2U, Inc. (Nasdaq: TWOU), today reported financial and operating results for the fourth quarter and full-year ended December 31, 2017.

Fourth Quarter 2017 Results

• Revenue was $86.7 million, an increase of 51% from $57.4 million in the fourth quarter of 2016.
• Net income was $0.5 million, or $0.01 per share, compared to net loss of $(2.2) million, or $(0.05)per share, in the fourth quarter of 2016.
• Adjusted net income was $7.9 million, or $0.14 per share, compared to $2.0 million, or $0.04 per share, in the fourth quarter of 2016.
• Adjusted EBITDA was $12.7 million, compared to $4.5 million in the fourth quarter of 2016.

Full-Year 2017 Results

• Revenue was $286.8 million, an increase of 39% from $205.9 million in 2016.
• Net loss was $(29.4) million, or $(0.60) per share, compared to $(20.7) million, or $(0.44) per share, in 2016.
• Adjusted net loss was $(4.3) million, or $(0.09) per share, compared to $(4.9) million, or $(0.10) per share, in 2016.
• Adjusted EBITDA was $11.4 million, compared to $4.5 million in 2016.

"A decade into our journey, 2U is now at the forefront of the digital transformation in higher education and the strength of our business performance and the high-quality student outcomes in our partner programs prove it," CEO and Co-Founder Christopher "Chip" Paucek said. "The positive momentum in our GetSmarter short course business combined with the organic growth in our graduate program business produced strong fourth quarter and full-year 2017 financial results and sets us up nicely for 2018."

Recent Developments

Today, 2U is announcing the signing of its first International Graduate Program: an MBA with University College London ("UCL"). This is the first online MBA offered by the UCL School of Management. The first cohort is expected to launch in 2019, subject to applicable internal approvals.

"The MBA@UCL is the first international graduate program in the history of 2U and a monumental step forward in the company's evolution," Paucek said. "This school has innovation in its DNA. The school's long-term vision centers on its goal of creating disruptive research and entrepreneurial leaders for the complex, interconnected world of the future. Now with our partnership, we are helping UCL extend that mission across the globe."

UC Berkeley is the first graduate program client that has signed to offer short courses. UC Berkeley School of Information will offer a range of technology-focused online short courses.

2U appointed two new board members to our Board of Directors: Valerie Jarrett, former Senior Advisor to President Obama, joined the board in December and Greg Peters, Chief Product Officer of Netflix, will be joining the board on March 15, 2018.

2U entered into aglobal, multi-year, exclusive partnership to enhance the future of work and learning with WeWork, a company that provides co-working space and other services to more than 175,000 members in 207 locations across the globe. The multi-dimensional deal includes:

• A perpetual license of Flatiron School's, a wholly owned subsidiary of WeWork Companies, Inc. ("WeWork"), Learn.co technology to 2U;
• Access to any WeWork location around the globe for students enrolled in 2U-powered graduate programs;
• $5 million in scholarships over three years offered by 2U exclusively to WeWork members and employees in 2U-powered graduate programs; and
• A commitment by 2U and WeWork to develop a Future of Learning and Work center in a WeWork location in 2019.

Financial Outlook

Based on information available as of today, 2U is issuing the following guidance for first quarter and full-year of 2018. This guidance assumes foreign exchange rates as of December 31, 2017, including a U.S. Dollar/South African Rand rate of 12.39.

2U expects that of 2018 revenue, approximately 54% should be recognized in the second half of the year. Of second half 2018 revenue, we now expect that approximately 49% will be recognized in the third quarter. Further, we expect to experience meaningful margin variability between periods driven by revenue growth combined with cost seasonality. For full-year 2018, we expect this margin variability to be distributed between the first half and the second half of the year as follows:

• net loss margin of between (19.8)% and (19.1)% for the first half of the year and between (4.1)% and (3.4)% for the second half of the year;
• adjusted net loss margin of between (10.2)% and (9.7)% for the first half of the year and adjusted net income margin of between 5.2% and 5.7% for the second half of the year; and
• adjusted EBITDA (loss) margin of between (4.5)% and (3.9)% for the first half of the year and adjusted EBITDA margin of between 10.9% and 11.3% for the second half of the year.

Note that cost seasonality in the second and fourth quarters typically reduces margins in the first half of each year and improves margins in the second half of each year, so second-half margins should not be viewed as being a run rate for the first half of the following year.

About 2U, Inc. (Nasdaq: TWOU)

2U partners with great colleges and universities to build what we believe is the world's best digital education. Our platform provides a comprehensive fusion of technology, services and data architecture to transform high-quality and rigorous campus-based universities into the best digital versions of themselves. 2U's No Back Row® approach allows qualified students and working professionals around the world to experience a first-rate university education and successful outcomes. To learn more, visit 2U.com.