Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 20, 2019 | Jun. 30, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | 2U, Inc. | ||
Entity Central Index Key | 1,459,417 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 4,102,056,578 | ||
Entity Common Stock, Shares Outstanding | 58,141,860 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 449,772 | $ 223,370 |
Investments | 25,000 | 0 |
Accounts receivable, net | 32,636 | 14,174 |
Prepaid expenses and other assets | 14,272 | 10,509 |
Total current assets | 521,680 | 248,053 |
Property and equipment, net | 52,299 | 49,055 |
Goodwill | 61,852 | 71,988 |
Amortizable intangible assets, net | 136,605 | 90,761 |
University payments and other assets, non-current | 34,918 | 22,205 |
Total assets | 807,354 | 482,062 |
Current liabilities | ||
Accounts payable and accrued expenses | 27,647 | 22,629 |
Accrued compensation and related benefits | 23,001 | 19,017 |
Deferred revenue | 8,345 | 7,024 |
Other current liabilities | 9,487 | 9,330 |
Total current liabilities | 68,480 | 58,000 |
Deferred government grant obligations | 3,500 | 3,500 |
Deferred tax liabilities, net | 6,949 | 10,087 |
Lease-related and other liabilities, non-current | 23,416 | 22,643 |
Total liabilities | 102,345 | 94,230 |
Commitments and contingencies (Note 6) | ||
Stockholders’ equity | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued | 0 | 0 |
Common stock, $0.001 par value, 200,000,000 shares authorized, 57,968,493 shares issued and outstanding as of December 31, 2018; 52,505,856 shares issued and outstanding as of December 31, 2017 | 58 | 53 |
Additional paid-in capital | 957,631 | 588,289 |
Accumulated deficit | (244,166) | (205,836) |
Accumulated other comprehensive income (loss) | (8,514) | 5,326 |
Total stockholders’ equity | 705,009 | 387,832 |
Total liabilities and stockholders’ equity | $ 807,354 | $ 482,062 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 57,968,493 | 52,505,856 |
Common stock, shares outstanding | 57,968,493 | 52,505,856 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | |||
Revenue | $ 411,769 | $ 286,752 | $ 205,864 |
Costs and expenses | |||
Curriculum and teaching | 23,290 | 6,609 | 0 |
Servicing and support | 67,203 | 50,767 | 40,982 |
Technology and content development | 63,812 | 45,926 | 33,283 |
Marketing and sales | 221,015 | 150,923 | 106,610 |
General and administrative | 82,989 | 62,665 | 46,021 |
Total costs and expenses | 458,309 | 316,890 | 226,896 |
Loss from operations | (46,540) | (30,138) | (21,032) |
Interest income | 5,173 | 371 | 383 |
Interest expense | (108) | (87) | (35) |
Other expense, net | (1,722) | (866) | 0 |
Loss before income taxes | (43,197) | (30,720) | (20,684) |
Income tax benefit | 4,867 | 1,297 | 0 |
Net loss | $ (38,330) | $ (29,423) | $ (20,684) |
Net loss per share, basic and diluted (in dollars per share) | $ (0.69) | $ (0.60) | $ (0.44) |
Weighted-average shares used in computing net loss per share, basic and diluted (in shares) | 55,833,492 | 49,062,611 | 46,609,751 |
Other comprehensive loss | |||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | $ (13,840) | $ 5,326 | $ 0 |
Comprehensive loss | $ (52,170) | $ (24,097) | $ (20,684) |
Consolidated Statements of Op_2
Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Other comprehensive loss | |||
Foreign currency translation adjustments, tax | $ 0 | $ 0 | $ 0 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss |
Balance at Dec. 31, 2015 | $ 195,789 | $ 46 | $ 351,324 | $ (155,581) | $ 0 |
Balance (in shares) at Dec. 31, 2015 | 45,776,455 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Exercise of stock options | 4,859 | $ 1 | 4,858 | ||
Exercise of stock options (in shares) | 1,011,153 | ||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (382) | (382) | |||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 351,319 | ||||
Issuance of common stock award | (168) | (168) | |||
Issuance of common stock award (in shares) | 12,708 | ||||
Stock-based compensation expense | 15,823 | 15,823 | |||
Net loss | (20,684) | (20,684) | |||
Foreign currency translation adjustment | 0 | ||||
Balance at Dec. 31, 2016 | 195,237 | $ 47 | 371,455 | (176,265) | 0 |
Balance (in shares) at Dec. 31, 2016 | 47,151,635 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative-effect of accounting change (Note 2) | 148 | (148) | |||
Adjusted balance | 195,237 | $ 47 | 371,603 | (176,413) | 0 |
Exercise of stock options | 6,615 | $ 1 | 6,614 | ||
Exercise of stock options (in shares) | 846,821 | ||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (1,309) | $ 1 | (1,310) | ||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 459,900 | ||||
Issuance of common stock award | 189,456 | $ 4 | 189,452 | ||
Issuance of common stock award (in shares) | 4,047,500 | ||||
Stock-based compensation expense | 21,930 | 21,930 | |||
Net loss | (29,423) | (29,423) | |||
Foreign currency translation adjustment | 5,326 | 5,326 | |||
Balance at Dec. 31, 2017 | $ 387,832 | $ 53 | 588,289 | (205,836) | 5,326 |
Balance (in shares) at Dec. 31, 2017 | 52,505,856 | 52,505,856 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Exercise of stock options | $ 7,366 | $ 1 | 7,365 | ||
Exercise of stock options (in shares) | 1,012,473 | ||||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings | (3,451) | (3,451) | |||
Issuance of common stock in connection with settlement of restricted stock units, net of withholdings (in shares) | 553,159 | ||||
Issuance of common stock award | 330,901 | $ 4 | 330,897 | ||
Issuance of common stock award (in shares) | 3,833,334 | ||||
Issuance of common stock in connection with employee stock purchase plan | 3,121 | $ 3,100 | 3,121 | ||
Issuance of common stock in connection with employee stock purchase plan (in shares) | 63,671 | ||||
Stock-based compensation expense | 31,410 | 31,410 | |||
Net loss | (38,330) | (38,330) | |||
Foreign currency translation adjustment | (13,840) | (13,840) | |||
Balance at Dec. 31, 2018 | $ 705,009 | $ 58 | $ 957,631 | $ (244,166) | $ (8,514) |
Balance (in shares) at Dec. 31, 2018 | 57,968,493 | 57,968,493 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities | |||
Net loss | $ (38,330) | $ (29,423) | $ (20,684) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||
Depreciation and amortization expense | 32,785 | 19,624 | 9,750 |
Stock-based compensation expense | 31,410 | 21,930 | 15,823 |
Changes in operating assets and liabilities: | |||
Accounts receivable, net | (18,497) | (5,634) | (6,885) |
Prepaid expenses and other assets | (4,932) | 1,549 | (1,090) |
Accounts payable and accrued expenses | 4,724 | 3,504 | (2,459) |
Accrued compensation and related benefits | 4,046 | 2,504 | 3,086 |
Deferred revenue | 1,527 | 1,661 | 528 |
Payments to university clients | (11,322) | (13,239) | 2,234 |
Other liabilities, net | (6,243) | 4,763 | 4,907 |
Other | 1,712 | 867 | 0 |
Net cash (used in) provided by operating activities | (3,120) | 8,106 | 5,210 |
Cash flows from investing activities | |||
Purchase of a business, net of cash acquired | (97,102) | 0 | |
Purchases of property and equipment | (11,996) | (27,316) | (7,648) |
Additions of amortizable intangible assets | (65,190) | (23,823) | (16,728) |
Purchase of investments | (25,000) | 0 | 0 |
Advances made to university clients | (300) | (1,950) | 0 |
Advances repaid by university clients | 25 | 817 | 0 |
Other | 0 | 0 | (142) |
Net cash used in investing activities | (102,461) | (149,374) | (24,518) |
Cash flows from financing activities | |||
Proceeds from issuance of common stock, net of offering costs | 330,901 | 189,463 | 0 |
Proceeds from exercise of stock options | 7,366 | 6,615 | 4,859 |
Proceeds from Employee Stock Purchase Plan share purchases | 3,121 | 0 | 0 |
Proceeds from debt | 0 | 3,500 | 0 |
Payments on debt | 0 | (1,517) | 0 |
Tax withholding payments associated with settlement of restricted stock units | (3,451) | (1,309) | (378) |
Payments for acquisition of amortizable intangible assets | (4,900) | 0 | 0 |
Other | 0 | 0 | (172) |
Net cash provided by financing activities | 333,037 | 196,752 | 4,309 |
Effect of exchange rate changes on cash | (1,054) | (844) | 0 |
Net increase (decrease) in cash and cash equivalents | 226,402 | 54,640 | (14,999) |
Cash and cash equivalents, beginning of period | 223,370 | 168,730 | 183,729 |
Cash and cash equivalents, end of period | $ 449,772 | $ 223,370 | $ 168,730 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization 2U, Inc. (together with its subsidiaries, the “Company”) is a leading education technology company that well-recognized nonprofit colleges and universities trust to bring them into the digital age. The Company’s comprehensive platform of tightly integrated technology and services provides the digital infrastructure universities need to attract, enroll, educate and support students at scale. With the Company’s platform, students can pursue their education anytime, anywhere, without quitting their jobs or moving; and university clients can improve educational outcomes, skills attainment and career prospects for a greater number of students. On July 1, 2017, the Company completed its acquisition of all of the outstanding equity interests of Get Educated International Proprietary Limited (“GetSmarter”). As a result of the acquisition of GetSmarter, the Company now manages its operations in two operating segments, which are also its two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals around the world through relationships with leading universities in the United States, the United Kingdom and South Africa. Refer to Note 13 for further information on the Company’s segments. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the assets, liabilities, results of operations and cash flows of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. Investments The Company’s investments within current assets on the consolidated balance sheets relate to certificates of deposit with original maturities between three months and one year. As of December 31, 2018 , the Company had a $25.0 million certificate of deposit included in investments that qualifies as a Level 1 fair value measurement asset and was stated at cost, which approximates fair value. Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments using the modified retrospective transition method and has concluded that doing so did not have a material impact on the amount and timing of either its revenue or costs. As part of its assessment, the Company completed reviews of its contracts and evaluated its costs, including costs of obtaining contracts with its university clients and costs associated with content development. Certain of these contract and content costs are capitalized under the new standard. The adoption of ASU 2014-09 did not have a material impact as of January 1, 2018, and no cumulative adjustment was recorded. Further, the amounts reported as of December 31, 2018 on the consolidated balance sheets and the results of operations for the year ended December 31, 2018 reported on the consolidated statements of operations and comprehensive loss would not have been materially different than under legacy U.S. GAAP (i.e., Topic 605). The Company generates substantially all of its revenue from contractual arrangements, with either its university clients or students, to provide a comprehensive platform of tightly integrated technology and technology-enabled services that support its graduate programs and short courses. