Executive Summary

Q1 revenue fell 17% year over year to $198.4M; adjusted EBITDA declined 43% to $17.3M (9% margin) as portfolio exits and continued boot camp weakness outweighed executive education strength .
Management reaffirmed FY24 revenue ($805–$815M) and adjusted EBITDA ($120–$125M) but widened FY24 net loss guidance to $(103)–$(98)M; introduced Q2 revenue of $191–$194M and adjusted EBITDA of $16–$18M .
Liquidity improved via a receivables sale; cash rose to $137.4M at quarter-end (up $64M q/q), though total debt remained elevated at $906.4M; performance improvement initiatives incurred $7.0M in Q1 .
CEO highlighted rising workforce development demand amid generative AI and a focus on operating model, cost structure, and product mix; 42 new degree programs were launched in the quarter, and exec ed momentum continued (+32% FCE) .

What Went Well and What Went Wrong

What Went Well

Executive education outperformed: alternative credential exec ed revenue increased by $11.0M y/y on 32% FCE growth, offsetting boot camp declines within the segment .
Cash/liquidity strengthened: quarter-end cash, cash equivalents, and restricted cash rose to $137.4M, aided by ~$74.0M net proceeds from a receivables transaction .
Strategic focus and product pipeline: management launched 42 new degree programs and reiterated a focus on profitable revenue and operating efficiency; CEO: “2U has a significant opportunity to respond to and support the current technology moment, where advances in generative AI are driving strong demand for workforce development” .

What Went Wrong

Top-line and profitability pressure: revenue fell 17% y/y and adjusted EBITDA declined 43% y/y to $17.3M (9% margin) as portfolio exits and boot camp weakness weighed on mix .
Boot camp headwinds intensified: boot camp revenue decreased by $21.9M y/y on a 30% FCE decline, particularly in coding, dragging the Alternative Credential segment down 11% .
Degree segment reset: Degree revenue fell 21% y/y to $111.5M as certain programs operating in 2023 are no longer operating in 2024 due to portfolio management activities; FY24 net loss guidance widened despite cost actions .

Financial Results

Consolidated P&L vs prior quarters

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$229.7	$255.7	$198.4
Net Loss ($M)	$(47.4)	$(42.4)	$(54.6)
GAAP EPS ($)	$(0.58)	$(0.52)	$(0.65)
Adjusted EBITDA ($M)	$28.6	$90.2	$17.3
Adjusted EBITDA Margin (%)	12%	35%	9%

Note: Consensus vs. actual not shown because S&P Global consensus data were unavailable for TWOU at time of analysis.

Segment performance

Segment Metric	Q3 2023	Q4 2023	Q1 2024
Degree Revenue ($M)	$137.6	$163.5	$111.5
Alt. Credential Revenue ($M)	$92.1	$92.2	$86.8
Degree Adjusted EBITDA ($M)	$43.6	$90.7	$32.0
Degree Adjusted EBITDA Margin (%)	32%	56%	29%
Alt. Credential Adjusted EBITDA ($M)	$(15.0)	$(0.6)	$(14.7)
Alt. Credential Adjusted EBITDA Margin (%)	(16%)	(1%)	(17%)

Key operating metrics (KPIs)

KPI	Q3 2023	Q4 2023	Q1 2024
Degree FCE Enrollments	45,284	43,309	44,693
Degree Avg Rev/FCE ($)	$3,039	$3,774	$2,496
Alt. Credential FCE Enrollments	25,318	24,499	24,955
Alt. Credential Avg Rev/FCE ($)	$3,428	$3,500	$3,260

Additional mix detail (Q1 y/y): boot camp revenue −$21.9M on 30% FCE decline; exec ed +$11.0M on 32% FCE growth .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	FY 2024	$805–$815	$805–$815	Maintained
Net Loss ($M)	FY 2024	$(90)–$(85)	$(103)–$(98)	Lowered (worse)
Adjusted EBITDA ($M)	FY 2024	$120–$125	$120–$125	Maintained
Capital Expenditures ($M)	FY 2024	~$45	~$45	Maintained
Weighted Avg Shares (M)	FY 2024	~85	~85	Maintained
Revenue ($M)	Q2 2024	N/A	$191–$194	New
Net Loss ($M)	Q2 2024	N/A	$(37.5)–$(32.5)	New
Adjusted EBITDA ($M)	Q2 2024	N/A	$16–$18	New

