2U, Inc.

2U reported first-quarter revenue of $198.4 million, down 17% from $238.5 million a year ago. Adjusted EBITDA was $17.3 million, down 43% year over year, with a 9% margin; net loss was $54.6 million versus $54.1 million last year. Operating expense was $225.7 million, down 13% year over year. Cash, cash equivalents and restricted cash ended the quarter at $137.4 million, up $64 million from December 31, 2023, including $74 million from receivable sales; cash provided by operating activities was $72.2 million. Management kept full-year 2024 guidance at revenue of $805 million to $815 million and adjusted EBITDA of $120 million to $125 million; second-quarter guidance is revenue of $191 million to $194 million and adjusted EBITDA of $16 million to $18 million.

Paul Lalljie framed the quarter as a solid start and said results exceeded expectations as 2U continues its “shrink to grow” strategy. He emphasized three priorities: product innovation, operational efficiency, and fixing the balance sheet. His tone was confident on the company’s long-term market opportunity, saying 2U has the technology, partnerships, and resources to return to top-line growth in 2025 and improve profitability and cash flow through cost savings.

Matt Norden said the company exceeded first-quarter revenue and profitability expectations, helped by 32% exec ed enrollment growth and prior cost optimization actions. He highlighted cash and liquidity improvement, including $137.4 million of cash and restricted cash at quarter-end, $72.2 million of operating cash flow, and $102.7 million of adjusted unlevered free cash flow over the last 12 months. He also outlined $90 million to $100 million of additional run-rate cost savings identified through 2025, including about $15 million from sales and marketing efficiency, $20 million from technology and product spend, and $8 million from G&A, while noting recurring revenue covenant pressure and active talks with creditors.

Analysts focused on the economics of the 42 newly launched programs, with questions about near-term revenue and free-cash-flow impact; management said roughly 60 programs launched in 2024 should cost about $23 million to $25 million and generate $10 million to $15 million of revenue this year, with about $100 million of steady-state revenue over time. On operational efficiency, management cited automation, outsourcing to lower-cost locations, and AI use cases, especially in marketing and operations, as ways to drive savings. Analysts also pressed on the balance sheet, and management said lender discussions are increasingly frequent and constructive, with a near-term resolution expected to address the covenant issue.