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Graduate Program Segment derives revenue primarily from contractually specified percentages of the amounts the Company’s university clients receive from their students in 2U-enabled graduate programs for tuition and fees, less credit card fees and other specified charges the Company has agreed to exclude in certain university contracts. The Company’s contracts with university clients in this segment typically have 10 to 15 year initial terms and have a single performance obligation, as the promises to provide a platform of tightly integrated technology and services that university clients need to attract, enroll, educate and support students are not distinct within the context of the contracts. The single performance obligation is delivered as the university clients receive and consume benefits, which occurs ratably over a series of academic terms. The amounts received from university clients over the term of the arrangement are variable in nature in that they are dependent upon the number of students that are enrolled in the program within each academic term. These amounts are allocated to and are recognized ratably over the related academic term, defined as the period beginning on the first day of classes through the last. Revenue is recognized net of an allowance, which is established for the Company’s expected obligation to refund tuition and fees to university clients. The Short Course Segment derives revenue directly from contracts with students for the tuition and fees paid to enroll in and progress through the Company’s short courses, which run between six and 16 weeks. The Company’s contracts with students in this segment have multiple performance obligations as the delivery of the short course and student support services are each considered distinct performance obligations. These performance obligations are each satisfied ratably over the same short course presentation period, which is defined as the period beginning on the first day of the course through the last. The Company recognizes the gross proceeds received from the students and shares contractually specified percentages with its university clients, for providing short course content and certification, which are recognized as curriculum and teaching costs on the Company’s consolidated statements of operations and comprehensive loss. The Company’s contracts with university clients in this segment are typically shorter and less restrictive than the Company’s contracts with university clients in the Graduate Program Segment. The Company does not disclose the value of unsatisfied performance obligations for the Graduate Program Segment because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company does not disclose the value of unsatisfied performance obligations for the Short Course Segment because the performance obligation is part of a contract that has an original duration of less than one year. Contract Acquisition Costs The Company pays commissions to certain of its employees to obtain contracts with university clients in the Graduate Program Segment. These costs are capitalized and recorded on a contract-by-contract basis and amortized using the straight-line method over the expected life, which is generally the length of the contract. With respect to contract acquisition costs in the Short Course Segment, the Company has elected to apply the practical expedient in ASC Topic 606 to expense these costs as incurred, as the terms of contracts with students in this segment are less than one year. Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients at either execution of a contract or at the extension of a contract in exchange for various marketing and other rights. Generally, these amounts are capitalized and amortized as contra revenue over the life of the contract, commencing on the later of when payment is due or when contract revenue recognition begins. Accounts Receivable, Contract Assets and Liabilities Balance sheet items related to contracts consist of accounts receivable, net and deferred revenue on the Company’s consolidated balance sheets. Included in accounts receivable, net are trade accounts receivable, which are comprised of billed and unbilled revenue. Accounts receivable, net is stated at net realizable value, and the Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. The Company’s estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable, net. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. The Company recognizes unbilled revenue when revenue recognition occurs in advance of billings. Unbilled revenue is recognized in the Graduate Program Segment because billings to university clients do not occur until after the academic term has commenced and final enrollment information is available. The Company’s unbilled revenue represents contract assets. Deferred revenue represents the excess of amounts billed or received as compared to amounts recognized in revenue on the consolidated statements of operations and comprehensive loss as of the end of the reporting period, and such amounts are reflected as a current liability on the Company’s consolidated balance sheets. The Company generally receives payments for its share of tuition and fees from graduate program university clients early in each academic term and from short course students, either in full upon registration for the course or in full before the end of the course based on a payment plan, prior to completion of the service period. These payments are recorded as deferred revenue until the services are delivered or until the Company’s obligations are otherwise met, at which time revenue is recognized. Business Combinations The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s consolidated financial statements from the acquisition date. Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash is held at financial institutions that management believes to be of high credit quality. The Company’s bank accounts exceed federally insured limits at times. The Company has not experienced any losses on cash to date. The Company maintains an allowance for doubtful accounts, if needed, based on collection history. Cash and Cash Equivalents Cash and cash equivalents consist of bank checking accounts, money market accounts, investments in certificates of deposit that have an original maturity of three months or less and highly liquid marketable securities with maturities at the time of purchase of three months or less. Fair Value Measurements The carrying amounts of certain assets and liabilities, including cash and cash equivalents, accounts receivable, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability. U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 —Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 —Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Advances to University Clients The Company is contractually obligated to pay advances to certain of its university clients in order to fund start-up expenses of the program on behalf of the university client. Advances to university clients are stated at realizable value. Advances are repaid to the Company on terms as required in the respective agreements. The Company recognizes imputed interest income on these advance payments when the related amount of imputed interest is deemed significant. For the years ended December 31, 2018 , 2017 and 2016 , the Company did not incur a material amount of imputed interest income. Long-Lived Assets Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Expenditures for major additions, construction and improvements are capitalized. Depreciation and amortization is expensed using the straight-line method over the estimated useful lives of the related assets, which range from three to five years for computer hardware and five to seven years for furniture and office equipment. Leasehold improvements are depreciated on a straight-line basis over the lesser of the remaining term of the leased facility or the estimated useful life of the improvement, which generally ranges from four to approximately 11 years . Useful lives of significant assets are periodically reviewed and adjusted prospectively to reflect the Company’s current estimates of the respective assets’ expected utility. Repair and maintenance costs are expensed as incurred. Amortizable Intangible Assets Acquired Intangible Assets. The Company capitalizes purchased intangible assets, such as software, websites and domains, and amortizes them on a straight-line basis over their estimated useful life. Historically, the Company has assessed the useful lives of these acquired intangible assets to be between three and ten years . Capitalized Technology. Capitalized technology includes certain purchased software and technology licenses, direct third-party costs, and internal payroll and payroll-related costs used in the creation of our internal-use software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of designing the application, coding, integrating the Company’s and the university’s networks and systems, and the testing of the software. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which the Company expects to benefit from the use of that software. Once the software is placed in service, these costs are amortized using the straight-line method over the estimated useful life of the software, which is generally three to five years. Capitalized Content Development. The Company develops content for each offering on a course-by-course basis in conjunction with the faculty for each graduate program and short course. University clients and their faculty generally provide materials used for the course in an on-campus setting, including curricula, case studies and other reading materials, and presentations. The Company is responsible for the conversion of the materials into a format suitable for delivery through its online learning platform, including all expenses associated with this effort. With regard to the Graduate Program Segment, the development of content is part of the Company’s single performance obligation and is considered a contract fulfillment cost. The content development costs that qualify for capitalization are third-party direct costs, such as videography, editing and other services associated with creating digital content. Additionally, the Company capitalizes internal payroll and payroll-related costs incurred to create and produce videos and other digital content utilized in the university clients’ offerings for delivery via the Company’s online learning platform. Capitalization ends when content has been fully developed by both the Company and the university client, at which time amortization of the capitalized content development costs begins. The capitalized costs for each offering are recorded on a course-by-course basis and included in capitalized content costs in amortizable intangible assets, net on the Company’s consolidated balance sheets. These costs are amortized using the straight-line method over the estimated useful life of the respective course, which is generally four to five years . The estimated useful life corresponds with the planned curriculum refresh rate. This refresh rate is consistent with expected curriculum refresh rates as cited by faculty members for similar on-campus offerings. Evaluation of Long-Lived Assets The Company reviews long-lived assets, which consist of property and equipment, capitalized technology costs, capitalized content development costs and acquired finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. In order to assess the recoverability of the capitalized technology and content development costs, the costs are grouped by the lowest level of independent cash flows (i.e., by degree program or short course, for content development costs). Recoverability of a long-lived asset is measured by a comparison of the carrying value of an asset or asset group to the future undiscounted net cash flows expected to be generated by that asset or asset group. If such assets are not recoverable, the impairment to be recognized is measured by the amount by which the carrying value of an asset exceeds the estimated fair value (discounted cash flow) of the asset or asset group. The Company’s impairment analysis is based upon cumulative results and forecasted performance. Non-Cash Long-Lived Asset Additions During the year ended December 31, 2018 , the Company had capital asset additions of $87.4 million in property and equipment and capitalized technology and content development, of which $5.3 million consisted of non-cash capital expenditures, primarily related to the acquisition of certain long-lived assets for which a liability was accrued. Due to extended payment terms associated with the timing of cash capital expenditures made more than 90 days after the date of purchase, an additional $4.9 million was classified as cash flows from financing activities in the consolidated statement of cash flows for the year ended December 31, 2018 . During the year ended December 31, 2017 , the Company had capital asset additions of $62.3 million in property and equipment and capitalized technology and content development, of which $11.2 million consisted of non-cash capital expenditures, primarily related to landlord funded leasehold improvements. Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of the business acquired. The Company’s goodwill balance relates to the acquisition of GetSmarter in 2017. The Company reviews goodwill at least annually, as of October 1. Between annual tests, goodwill is reviewed for possible impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the two-step goodwill impairment review. The Company will review goodwill for impairment using the two-step process if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon the completion of the two-step process, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the goodwill recorded. Employee Benefits The Company offers a variety of benefits to its employees (e.g., healthcare, gym memberships and tuition reimbursement). The Company accounts for costs related to providing employee benefits as incurred, unless there is a service requirement, in which case, such costs are recognized over the service commitment period. Government Grants Government grants awarded to the Company in the form of forgivable loans are recorded as “deferred government grant obligations” within long-term liabilities on the consolidated balance sheets until all contingencies are resolved and the grant is determined to be realized. Income Taxes Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements. Under this method, the deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of the assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on the deferred tax assets and liabilities is recognized in earnings in the period when the new rate is enacted. Deferred tax assets are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company considers all positive and negative evidence relating to the realization of the deferred tax assets in assessing the need for a valuation allowance. The Company currently maintains a full valuation allowance against deferred tax assets in the U.S. and certain entities in the foreign jurisdictions. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating tax positions. Step one, recognition, occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Step two, measurement, determines the amount of benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur if the Company subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations and comprehensive loss. Marketing and Sales Costs The majority of the marketing and sales costs incurred by the Company are directly related to acquiring students for its university clients’ graduate programs, with lesser amounts related to acquiring students for its short course and marketing and advertising efforts related to the Company’s own brand. For the years ended December 31, 2018 , 2017 and 2016 , costs related to the Company’s marketing and advertising efforts of its own brand were not material. All such costs are expensed as incurred and reported in marketing and sales expense on the Company’s consolidated statements of operations and comprehensive loss. As of December 31, 2018 and 2017 , the Company had $10.3 million and $11.7 million , respectively, of accrued marketing costs included in accounts payable and accrued expenses on the Company’s consolidated balance sheets. Leases The Company leases all of its office facilities and enters into various other lease agreements in conducting its business. At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease. Additionally, many of the Company’s lease agreements contain renewal options, tenant improvement allowances, rent holiday and/or rent escalation clauses. The Company defers tenant improvement allowances and amortizes such balances as a reduction of rent expense over the term of the lease. When rent holidays or rent escalations are included in a lease agreement, the Company records a deferred rent asset or liability on the consolidated financial statements, and records these items in rent expense evenly over the term of the lease. The Company is also required to make additional payments under operating lease terms for taxes, insurance and other operating expenses incurred during the operating lease period; such items are expensed as incurred. Rental deposits are included as other assets on the consolidated financial statements for lease agreements that require payments in advance or deposits held for security that are refundable, less any damages, at the end of the respective lease. Stock-Based Compensation The Company accounts for stock-based compensation awards based on the fair value of the award as of the grant date. For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense on a straight-line basis over the awards’ requisite service period. Effective April 1, 2017, expected volatility is based on the historical volatilities of the Company’s common stock. Prior to January 1, 2017, the Company adjusted stock-based compensation expense for estimated forfeitures of stock-based awards. As described in the “Recent Accounting Pronouncements” section of this Note, beginning on January 1, 2017, the Company accounts for forfeitures (and the impact on stock-based compensation expense) as they occur. For awards subject to both performance and service-based vesting conditions, the Company recognizes stock-based compensation expense using an accelerated recognition method when it is probable that the performance condition will be achieved. Foreign Currency Translation For the portion of the Company’s non-U.S. business where the local currency is the functional currency, operating results are translated into U.S. dollars using the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of stockholder’s equity and comprehensive loss. For any transaction that is in a currency different from the entity’s functional currency, the Company records a gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) as other income (expense), net on the consolidated statements of operations and comprehensive loss. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which requires customers in cloud computing arrangements that are service contracts to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU as of July 1, 2018 under the prospective method. During the six months ended December 31, 2018 since the adoption of this ASU, the Company capitalized $0.4 million of implementation costs incurred in its cloud computing arrangements that are service contracts. In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements , which clarifies and corrects unintended applications of guidance, and makes improvements to several Accounting Standards Codification topics. The applicable amendments in this ASU will be effective for the Company in annual periods beginning after December 15, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share-based payments to nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company expects that the adoption of this standard will impact its consolidated financial statements and related disclosures only to the extent that a future goodwill impairment test results in the recognition of an impairment charge. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU were effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018. Adoption of this standard did not have a material impact on the Company’s consolidated statements of cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The ASU simplifies various aspects related to the accounting and presentation of share-based payments. The guidance also allows employers to withhold shares to satisfy minimum statutory withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. Additionally, the guidance stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax withholding purposes should be classified as a financing activity on the statement of cash flows, and allows companies to elect an accounting policy to either estimate the share-based award forfeitures (and expense) or account for forfeitures (and expense) as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017. In connection with the adoption of this standard, the Company elected to no longer apply an estimated forfeiture rate and will instead account for forfeitures as they occur. Accordingly, the Company applied the modified retrospective adoption approach, which resulted in a $0.1 million cumulative-effect reduction to retained earnings with an offset to additional paid-in-capital. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and the Company will adopt this ASU in the first quar |
Business Combination
Business Combination | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Business Combination | Business Combination On July 1, 2017, the Company, through a wholly owned subsidiary (“2U South Africa”), completed its acquisition of all of the outstanding equity interests of Get Educated International Proprietary Limited (“GetSmarter”) pursuant to a Share Sale Agreement, dated as of May 1, 2017 (the “Share Sale Agreement”), as amended by an addendum, dated as of June 29, 2017, for a net purchase price of $98.7 million in cash. In addition, 2U South Africa agreed to pay a potential earn out payment of up to $20.0 million , subject to the achievement of certain financial milestones in calendar years 2017 and 2018. As of December 31, 2018 , the financial milestones were not met and no earn out payment was due. The valuation of the assets acquired and liabilities assumed (i.e., purchase price allocation) was completed as of December 31, 2017. The Company has completed its valuation of the assets acquired and liabilities assumed of GetSmarter. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition: Estimated Average Purchase Price (in thousands) Cash and cash equivalents $ 1,584 Current assets 3,676 Property and equipment, net 479 Amortizable intangible assets: Capitalized technology 3 2,800 Capitalized content development 4 5,000 University client relationships 9 28,000 Trade names and domain names 10 8,900 Goodwill 68,172 Current liabilities (9,031 ) Non-current liabilities (10,894 ) $ 98,686 The unaudited pro forma combined financial information below is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combination occurred as of the date indicated or what the results would be for any future periods. The following table presents the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share for the year ended December 31, 2017 as if the acquisition of GetSmarter had occurred on January 1, 2017: Year Ended Year Ended (in thousands, except per share amounts) Pro forma revenue $ 294,446 Pro forma net loss (37,267 ) Pro forma net loss per share, basic and diluted $ (0.76 ) |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment, Net | |
