21,221,624	25,714,939	21,221,624
Numerator:
Net loss	$ (121,676)	$ (60,110)	$ (310,308)	$ (127,505)
Denominator:
Weighted-average shares of common stock outstanding, basic (in shares)	77,692,911	74,691,521	77,013,180	74,266,999
Weighted-average shares of common stock outstanding, diluted (in shares)	77,692,911	74,691,521	77,013,180	74,266,999
Net loss per share, basic (in dollars per share)	$ (1.57)	$ (0.80)	$ (4.03)	$ (1.72)
Net loss per share, diluted (in dollars per share)	$ (1.57)	$ (0.80)	$ (4.03)	$ (1.72)
Stock options
Potential dilutive securities that would have been anti-dilutive
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares)	5,428,679	3,538,522	5,428,679	3,538,522
Restricted stock units
Potential dilutive securities that would have been anti-dilutive
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares)	4,594,782	2,681,579	4,594,782	2,681,579
Performance restricted stock units
Potential dilutive securities that would have been anti-dilutive
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares)	2,248,104	1,558,149	2,248,104	1,558,149
Shares related to convertible senior notes
Potential dilutive securities that would have been anti-dilutive
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares)	13,443,374	13,443,374	13,443,374	13,443,374

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Segment and Geographic Information - Narrative (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022 USD ($) segment	Dec. 31, 2021 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments (in segments) | segment	2
Accounts receivable, net	$ 97,164	$ 67,287
University client 1 | Accounts receivable, net | Credit concentration risk | Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Accounts receivable, net		$ 9,800
Percentage of concentration of credit risk		14.00%
University client 2 | Accounts receivable, net | Credit concentration risk | Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Accounts receivable, net		$ 8,800
Percentage of concentration of credit risk		13.00%

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Segment and Geographic Information - Segment Results of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting Information [Line Items]
Total revenue	$ 232,238	$ 232,376	$ 727,031	$ 702,058
Total segment profitability	$ 32,518	$ 14,740	$ 66,700	$ 45,600
Total segment profitability margin	14.00%	6.40%	9.20%	6.50%
Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Total revenue	$ 137,242	$ 147,795	$ 434,499	$ 439,884
Total segment profitability	$ 44,907	$ 32,925	$ 120,264	$ 86,786
Total segment profitability margin	32.70%	22.30%	27.70%	19.70%
Alternative Credential Segment accounts receivable
Segment Reporting Information [Line Items]
Total revenue	$ 94,996	$ 84,581	$ 292,532	$ 262,174
Total segment profitability	$ (12,389)	$ (18,185)	$ (53,564)	$ (41,186)
Total segment profitability margin	(13.00%)	(21.50%)	(18.30%)	(15.70%)

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Segment and Geographic Information - Reconciliation of Net Loss to Total Segment Profitability (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting [Abstract]
Net loss	$ (121,676)	$ (62,852)	$ (125,780)	$ (60,110)	$ (21,831)	$ (45,564)	$ (310,308)	$ (127,505)
Adjustments:
Stock-based compensation expense	15,967			25,022			62,740	74,745
Other (income) expense, net	1,845			425			4,242	(22,730)
Net interest expense	15,644			16,471			42,942	31,826
Income tax benefit	(59)			(319)			(474)	(448)
Depreciation and amortization expense	29,313			26,168			95,070	77,577
Impairment charges	79,509			0			138,291	0
Loss on debt extinguishment	0			0			0	(1,101)
Restructuring charges	11,632			5,395			29,172	7,214
Other	343			1,688			5,025	3,820
Total adjustments	154,194			74,850			377,008	173,105
Total segment profitability	32,518			14,740			66,700	45,600
Transaction and integration costs	(0)			800			3,400	2,600
Stockholder activism costs	$ 300			$ 800			$ 1,600	$ 1,200

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Segment and Geographic Information - Total Assets by Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Total assets	$ 1,909,556	$ 2,109,006
Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Total assets	518,292	546,572
Alternative Credential Segment accounts receivable
Segment Reporting Information [Line Items]
Total assets	$ 1,391,264	$ 1,562,434

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Segment and Geographic Information - Geographical Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Geographical Information
Total revenue	$ 232,238	$ 232,376	$ 727,031	$ 702,058
Assets	1,909,556		1,909,556		$ 2,109,006
Alternative Credential Segment accounts receivable
Geographical Information
Total revenue	94,996	84,581	292,532	262,174
Assets	1,391,264		1,391,264		1,562,434
Non-US
Geographical Information
Total revenue	24,500	$ 24,700
Non-US | Alternative Credential Segment accounts receivable
Geographical Information
Total revenue			79,800	$ 74,100
Assets	$ 3,100		$ 3,100		$ 3,300

