2U and Coursera: A tale of two earnings calls
Insights into regulatory environment, OPM demand, and cost of marketing
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Both 2U and Coursera held their Q1 earnings calls this week. Listening to the two earnings calls, it is hard to believe that the two companies operate in similar spaces. The tone of each call was very different, though there were some elements of the content of the calls that were similar. Both the differences and similarities tell us some interesting things about what is happening with OPMs and online learning. There was a lot of news in the calls, but I want to focus on a few things in particular:
The way that the companies are publicly handling the current regulatory environment
Demand for OPM services
Costs of marketing
The current regulatory environment
The two companies dealt with the issue of the Department of Education’s Dear Colleague Letter (DCL) around bundled services and revenue share as well as Third Party Servicers in very different ways. The 2U call began with an eight-and-a-half-minute long statement from CEO Chip Paucek about the regulatory guidance, the uncertainty it created, and their response to it. It was a clear, strong, and cogent analysis of the issues. The topic also came up numerous times during analyst questions, for example about what impact the uncertainty was having on the pipeline, on whether 2U was working to reduce its exposure to Title IV programs, and how it was changing how they run the company (none, no, and no).
By contrast it was a full 53 minutes into the Coursera call before the regulatory issue came up, and then only once from an analyst question. The lack of coverage of the topic was striking, and I’m not entirely sure what it signifies. On the one hand, maybe the vendors like Coursera who are at least publicly ignoring the issue (or criticizing 2U for its outspokenness and lawsuit) are wise in that things are still very far from decided and we really don’t know what’s going to happen. Given the media’s predilection for glomming onto company narratives, it might be better to stay out of the limelight and let 2U take the heat. On the other hand, it is almost as if some OPMs don’t think of themselves as OPMs, and that the uncertainty doesn’t apply to them (they are wrong). It does raise some interesting questions about what 2U’s outspoken nature means for the company - in many ways the company has become the face of the OPM market, but at a certain point being such a lightning rod must take a toll.
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