Property and Equipment, Net | Property and Equipment, Net Property and equipment, net consisted of the following as of: December 31, December 31, (in thousands) Computer hardware $ 5,114 $ 2,663 Furniture and office equipment 14,888 11,210 Leasehold improvements 45,158 42,086 Leasehold improvements in process 1,940 194 Total 67,100 56,153 Accumulated depreciation and amortization (14,801 ) (7,098 ) Property and equipment, net $ 52,299 $ 49,055 Depreciation expense of property and equipment was $8.9 million , $5.5 million and $1.7 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. |
Goodwill and Amortizable Intang
Goodwill and Amortizable Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Amortizable Intangible Assets | Goodwill and Amortizable Intangible Assets The table below summarizes the changes in the carrying amount of goodwill by reportable segment: Graduate Program Segment Short Course Segment Total (in thousands) Balance as of December 31, 2016 $ — $ — $ — Acquisition of GetSmarter — 68,172 68,172 Foreign currency translation adjustments — 3,816 3,816 Balance as of December 31, 2017 — 71,988 71,988 Foreign currency translation adjustments — (10,136 ) (10,136 ) Balance as of December 31, 2018 $ — $ 61,852 $ 61,852 Amortizable intangible assets consisted of the following as of: December 31, 2018 December 31, 2017 Estimated Average Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Capitalized technology 3-5 $ 68,291 $ (16,945 ) $ 51,346 $ 27,108 $ (9,486 ) $ 17,622 Capitalized content development 4-5 79,725 (31,662 ) 48,063 55,872 (21,417 ) 34,455 University client relationships 9 25,616 (4,269 ) 21,347 29,443 (1,636 ) 27,807 Trade names and domain names 8-10 18,793 (2,944 ) 15,849 12,119 (1,242 ) 10,877 Total amortizable intangible assets, net $ 192,425 $ (55,820 ) $ 136,605 $ 124,542 $ (33,781 ) $ 90,761 The amounts presented above include $40.3 million and $15.6 million of in process capitalized technology and content development as of December 31, 2018 and December 31, 2017 , respectively. During 2018, the Company acquired certain third-party technologies to enhance the Company’s platform, which is referred to as the 2U Operating System, or 2UOS, for aggregate consideration of $9.5 million . These amounts are classified as capitalized technology within amortizable intangible assets, net, on the Company’s consolidated balance sheets. Additionally, during the same period the Company purchased several active websites and additional domains for consideration of $7.6 million to support the marketing efforts of certain graduate programs. As of December 31, 2018 , these acquired assets are classified in trade names and domain names within amortizable intangible assets, net, on the Company’s consolidated balance sheets. In the first quarter of 2018, the Company entered into an agreement with WeWork Companies, Inc. (“WeWork”) and Flatiron School, Inc., a wholly owned subsidiary of WeWork, to purchase a perpetual source code license for the Learn.co platform and certain integration software development services for $14.5 million . As of December 31, 2018 , the Company has recorded capitalized technology of $13.2 million related to this agreement in amortizable intangible assets, net on the Company’s consolidated balance sheets. The remaining $1.3 million is payable under the agreement in connection with the performance of certain software development services. In addition, the Company entered into a multi-year agreement to purchase Global Access Memberships to WeWork spaces around the world that will be provided to students in 2U-powered online graduate programs as well as to faculty and lead convenors of its offerings, an agreement to offer $5 million in scholarships to certain WeWork community members and employees, and collaborate on additional mutually agreed upon projects. The Company recorded amortization expense related to amortizable intangible assets of $23.9 million , $14.0 million and $8.0 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. As of December 31, 2018 , the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands): 2019 $ 25,244 2020 21,814 2021 16,420 2022 12,405 2023 7,690 Thereafter 12,730 Total $ 96,303 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Contingencies From time to time, the Company may become involved in legal proceedings or be subject to claims (e.g., related to regulatory, employment or indirect tax matters) in the ordinary course of its business. The Company is not presently involved in any legal proceeding or other contingency that, if determined adversely to it, would individually or in the aggregate have a material adverse effect on its business, operating results, financial condition or cash flows. Accordingly, the Company does not believe that there is a reasonable possibility that a material loss exceeding amounts already recognized may have been incurred as of the date of the balance sheets presented herein. Marketing and Sales Commitments Certain of the agreements entered into between the Company and its university clients in the Graduate Program Segment require the Company to commit to meet certain staffing and spending investment thresholds related to marketing and sales activities. In addition, certain of the agreements in the Graduate Program Segment require the Company to invest up to agreed upon levels in marketing the programs to achieve specified program performance. The Company believes it is currently in compliance with all such commitments. Future Minimum Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients in exchange for contract extensions and various marketing and other rights. As of December 31, 2018 , the future minimum payments due to university clients were as follows (in thousands): 2019 $ 10,125 2020 625 2021 625 2022 625 2023 625 Thereafter 3,775 Total future minimum payments to university clients $ 16,400 Contingent Payments The Company has entered into an agreement with one university client in the Graduate Program Segment under which the Company would be obligated to make future minimum payments in the event that certain program metrics are not achieved. Due to the dependency of these calculations on future program performance, the timing and amounts of any associated contingent payments cannot be reasonably estimated at this time, and have therefore been excluded from the table above. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2018 | |
Leases, Operating [Abstract] | |
Leases | Leases The Company leases office facilities under non-cancelable operating leases in Maryland, New York, California, Colorado, North Carolina, Virginia, Hong Kong, South Africa and the United Kingdom. The Company also leases office equipment under non-cancelable leases. As of December 31, 2018 , the future minimum lease payments were as follows (in thousands): 2019 $ 12,941 2020 14,020 2021 13,900 2022 13,633 2023 13,959 Thereafter 68,347 Total future minimum lease payments $ 136,800 The future minimum lease payments due under non-cancelable operating lease arrangements contain fixed rent increases over the term of the lease. Rent expense on these operating leases is recognized over the term of the lease on a straight-line basis. The excess of rent expense over actual lease payments is reported in non-current liabilities on the accompanying consolidated balance sheets. The deferred rent liability related to these leases totaled $8.9 million and $6.5 million as of December 31, 2018 and 2017 , respectively. The Company does not have any subleases as of December 31, 2018 . Total rent expense from non-cancelable operating lease agreements (net of sublease income of zero , zero and $0.3 million ) was $9.3 million , $8.5 million and $5.8 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. |
Debt
Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Debt Lines of Credit On December 31, 2013, the Company entered into a credit agreement with Comerica Bank (“Comerica”) for a revolving line of credit with an aggregate commitment not to exceed $37.0 million . On December 31, 2015, the Company amended this credit agreement to reduce the aggregate amount it may borrow to $25.0 million . In June 2017, the Company and Comerica amended this credit agreement pursuant to which, among other things, Comerica consented to the Company’s acquisition of GetSmarter and the Company’s formation of certain subsidiaries in connection therewith. On December 31, 2018, the Company amended this credit agreement to extend the maturity date through March 31, 2019. No amounts were outstanding under this credit agreement as of December 31, 2018 or 2017 . The Company intends to extend this agreement under comparable terms, prior to expiration. Under this revolving line of credit, the Company has the option of borrowing funds subject to (i) a base rate , which is equal to 1.5% plus the greater of Comerica’s prime rate, the federal funds rate plus 1% or the 30-day LIBOR plus 1% , or (ii) LIBOR plus 2.5% . For amounts borrowed under the base rate, the Company may make interest-only payments quarterly, and may prepay such amounts with no penalty. For amounts borrowed under LIBOR, the Company makes interest-only payments in periods of one, two and three months and will be subject to a prepayment penalty if such borrowed amounts are repaid before the end of the interest period. Borrowings under the line of credit are collateralized by substantially all of the Company’s assets. The availability of borrowings under this credit line is subject to compliance with reporting and financial covenants, including, among other things, that the Company achieves specified minimum three-month trailing revenue levels during the term of the agreement and specified minimum six-month trailing profitability levels for some university client programs, measured quarterly. In addition, the Company is required to maintain a minimum adjusted quick ratio, which measures short-term liquidity, of at least 1.10 to 1.00. As of December 31, 2018 and 2017 , the Company’s adjusted quick ratio was 12.38 and 5.44 , respectively. The covenants under the line of credit also place limitations on the Company’s ability to incur additional indebtedness or to prepay permitted indebtedness, grant liens on or security interests in its assets, carry out mergers and acquisitions, dispose of assets, declare, make or pay dividends, make capital expenditures in excess of specified amounts, make investments, loans or advances, enter into transactions with affiliates, amend or modify the terms of material contracts, or change its fiscal year. If the Company is not in compliance with the covenants under the line of credit, after any opportunity to cure such non-compliance, or it otherwise experiences an event of default under the line of credit, the lenders may require repayment in full of all principal and interest outstanding. The Company is currently in compliance with all such covenants. Certain of the Company’s operating lease agreements