EdTech Related Updates from Earnings Calls

What did we learn from 2U, Coursera, and other public company releases?

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Over the past eight days there have been a number of earnings calls for publicly-traded companies related to EdTech. Strategic Education (Strayer and Capella U), Chegg, Coursera, Graham Holdings (Purdue Global), 2U, and Adtalem (Chamberlain and Walden U). What did we learn?

As always, this is not a financial newsletter, so our focus is not on stock price; rather, it is on what the public reporting can tell us about operational issues - enrollments in online programs, OPM market prospects, etc.

2U’s Progress

The biggest question for our coverage is how 2U is doing. We have covered since November how the company faces a balance sheet issue where it will have to refinance its debt or get debt holders to agree to different terms this year, or face bankruptcy restructuring. From the mid March post, I summarized the situation (which differs from some media coverage and public letters from activist organizations).

With that in mind, the key updates I have are to clarify that 2U’s problems are around debt maturity and not liquidity, and that I believe there is a real turnaround attempt in progress.

The key question is based on 2U’s ability to service its debt.

What the company has confirmed, directly and indirectly, is that it must refinance its term loan that matures in 2025, and if does not succeed, the company would have to declare bankruptcy. That is my key point across these posts - not that 2U will cease to operate, but rather that one way or the other 2U has to deal with that debt outside of normal operations.

On today’s call, I would summarize the results as 2U starting to execute on the revised “shrink to grow” strategy announced three months ago. 2U has dropped quite a few of its degree programs (described as portfolio management) and is focused on improving its cash position to help manage the debt, and to create a more sustainable strategy. In short, today showed the company doing what executives said it would do.

One change that I appreciate is that 2U is reporting student completion rates across different offerings. 89% for executive education, 77% for bootcamps, 72% for degree programs, and 54% for open courses (i.e., MOOCs from edX).

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