Guidance assumptions include: (i) no new 2024 portfolio management activities and (ii) $15M of 2023 portfolio management revenue recognized in FY2024 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023, Q4 2023)	Current Period (Q1 2024)	Trend
AI/technology demand	Company positioned to benefit from “advancements in technology, including AI” (Q3 commentary) .	CEO cites “generative AI… driving strong demand for workforce development” and 2U’s opportunity/positioning .	Increasing emphasis on AI-driven workforce upskilling.
Portfolio management/degree exits	Q3: $25.8M degree revenue from portfolio management; lower degree FCEs and ARPU mix shifts . Q4: $54.6M degree revenue from portfolio management .	Y/Y degree revenue down as certain 2023 programs are no longer operating in 2024 due to portfolio management .	Portfolio pruning continuing; 2024 assumes no new actions .
Boot camps	Q3: Alt cred down 3% on lower coding boot camp enrollments . Q4: Alt cred −7% on lower coding boot camps .	Alt cred −11% y/y as boot camp revenue −$21.9M on 30% FCE decline (coding) .	Headwinds intensifying.
Executive education	Q3: +18% FCE growth . Q4: +8% FCE growth .	+$11.0M revenue; +32% FCE growth .	Strengthening.
Liquidity/balance sheet	Q3: discussions to refinance notes; cash down ytd . Q4: going-concern warning absent refinancing; $904.7M total debt .	$74M receivables transaction; cash to $137.4M; total debt $906.4M; focus on balance sheet .	Liquidity boosted, leverage still high.
Cost actions/performance improvement	Q3: 12% headcount reduction, ~$55M annualized savings . Q4: new org structure and discipline .	Ongoing cost reductions (personnel, real estate, delivery); $7.0M implementation expense in Q1 .	Continuing execution.

Management Commentary

CEO (press release): “2U has a significant opportunity to respond to and support the current technology moment, where advances in generative AI are driving strong demand for workforce development… we are focused on the right operating model… products, and a balance sheet that provides a sound financial foundation.”
CFO (press release): “first quarter results were better than our expectations… pursuing additional operating efficiencies… We believe our increased cash position of $137 million, together with the kick-off of our performance improvement initiatives, put us in a strong position to fix our balance sheet.”
Call highlight: “Our first quarter financial results exceeded our expectations as we continue to execute our shrink-to-grow strategy… Revenue… $198.4 million… adjusted EBITDA… $17.3 million.” Management maintained FY revenue and adjusted EBITDA guidance while acknowledging boot camp headwinds .

Q&A Highlights

Guidance and mix: Management maintained FY24 revenue and adjusted EBITDA targets while flagging continued boot camp headwinds, with strength expected from edX/exec ed; Q2 guide set at revenue $191–$194M and adjusted EBITDA $16–$18M .
Demand/enrollments: Management referenced increased total new enrollments (116k vs. 88k prior quarter) across ~4,600 partner programs, aligning with the workforce upskilling narrative on the platform .
Balance sheet actions: Liquidity improved via the receivables transaction; management reiterated focus on operating efficiency and balance sheet repair in 2024 .
Assumption clarity: FY guidance assumes no new 2024 portfolio management actions and ~$15M of 2023 portfolio management revenue in FY24 .

Estimates Context

S&P Global (Capital IQ) consensus for Q1 2024 was unavailable for TWOU at time of analysis due to missing mapping; therefore, verified beat/miss vs. consensus cannot be provided from S&P Global.
Management disclosed that Q1 results exceeded internal expectations; third-party transcript outlets report revenue of $198.4M and adjusted EBITDA of $17.3M, consistent with company disclosures .

Guidance and Strategic Developments Post-Quarter (context)

Pepperdine expansion: 2U and Pepperdine announced six new online degrees in education and healthcare under the flexible degree partnership model (MS Education in 2024; others in 2025), deepening degree pipeline with licensure-oriented offerings .

Key Takeaways for Investors

Mix reset continues: Degree revenue compression from portfolio exits and persistent boot camp headwinds are pressuring top-line and margins, though exec ed momentum is a partial offset .
FY guide held on revenue and adjusted EBITDA: Despite Q1 y/y declines, mgmt kept FY revenue and adjusted EBITDA ranges; net loss guidance widened, reflecting ongoing restructuring, cost to implement initiatives, and mix .
Liquidity improved, leverage elevated: Cash rose to $137.4M on receivables sale; total debt at ~$906M underscores the importance of continued cost actions and balance sheet strategy in 2024 .
AI/workforce demand as secular tailwind: Management is leaning into generative-AI-driven upskilling themes (edX, exec ed), with post-quarter partnership expansions (e.g., Pepperdine) supporting pipeline and strategic positioning .
Watch Q2 execution and boot camp trend: Q2 guide implies continued pressure from coding boot camps; track conversion in exec ed and degree launches, plus incremental cost savings realization .
Non-GAAP adjustments meaningful: Q1 included $7.0M of performance improvement initiative implementation expense within non-GAAP reconciliations; investors should compare GAAP and adjusted results carefully as the turnaround progresses .

Appendix: Additional Data and Disclosures

Cash and debt (Q1 2024): Cash, cash equivalents, and restricted cash $137.4M (+$64.0M q/q); total debt $906.4M (including $40.0M drawn on revolver) .
Operating expense controls: Personnel expenses −$29.5M y/y; paid marketing −$5.6M; D&A −$5.3M; offset by $7.0M performance improvement initiative costs .
Non-GAAP definitions and reconciliations provided by the company (adjusted EBITDA, adjusted net loss, adjusted free cash flow) .

Sources:

Q1 2024 8-K/Press Release and financial statements
Prior quarters: Q4 2023 8-K/Press Release ; Q3 2023 8-K/Press Release
Q1 2024 earnings call transcript excerpts and highlights
Pepperdine partnership press release (May 16, 2024)

2U, Inc. (TWOU)·Q1 2024 Earnings Summary