require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of December 31, 2018 , the Company has entered into standby letters of credit totaling $11.5 million as security deposits for the applicable leased facilities. Additionally, in June 2017, the Company entered into standby letters of credit totaling $3.5 million in connection with two government grants, as described later in this Note. These letters of credit reduced the aggregate amount the Company may borrow under its revolving line of credit to $10.0 million . The Company’s Short Course Segment had $1.9 million of revolving debt facilities bearing interest at a rate of 10.25% , with an original maturity date of December 31, 2017. These facilities were extended with a borrowing base of $1.3 million and matured on March 31, 2018. As of December 31, 2018 , there were no amounts outstanding under these facilities. Government Grants On June 22, 2017, the Company executed a conditional loan agreement and received financing from Prince George’s County, Maryland that provides for a grant in the form of a forgivable loan of $1.5 million . The financing was secured by a letter of credit pursuant to the Company’s line of credit with Comerica. The conditional loan obligation is recorded as “deferred government grant obligations” on the consolidated balance sheets. The proceeds from this loan are to be used in connection with the relocation of 2U’s headquarters, leasehold improvements thereto and other purposes. The loan has a maturity date of June 22, 2027, and bears interest at a rate of 3% per annum. If 2U does not employ at least 650 employees at its Lanham headquarters at any time during the term of the loan period or otherwise defaults on the loan, the entire principal balance, plus accrued interest, will become due and payable. If 2U does not employ at least 1,300 employees at its Lanham headquarters by January 1, 2020, the Company will be required to repay a prorated portion of the loan ( $2,252 per employee, for every employee below 1,300 ), plus interest. During the year ended December 31, 2018 , the Company did not incur a material amount of interest expense on this forgivable loan. On June 27, 2017, 2U Harkins Road LLC (a wholly owned subsidiary of the Company) executed a loan agreement and received financing from the Department of Commerce (a principal department of the State of Maryland) that provides for a grant in the form of a forgivable loan of $2.0 million . The financing was secured by a letter of credit pursuant to the Company’s line of credit with Comerica. The conditional loan obligation is recorded as “deferred government grant obligations” on the consolidated balance sheets. The proceeds from this loan are to be used in connection with the relocation of 2U’s headquarters, leasehold improvements thereto and other purposes. The loan has a maturity date of December 31, 2026, and bears interest at a rate of 3% per annum. If 2U does not employ at least 650 employees at its Lanham headquarters at any time during the term of the loan period or otherwise defaults on the loan, the entire principal balance, plus accrued interest, will become due and payable. If 2U does not employ at least 1,600 employees at its Lanham headquarters by December 31, 2020, and at each December 31 thereafter through 2026, the Company will be required to repay a prorated portion of the loan ( $2,105 per employee, for every employee below 1,600 ), plus interest. During the year ended December 31, 2018 , the Company did not incur a material amount of interest expense on this forgivable loan. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table presents the components of loss before income taxes: Year Ended December 31, 2018 2017 2016 (in thousands) Loss before income taxes: United States $ (33,339 ) $ (25,002 ) $ (20,684 ) Foreign (9,858 ) (5,718 ) — Total $ (43,197 ) $ (30,720 ) $ (20,684 ) For the year ended December 31, 2018 , the Company had a tax benefit of $4.9 million , which was solely related to a deferred tax benefit. For the year ended December 31, 2017 , the Company had a tax benefit of $1.3 million , which was solely related to a deferred tax benefit. For the year ended December 31, 2016 , the Company did not have a current or deferred tax provision or benefit. A reconciliation between the Company’s statutory federal income tax rate and the effective tax rate is presented below: Year Ended December 31, 2018 2017 2016 U.S. statutory federal income tax rate 21.0 % 35.0 % 35.0 % Increase (decrease) resulting from: U.S. state income taxes, net of federal benefits 0.9 9.9 5.5 Foreign tax rate differential 1.1 (1.4 ) — Non-deductible expenses (2.6 ) (1.8 ) (1.5 ) Stock-based compensation 30.0 40.9 (2.9 ) Change in valuation allowance (39.3 ) 29.8 (36.6 ) Change in tax rate (0.1 ) (108.0 ) — Other 0.3 (0.2 ) 0.5 Effective tax rate 11.3 % 4.2 % 0.0 % The significant components of the Company’s deferred tax assets and liabilities are as follows: As of December 31, 2018 2017 (in thousands) Deferred tax assets: Accrued expenses and other $ 2,580 $ 2,395 Accrued compensation and related benefits 3,395 3,524 Rebate reserve 5 20 Deferred rent 6,388 6,924 Stock-based compensation 8,279 6,874 Deferred income 257 191 Foreign net operating loss carryforwards 1,543 1,704 U.S. net operating loss carryforwards 96,809 69,425 Valuation allowance (88,061 ) (71,101 ) Total deferred tax assets $ 31,195 $ 19,956 Deferred tax liabilities: Prepaid expenses and other $ (95 ) $ (355 ) Capitalized content development costs (11,866 ) (8,600 ) Capitalized software development costs (13,388 ) (4,356 ) Property and equipment (4,038 ) (4,720 ) Intangibles (8,757 ) (12,012 ) Total deferred tax liabilities $ (38,144 ) $ (30,043 ) Net deferred tax liabilities $ (6,949 ) $ (10,087 ) As of December 31, 2018 , the Company had a U.S. net operating loss (“NOL”) carryforward of approximately $373.5 million , of which $254.5 million expires between 2029 and 2037. The Company generated $119.0 million of U.S. NOLs for the year ended December 31, 2018 . In accordance with the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), U.S. NOLs arising in a tax year ending after 2017 will not expire. The gross amount of the state NOL carryforwards is equal to or less than the federal NOL carryforwards and expires over various periods based on individual state tax laws. The Company also had an NOL carryforward of $5.8 million in its foreign jurisdictions, which does not expire. A full valuation allowance has been established to offset its net deferred tax assets in the U.S., and certain foreign jurisdictions as the Company has not generated taxable income since inception and does not have sufficient deferred tax liabilities to recover the deferred tax assets in these jurisdictions. The total increase in the valuation allowance was $17.0 million for the year ended December 31, 2018 . The utilization of the NOL carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the NOL carryforwards. Under the provisions of Internal Revenue Code Section 382, certain substantial changes in the Company’s ownership may result in a limitation on the amount of U.S. net operating loss carryforwards that could be utilized annually to offset future taxable income and taxes payable. The Company does not expect such limitation, if any, to impact the use of the net operating losses prior to their expiration. As of December 31, 2018 and 2017 , the Company has not recognized any amounts for uncertain tax positions. The Company has analyzed its filing positions in all significant federal, state and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local tax examinations by tax authorities for the years prior to 2015 , though the NOL carryforwards can be adjusted upon audit and could impact taxes owed in open tax years. No income tax returns are currently under examination by the taxing authorities. On December 22, 2017, the Tax Act was enacted into law and contains certain key tax provisions that affect the Company. The Tax Act affects the Company by (i) reducing the U.S. tax rate to 21%, effective January 1, 2018, (ii) impacting the values of the Company’s deferred assets and liabilities, (iii) changing the Company’s ability to utilize future net operating losses and (iv) requiring a one-time tax on any of the Company’s unrepatriated foreign earnings and profits (“E&P”) in 2017. Pursuant to U.S. GAAP, changes in tax rates and tax laws are accounted for in the period of enactment, and the resulting effects are included as components of the income tax provision related to continuing operations within the same period. Therefore, the following changes in the tax laws were accounted for in 2017. The Company’s deferred tax assets and liabilities and offsetting valuation allowance have been remeasured at the new enacted tax rate as of December 31, 2017. The amount of U.S. net operating losses that the Company has available as of December 31, 2017 and the Company’s ability to utilize them to reduce future taxable income is not impacted by the Tax Act. However, the Tax Act may impact the amount and ability to utilize net operating losses generated by the Company in the future. Additionally, the Company had negative cumulative foreign earnings and profits as of December 31, 2017 , and therefore, did not incur any transition tax in 2017 . The Company was required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring its U.S. deferred tax assets and liabilities, as well as reassessing the net realizability of deferred tax assets and liabilities. In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allowed entities to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. The Company considered its E&P and other items to be provisional and has since completed its analysis within the measurement period in accordance with SAB 118. The Company recorded no adjustment to the income tax benefit (expense) on the Company’s consolidated statements of operations during the re-measurement period and finalized its E&P position, which resulted in no transition tax due, as originally estimated. The Tax Act includes Global Intangible Low-Taxed Income (“GILTI”) provisions that require a company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Due to foreign subsidiary losses, this provision does not apply to the Company in 2018. Another significant section of the Tax Act, the Base Erosion Anti-Abuse Tax (“BEAT”), will not apply to the Company’s 2018 tax year as the Company does not meet the minimum revenue requirements under the BEAT. As these taxes may become applicable in the future, the Company will continue to monitor the potential impact. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity On May 22, 2018, the Company sold 3,833,334 shares of its common stock to the public, including 500,000 shares sold pursuant to the underwriters’ over-allotment option, and received net proceeds of $330.9 million . On September 11, 2017, the Company sold 4,047,500 shares of its common stock to the public, including 547,500 shares sold pursuant to the underwriters’ over-allotment option, and received net proceeds of $189.5 million . The Company intends to use the net proceeds from both of these public offerings of common stock for working capital and other general corporate purposes, including expenditures for graduate program and short course marketing, technology and content development, in connection with new graduate program and short course launches and growing existing graduate programs and short courses, as well as strategic acquisitions of, or investments in, complementary products, technologies, solutions or businesses. As of December 31, 2018 , the Company was authorized to issue 205,000,000 total shares of capital stock, consisting of 200,000,000 shares of common stock and 5,000,000 shares of preferred stock. As of December 31, 2018 , the Company had reserved a total of 12,352,406 of its authorized shares of common stock for future issuance as follows: Outstanding stock options 4,057,788 Outstanding restricted stock units 1,139,045 Available for future issuance under Amended and Restated 2014 Equity Incentive Plan 6,219,244 Available for future issuance under 2017 Employee Stock Purchase Plan 936,329 Total shares of common stock reserved for future issuance 12,352,406 |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company provides equity-based compensation awards to employees, independent contractors and directors as an effective means for attracting, retaining and motivating such individuals. The Company maintains two share-based compensation plans: the Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the 2008 Stock Incentive Plan (the “2008 Plan”). Upon the effective date of the 2014 Plan in January 2014, the Company ceased using the 2008 Plan to grant new equity awards, and began using the 2014 Plan for grants of new equity awards. 2014 Plan In February 2014, the Company’s stockholders approved the 2014 Plan. The 2014 Plan provides for the grant of incentive stock options to the Company’s employees and its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to the Company’s employees, consultants and directors. The 2014 Plan also provides for the grant of performance-based cash awards to the Company’s employees, consultants and directors. A total of 2,800,000 shares of the Company’s common stock were initially reserved for issuance pursuant to the 2014 Plan. In addition, the shares reserved for issuance under the 2014 Plan include (a) those shares reserved but unissued under the 2008 Plan, and (b) shares returned to the 2008 Plan as the result of expiration or termination of awards (provided that the maximum number of shares that may be added to the 2014 Plan pursuant to (a) and (b) is 5,943,348 shares). The number of shares of the Company’s common stock that may be issued under the 2014 Plan will automatically increase on January 1st of each year, for a period of ten years , from January 1, 2015 continuing through January 1, 2024, by 5% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. The shares available for issuance increased by 2,896,365 and 2,625,292 on January 1, 2019 and 2018, respectively, pursuant to the automatic share reserve increase provision under the 2014 Plan. In addition, shares subject to outstanding stock awards granted under the 2008 Plan and 2014 Plan that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (iii) are reacquired or withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award, return to the 2014 Plan’s share reserve and become available for future grant under the 2014 Plan, up to the maximum number of shares of 5,943,348 . As of December 31, 2018 , the Company had 6,219,244 shares reserved for issuance under the 2014 Plan. Further, as of December 31, 2018 , under the 2014 Plan, options to purchase 2,687,726 shares of the Company’s common stock were outstanding at a weighted-average exercise price of $38.58 per share and 1,139,045 restricted stock units were outstanding. 2008 Plan In October 2008, the Company’s stockholders approved the Company’s 2008 Plan. The 2008 Plan was most recently amended on May 8, 2013. The 2008 Plan provided for the grant of incentive stock options to the Company’s employees and the employees of the Company’s subsidiaries, and for the grant of nonstatutory stock options, restricted stock awards and deferred stock awards to the Company’s employees, directors and consultants. The Company ceased granting equity awards under the 2008 Plan, and accordingly, as of January 30, 2014, no shares were available for future grant under the 2008 Plan. However, the 2008 Plan will continue to govern the terms and conditions of outstanding awards granted thereunder. As of December 31, 2018 , options to purchase 1,370,062 shares of the Company’s common stock were outstanding under the 2008 Plan at a weighted-average exercise price of $4.95 per share. Stock Options The terms of stock option grants, including the exercise price per share and vesting periods, are determined by the Company’s board of directors or the compensation committee thereof. Stock options are granted at exercise prices of not less than the estimated fair market value of the Company’s common stock at the date of grant. Stock options are generally subject to service-based vesting conditions and vest at various times from the date of the grant, with most options vesting in tranches, generally over a period of four years . Stock options granted under the 2014 Plan and the 2008 Plan are subject to service-based vesting conditions, and generally expire ten years from the grant date. The Company values stock options using the Black-Scholes-Merton option pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected life of the option, expected stock price volatility and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of the Company’s employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the “simplified method.” Under the “simplified method,” the expected life of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. The Company uses the “simplified method” due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Expected volatility is based on the historical volatility of the Company’s common stock over the estimated expected life of the stock options. The Company assumes no dividend yield because dividends are not expected to be paid in the near future, which is consistent with the Company’s history of not declaring or paying dividends to date. The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the periods presented. Year Ended December 31, 2018 2017 2016 Risk-free interest rate 2.3% - 3.0% 2.0% - 2.1% 1.1% - 1.9% Expected term (years) 5.97 - 6.77 6.00 - 6.08 5.43 - 6.50 Expected volatility 44% - 45% 46% - 49% 50% Dividend yield 0% 0% 0% The following is a summary of the stock option activity for the year ended December 31, 2018 : Number of Options Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding balance as of December 31, 2017 4,559,176 $ 15.10 5.89 225,283 Granted 668,390 84.06 8.76 Exercised (1,012,473 ) 7.27 2.34 Forfeited (157,305 ) 45.59 Expired — — Outstanding balance as of December 31, 2018 4,057,788 27.23 5.95 113,211 Exercisable as of December 31, 2018 2,910,317 14.07 4.91 104,444 The weighted-average grant date fair value of the Company’s stock options granted during the years ended December 31, 2018 , 2017 and 2016 was $39.66 , $19.65 and $11.41 per share, respectively. The total unrecognized compensation cost related to the unvested options as of December 31, 2018 was $28.9 million and will be recognized over a weighted-average period of approximately 2.9 years . The aggregate intrinsic value of the options exercised during the years ended December 31, 2018 , 2017 and 2016 was $54.0 million , $24.9 million and $24.9 million , respectively. Restricted Stock Units Throughout 2018 and 2017 , the Company granted restricted stock units under the 2014 Plan to the Company’s directors and certain of the Company’s employees. The terms of the restricted stock unit grants under the 2014 Plan, including the vesting periods, are determined by the Company’s board of directors or the compensation committee thereof. Restricted stock units are generally subject to service-based vesting conditions and vest at various times from the date of the grant, with most restricted stock units vesting in equal annual tranches, generally over a period of four years . The following is a summary of restricted stock unit activity for the year ended December 31, 2018 : Number of Restricted Stock Units Weighted-Average Grant Date Fair Value per Share Outstanding balance as of December 31, 2017 1,413,423 $ 29.95 Granted 536,502 81.55 Vested (595,866 ) 25.79 Forfeited (215,014 ) 50.90 Outstanding balance as of December 31, 2018 1,139,045 52.47 The total compensation cost related to the nonvested restricted stock units not yet recognized as of December 31, 2018 was $43.8 million and will be recognized over a weighted-average period of approximately 2.2 years . Employee Stock Purchase Plan The Company’s 2017 Employee Stock Purchase Plan (the “ESPP”) provides (i) for two offering periods each year and (ii) that the purchase price for shares of the Company’s common stock purchased under the ESPP will be 90% of the lesser of the fair market value of the 2U’s common stock on the purchase date or the fair market value of 2U’s common stock on the first day of the offering period. Notwithstanding the foregoing, the Compensation Committee of the Company’s Board of Directors may exercise its discretion, subject to certain conditions, to make changes to certain aspects of the ESPP including, but not limited to, the length of the offering periods and that the purchase price will be 85% of the lesser of the fair market value of 2U’s common stock on the purchase date or the fair market value of 2U’s common stock on the first day of the offering period. Participating eligible employees select a rate of payroll deduction between 1% and 15% of their salary or wage compensation received from the Company as in effect at the start of the offering period, with the aggregate purchase of each offering period limited to a maximum fair market value of $25,000 per employee per year. Participation in the ESPP began on January 1, 2018. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 1,000,000 shares of 2U’s common stock may be issued under the ESPP, subject to adjustments for certain capital transactions. During the year ended December 31, 2018 , an aggregate of 63,671 shares of 2U’s common stock were purchased in accordance with the ESPP. Net proceeds from the issuance of shares of 2U’s common stock under the ESPP for the year ended December 31, 2018 were $3.1 million . As of December 31, 2018 , 936,329 shares remain available for purchase under the ESPP. Stock-Based Compensation Expense Stock-based compensation expense related to stock-based awards, as well as the ESPP, is included in the following line items on the accompanying consolidated statements of operations and comprehensive loss: Year Ended December 31, 2018 2017 2016 (in thousands) Curriculum and teaching $ 14 $ 3 $ — Servicing and support 4,764 4,036 3,245 Technology and content development 4,094 3,306 2,392 Marketing and sales 2,743 1,742 1,317 General and administrative 19,795 12,843 8,869 Total stock-based compensation expense $ 31,410 $ 21,930 $ 15,823 Prior to January 1, 2017, the Company adjusted stock-based compensation expense for estimated forfeitures of stock-based awards. As described in the “Recent Accounting Pronouncements” section of Note 2 , beginning on January 1, 2017, the Company accounts for forfeitures (and the impact on stock-based compensation expense) as they occur. |
Net Loss per Share
Net Loss per Share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Net Loss per Share | Net Loss per Share Diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive, given the Company’s net loss. The following securities have been excluded from the calculation of weighted-average shares of common stock outstanding because the effect is anti-dilutive for the years ended December 31, 2018 , 2017 and 2016 : Year Ended December 31, 2018 2017 2016 Stock options 4,057,788 4,559,176 4,882,237 Restricted stock units 1,139,045 1,413,423 1,412,934 Basic and diluted net loss per share is calculated as follows: Year Ended December 31, 2018 2017 2016 Numerator (in thousands): Net loss $ (38,330 ) $ (29,423 ) (20,684 ) Denominator: Weighted-average shares of common stock outstanding, basic and diluted 55,833,492 49,062,611 46,609,751 Net loss per share, basic and diluted $ (0.69 ) $ (0.60 ) $ (0.44 ) |