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Receivables and Contract Liabilities - Trade Accounts Receivable and Contract Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Accounts receivable, before allowance for credit loss, current	$ 113,476	$ 78,973
Less: Provision for credit losses	(16,312)	(11,686)
Trade accounts receivable, net	97,164	67,287
Degree Program Segment
Segment Reporting Information [Line Items]
Accounts receivable, before allowance for credit loss, current	33,985	31,762
Degree Program Segment unbilled revenue	32,127	4,440
Alternative Credential Segment accounts receivable
Segment Reporting Information [Line Items]
Accounts receivable, before allowance for credit loss, current	$ 47,364	$ 42,771

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Receivables and Contract Liabilities - Change in Provision for Credit Losses for Trade Receivables (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of December 31, 2021	$ 11,686
Current period provision	5,097
Foreign currency translation adjustments	(70)
Other	(401)
Balance as of September 30, 2022	$ 16,312

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Receivables and Contract Liabilities - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Segment Reporting Information [Line Items]
Percentage of other receivables that are current (as a percent)	87.00%		87.00%
Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Contract with customer, liability, revenue recognized	$ 0.1	$ 0.0	$ 1.5	$ 1.7
Capitalized contract cost	0.5		0.5		$ 0.5
Alternative Credential Segment accounts receivable
Segment Reporting Information [Line Items]
Contract with customer, liability, revenue recognized	$ 7.3	$ 0.0	$ 73.8	$ 71.9
Minimum
Segment Reporting Information [Line Items]
Term of other receivables			12 months
Maximum
Segment Reporting Information [Line Items]
Term of other receivables			42 months

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Receivables and Contract Liabilities - Other Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Receivables And Contract Liabilities Disclosure [Abstract]
Other receivables, amortized cost	$ 54,379	$ 52,428
Less: Provision for credit losses	(2,363)	(1,421)
Other receivables, net	52,016	51,007
Other receivables, net, current	31,009	29,439
Other receivables, net, non-current	$ 21,007	$ 21,568

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Receivables and Contract Liabilities - Change in Provision for Credit Losses for Other Receivables (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Other Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of December 31, 2021	$ 1,421
Current period provision	1,031
Other	(89)
Balance as of September 30, 2022	$ 2,363

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Receivables and Contract Liabilities - Other Receivables Credit Quality Indicators (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Financing Receivable, Credit Quality Indicator [Line Items]
Origination year	$ 33,896	$ 40,953
Origination year, one year before current fiscal year	14,670	7,429
Origination year, two years before current fiscal year	1,670	3,209
Origination year, three years before current fiscal year	3,306	837
Origination year, four years before current fiscal year	837
Total	54,379	52,428
High
Financing Receivable, Credit Quality Indicator [Line Items]
Origination year	14,559	18,466
Origination year, one year before current fiscal year	5,256	1,635
Origination year, two years before current fiscal year	11	24
Origination year, three years before current fiscal year	20	115
Origination year, four years before current fiscal year	115
Total	19,961	20,240
Mid
Financing Receivable, Credit Quality Indicator [Line Items]
Origination year	13,938	14,352
Origination year, one year before current fiscal year	5,640	2,992
Origination year, two years before current fiscal year	517	1,312
Origination year, three years before current fiscal year	1,356	392
Origination year, four years before current fiscal year	392
Total	21,843	19,048
Low
Financing Receivable, Credit Quality Indicator [Line Items]
Origination year	5,399	8,135
Origination year, one year before current fiscal year	3,774	2,802
Origination year, two years before current fiscal year	1,142	1,873
Origination year, three years before current fiscal year	1,930	330
Origination year, four years before current fiscal year	330
Total	$ 12,575	$ 13,140

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Receivables and Contract Liabilities - Contract Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Total contract liabilities	$ 127,597	$ 91,926
Degree Program Segment deferred revenue
Segment Reporting Information [Line Items]
Total contract liabilities	31,102	3,462
Alternative Credential Segment deferred revenue
Segment Reporting Information [Line Items]
Total contract liabilities	$ 96,495	$ 88,464

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Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Supplemental Cash Flow Elements [Abstract]
Cash interest payments	$ 35.2	$ 4.5
Unpaid capital expenditures	$ 2.8	$ 4.3