2U Making Online Education Possible

In a report by Docebo, the worldwide market for self-paced E-Learning market, which was worth $35.6 billion in 2011, is projected to grow 7.6% over the five year period to be worth $51.5 billion by 2016. The report projects that the market for Learning Management Systems (LMS) that support the rapid growth in online education will grow from $40.6 billion in 2013 to $51.2 billion by the year 2016.

2U’s Offerings
Landover, Maryland-based 2U (NASDAQ: TWOU) was founded in 2008 to make online education technology simpler for universities. 2U was founded in 2008 by a group of veterans of the education and technology sectors. The company partners with colleges and universities in helping them create online programs. Their cloud-based platform operates on a software-as-a-service (SaaS) platform that allows universities and students to connect with each other to deliver the online course.

2U’s online learning platform and technology-enabled service provide the infrastructure that educational institutions need to develop online content to attract, enroll, and support their students. Their solutions help these organizations expand their markets and make their on-campus offerings available to a wider population. They work with universities to help them create multimedia instructional content. They also provide other services that are a part of the lifecycle of a higher education program such as facilitating field placements, providing technical support, and providing real-time analytical data into student performance and engagement.

Through their platform, universities can provide instructor-led classes to an online community in sessions that average ten students. The small batch size allows all students to connect with the faculty members in innovative, flexible, and secure ways. Their platform has helped their client universities see full course equivalent enrollments grow 49% annually over the period 2011 through 2013 to 31,338. They have enrolled 8,540 unique individuals as students to their programs.

2U’s Financials
2U’s client list includes the University of Southern California, Georgetown University, the University of North Carolina at Chapel Hill, and the University of California, Berkeley.

2U earns revenues by charging a share of the tuition and fees received by their clients from the students. Their revenues have grown from $29.7 million in 2011 to $83.1 million in 2013. Their losses have increased from $24.9 million to $28.0 million during the same period. Adjusted EBITDA has reduced marginally from a loss of $22.5 million in 2011 to $21.2 million in 2013. For the recently ended quarter, revenues increased 38% to $26.3 million with an adjusted EBITDA loss of $3.8 million compared with a loss of $2.4 million a year ago.

Till recently, 2U was venture funded with $95.9 million in funding from investors including Rethink Education, Redpoint Ventures, Highland Capital Partners, Bessemer Venture Partners, QED Investors, Hillman Ventures, City Light Capital, and Novak Biddle Venture Partners. Earlier this year, they raised $119 million by selling 9.2 million shares at $13 each on the Nasdaq.

The stock is trading at $16.65 with a market capitalization of $669.5 million. It touched a high of $17.58 soon after listing.