Segment and Geographic Informat
Segment and Geographic Information | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information The Company’s operations consist of two operating segments, which are also its two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals around the world through relationships with leading universities in the United States, the United Kingdom and South Africa. Graduate Program Segment For the year ended December 31, 2018 , three university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $86.9 million , $54.2 million and $42.7 million , which equaled 21% , 13% and 10% of the Company’s consolidated revenue, respectively. For the year ended December 31, 2017 , four university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $77.6 million , $48.2 million , $30.1 million and $28.3 million , which equaled 27% , 17% , 11% and 10% of the Company’s consolidated revenue, respectively. As of December 31, 2018 , two university clients each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $11.9 million and $11.8 million , which equaled 36% and 36% of the Company’s consolidated accounts receivable, net balance, respectively. As of December 31, 2017 , two university clients each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $9.4 million and $2.0 million , which equaled 67% and 14% of the Company’s consolidated accounts receivable, net balance, respectively. Short Course Segment For the year ended December 31, 2018 and 2017 , there were no customers or individual university clients that had revenue associated with it that accounted for 10% or more of the Company’s consolidated revenue. In addition, as of December 31, 2018 and December 31, 2017 , no customers had accounts receivable, net balances that accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as customers are individual students or third parties paying on their behalf, rather than university clients. For the year ended December 31, 2018 , offerings associated with three university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 81% of the segment’s revenue. For the year ended December 31, 2017 , offerings associated with three university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue. Segment Performance The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented: Year Ended December 31, 2018 2017 2016 (in thousands) Revenue by segment* Graduate Program Segment $ 348,361 $ 270,432 $ 205,864 Short Course Segment 63,408 16,320 — Total revenue $ 411,769 $ 286,752 $ 205,864 Segment profitability** Graduate Program Segment $ 16,839 $ 13,022 $ 4,541 Short Course Segment 816 (1,606 ) — Total segment profitability $ 17,655 $ 11,416 $ 4,541 Segment profitability margin*** Graduate Program Segment 4.8 % 4.8 % 2.2 % Short Course Segment 1.3 (9.8 ) — Total segment profitability margin 4.3 3.9 2.2 * The Company has excluded approximately $44,000 of intersegment revenues from the year ended December 31, 2018 . ** The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization expense, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. *** The Company defines segment profitability margin as segment profitability as a percentage of the respective segment’s revenue. The following table reconciles net loss to total segment profitability: Year Ended December 31, 2018 2017 2016 (in thousands) Net loss $ (38,330 ) $ (29,423 ) $ (20,684 ) Adjustments: Interest income (5,173 ) (371 ) (383 ) Interest expense 108 87 35 Foreign currency loss 1,722 866 — Depreciation and amortization expense 32,785 19,624 9,750 Income tax benefit (4,867 ) (1,297 ) — Stock-based compensation expense 31,410 21,930 15,823 Total adjustments 55,985 40,839 25,225 Total segment profitability $ 17,655 $ 11,416 $ 4,541 The Company’s total assets by segment are as follows: December 31, December 31, (in thousands) Total assets Graduate Program Segment $ 702,827 $ 359,597 Short Course Segment 104,527 122,465 Total assets $ 807,354 $ 482,062 Trade Accounts Receivable and Contract Liabilities The Company’s trade accounts receivable and contract liabilities in each segment are as follows: December 31, December 31, (in thousands) Trade accounts receivable Graduate Program Segment accounts receivable, net of allowance for doubtful accounts of $0 for all periods presented $ 31,110 $ 12,520 Graduate Program Segment unbilled revenue 265 666 Short Course Segment accounts receivable, net of allowance for doubtful accounts of $257 and $287 as of December 31, 2018 and 2017, respectively 982 988 Total trade accounts receivable $ 32,357 $ 14,174 Contract liabilities Graduate Program Segment deferred revenue $ 2,864 $ 2,523 Short Course Segment deferred revenue 5,481 4,501 Total contract liabilities $ 8,345 $ 7,024 For the Graduate Program Segment, revenue recognized during the year ended December 31, 2018 that was included in the deferred revenue balance at the beginning of the year was $2.5 million . For the Short Course Segment, revenue recognized during the year ended December 31, 2018 that was included in the deferred revenue balance at the beginning of the year was $4.5 million . Contract Acquisition Costs The Graduate Program Segment had $0.3 million of net capitalized contract acquisition costs as of December 31, 2018 . For the year ended December 31, 2018 , the Company capitalized $0.3 million and recorded an immaterial amount of amortization expense in the Graduate Program Segment. Geographical Information The Company’s non-U.S. revenue, which is based upon the currency of the country in which the university client primarily operates, was $33.9 million and $10.0 million for the years ended December 31, 2018 and 2017 , respectively, and was sourced entirely from the Short Course Segment’s operations outside of the U.S. The Company’s long-lived tangible assets in non-U.S. countries as of December 31, 2018 and December 31, 2017 totaled approximately $1.2 million and $0.7 million , respectively. |
Retirement Plan
Retirement Plan | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Retirement Plan | Retirement Plan The Company has established a 401(k) plan for eligible employees to contribute up to 100% of their compensation, limited by the IRS-imposed maximum contribution amount. The Company matches 33% of each employee’s contribution up to 6% of the employee’s salary deferral each plan year. For the years ended December 31, 2018 , 2017 and 2016 , the Company made employer contributions of $2.1 million , $1.3 million and $1.1 million , respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions During the year ended December 31, 2016, the Company subleased office space to an entity that was, upon execution of the sublease in 2011, a greater than 5% stockholder. The lease required the subtenant to reimburse the Company for the allocated cost of the office space subleased. The Company had no transactions with this related party during the years ended December 31, 2018 and 2017 , other than the repayment of a $0.1 million security deposit in connection with the expiration of the sublease in December 2016. For the year ended December 31, 2016 , the Company recorded $0.3 million as rental income from this related entity. During the year ended December 31, 2016, the Company utilized the marketing and event planning services of a company that is partially owned by one of the Company’s former executives. The Company had no transactions with this related party during the years ended December 31, 2018 and 2017 . The Company recorded $1.4 million for the expenses incurred related to the services provided by this related party for the year ended December 31, 2016 . No amounts were due to the related party or recorded in accounts payable on the consolidated balance sheets as of December 31, 2018 and 2017 . |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Information (Unaudited) | Quarterly Financial Information (Unaudited) The following tables set forth certain unaudited quarterly financial data for 2018 and 2017 . This unaudited information has been prepared on the same basis as the audited information included elsewhere in this Annual Report and includes all adjustments necessary to present fairly the information set forth therein. The operating results are not necessarily indicative of results for any future period. Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except share and per share amounts) Revenue $ 92,288 $ 97,423 $ 106,963 $ 115,095 Costs and expenses Curriculum and teaching 4,307 6,007 6,351 6,625 Servicing and support 15,233 17,297 16,586 18,087 Technology and content development 13,840 15,235 16,361 18,376 Marketing and sales 53,058 58,376 60,548 49,033 General and administrative 21,869 22,480 18,974 19,666 Total costs and expenses 108,307 119,395 118,820 111,787 Income (loss) from operations (16,019 ) (21,972 ) (11,857 ) 3,308 Interest income 342 912 1,799 2,120 Interest expense (27 ) (27 ) (27 ) (27 ) Other expense, net (395 ) (825 ) (273 ) (229 ) Income (loss) before income taxes (16,099 ) (21,912 ) (10,358 ) 5,172 Income tax benefit (expense) 1,228 3,565 414 (340 ) Net income (loss) $ (14,871 ) $ (18,347 ) $ (9,944 ) $ 4,832 Net income (loss) per share, basic $ (0.28 ) $ (0.33 ) $ (0.17 ) $ 0.08 Net income (loss) per share, diluted $ (0.28 ) $ (0.33 ) $ (0.17 ) $ 0.08 Weighted-average shares used in computing net income (loss) per share, basic 52,687,299 54,981,192 57,663,361 57,924,666 Weighted-average shares used in computing net income (loss) per share, diluted 52,687,299 54,981,192 57,663,361 60,666,682 Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except share and per share amounts) Revenue $ 64,829 $ 64,995 $ 70,250 $ 86,678 Costs and expenses Curriculum and teaching — — 1,792 4,817 Servicing and support 10,925 13,458 12,939 13,445 Technology and content development 9,205 11,140 12,735 12,846 Marketing and sales 34,670 37,242 41,311 37,700 General and administrative 13,664 13,930 17,227 17,844 Total costs and expenses 68,464 75,770 86,004 86,652 Income (loss) from operations (3,635 ) (10,775 ) (15,754 ) 26 Interest income 196 53 18 104 Interest expense — (1 ) (36 ) (50 ) Other income (expense), net — (1,031 ) 59 106 Income (loss) before income taxes (3,439 ) (11,754 ) (15,713 ) 186 Income tax benefit (expense) — — 974 323 Net income (loss) $ (3,439 ) $ (11,754 ) $ (14,739 ) $ 509 Net income (loss) per share, basic $ (0.07 ) $ (0.25 ) $ (0.30 ) $ 0.01 Net income (loss) per share, diluted $ (0.07 ) $ (0.25 ) $ (0.30 ) $ 0.01 Weighted-average shares used in computing net income (loss) per share, basic 47,237,341 47,668,397 48,961,914 52,330,067 Weighted-average shares used in computing net income (loss) per share, diluted 47,237,341 47,668,397 48,961,914 56,593,108 |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the assets, liabilities, results of operations and cash flows of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. |
Investments | Investments The Company’s investments within current assets on the consolidated balance sheets relate to certificates of deposit with original maturities between three months and one year. As of December 31, 2018 , the Company had a $25.0 million certificate of deposit included in investments that qualifies as a Level 1 fair value measurement asset and was stated at cost, which approximates fair value. |
Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts | Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments using the modified retrospective transition method and has concluded that doing so did not have a material impact on the amount and timing of either its revenue or costs. As part of its assessment, the Company completed reviews of its contracts and evaluated its costs, including costs of obtaining contracts with its university clients and costs associated with content development. Certain of these contract and content costs are capitalized under the new standard. The adoption of ASU 2014-09 did not have a material impact as of January 1, 2018, and no cumulative adjustment was recorded. Further, the amounts reported as of December 31, 2018 on the consolidated balance sheets and the results of operations for the year ended December 31, 2018 reported on the consolidated statements of operations and comprehensive loss would not have been materially different than under legacy U.S. GAAP (i.e., Topic 605). The Company generates substantially all of its revenue from contractual arrangements, with either its university clients or students, to provide a comprehensive platform of tightly integrated technology and technology-enabled services that support its graduate programs and short courses. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Graduate Program Segment derives revenue primarily from contractually specified percentages of the amounts the Company’s university clients receive from their students in 2U-enabled graduate programs for tuition and fees, less credit card fees and other specified charges the Company has agreed to exclude in certain university contracts. The Company’s contracts with university clients in this segment typically have 10 to 15 year initial terms and have a single performance obligation, as the promises to provide a platform of tightly integrated technology and services that university clients need to attract, enroll, educate and support students are not distinct within the context of the contracts. The single performance obligation is delivered as the university clients receive and consume benefits, which occurs ratably over a series of academic terms. The amounts received from university clients over the term of the arrangement are variable in nature in that they are dependent upon the number of students that are enrolled in the program within each academic term. These amounts are allocated to and are recognized ratably over the related academic term, defined as the period beginning on the first day of classes through the last. Revenue is recognized net of an allowance, which is established for the Company’s expected obligation to refund tuition and fees to university clients. The Short Course Segment derives revenue directly from contracts with students for the tuition and fees paid to enroll in and progress through the Company’s short courses, which run between six and 16 weeks. The Company’s contracts with students in this segment have multiple performance obligations as the delivery of the short course and student support services are each considered distinct performance obligations. These performance obligations are each satisfied ratably over the same short course presentation period, which is defined as the period beginning on the first day of the course through the last. The Company recognizes the gross proceeds received from the students and shares contractually specified percentages with its university clients, for providing short course content and certification, which are recognized as curriculum and teaching costs on the Company’s consolidated statements of operations and comprehensive loss. The Company’s contracts with university clients in this segment are typically shorter and less restrictive than the Company’s contracts with university clients in the Graduate Program Segment. The Company does not disclose the value of unsatisfied performance obligations for the Graduate Program Segment because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company does not disclose the value of unsatisfied performance obligations for the Short Course Segment because the performance obligation is part of a contract that has an original duration of less than one year. Contract Acquisition Costs The Company pays commissions to certain of its employees to obtain contracts with university clients in the Graduate Program Segment. These costs are capitalized and recorded on a contract-by-contract basis and amortized using the straight-line method over the expected life, which is generally the length of the contract. With respect to contract acquisition costs in the Short Course Segment, the Company has elected to apply the practical expedient in ASC Topic 606 to expense these costs as incurred, as the terms of contracts with students in this segment are less than one year. Payments to University Clients Pursuant to certain of the Company’s contracts in the Graduate Program Segment, the Company has made, or is obligated to make, payments to university clients at either execution of a contract or at the extension of a contract in exchange for various marketing and other rights. Generally, these amounts are capitalized and amortized as contra revenue over the life of the contract, commencing on the later of when payment is due or when contract revenue recognition begins. Accounts Receivable, Contract Assets and Liabilities Balance sheet items related to contracts consist of accounts receivable, net and deferred revenue on the Company’s consolidated balance sheets. Included in accounts receivable, net are trade accounts receivable, which are comprised of billed and unbilled revenue. Accounts receivable, net is stated at net realizable value, and the Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. The Company’s estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable, net. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. The Company recognizes unbilled revenue when revenue recognition occurs in advance of billings. Unbilled revenue is recognized in the Graduate Program Segment because billings to university clients do not occur until after the academic term has commenced and final enrollment information is available. The Company’s unbilled revenue represents contract assets. Deferred revenue represents the excess of amounts billed or received as compared to amounts recognized in revenue on the consolidated statements of operations and comprehensive loss as of the end of the reporting period, and such amounts are reflected as a current liability on the Company’s consolidated balance sheets. The Company generally receives payments for its share of tuition and fees from graduate program university clients early in each academic term and from short course students, either in full upon registration for the course or in full before the end of the course based on a payment plan, prior to completion of the service period. These payments are recorded as deferred revenue until the services are delivered or until the Company’s obligations are otherwise met, at which time revenue is recognized. |
Business Combinations | Business Combinations The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity, net of the amounts assigned to the assets acquired and liabilities assumed, is recognized as goodwill. The net assets and results of operations of an acquired entity are included on the Company’s consolidated financial statements from the acquisition date. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash is held at financial institutions that management believes to be of high credit quality. The Company’s bank accounts exceed federally insured limits at times. The Company has not experienced any losses on cash to date. The Company maintains an allowance for doubtful accounts, if needed, based on collection history. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of bank checking accounts, money market accounts, investments in certificates of deposit that have an original maturity of three months or less and highly liquid marketable securities with maturities at the time of purchase of three months or less. |
Fair Value Measurements | Fair Value Measurements The carrying amounts of certain assets and liabilities, including cash and cash equivalents, accounts receivable, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability. U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 —Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 —Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. |
Advances to University Clients | Advances to University Clients The Company is contractually obligated to pay advances to certain of its university clients in order to fund start-up expenses of the program on behalf of the university client. Advances to university clients are stated at realizable value. Advances are repaid to the Company on terms as required in the respective agreements. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Expenditures for major additions, construction and improvements are capitalized. Depreciation and amortization is expensed using the straight-line method over the estimated useful lives of the related assets, which range from three to five years for computer hardware and five to seven years for furniture and office equipment. Leasehold improvements are depreciated on a straight-line basis over the lesser of the remaining term of the leased facility or the estimated useful life of the improvement, which generally ranges from four to approximately 11 years . Useful lives of significant assets are periodically reviewed and adjusted prospectively to reflect the Company’s current estimates of the respective assets’ expected utility. Repair and maintenance costs are expensed as incurred. |
Amortizable Intangible Assets | Amortizable Intangible Assets Acquired Intangible Assets. The Company capitalizes purchased intangible assets, such as software, websites and domains, and amortizes them on a straight-line basis over their estimated useful life. Historically, the Company has assessed the useful lives of these acquired intangible assets to be between three and ten years . Capitalized Technology. Capitalized technology includes certain purchased software and technology licenses, direct third-party costs, and internal payroll and payroll-related costs used in the creation of our internal-use software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of designing the application, coding, integrating the Company’s and the university’s networks and systems, and the testing of the software. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which the Company expects to benefit from the use of that software. Once the software is placed in service, these costs are amortized using the straight-line method over the estimated useful life of the software, which is generally three to five years. Capitalized Content Development. The Company develops content for each offering on a course-by-course basis in conjunction with the faculty for each graduate program and short course. University clients and their faculty generally provide materials used for the course in an on-campus setting, including curricula, case studies and other reading materials, and presentations. The Company is responsible for the conversion of the materials into a format suitable for delivery through its online learning platform, including all expenses associated with this effort. With regard to the Graduate Program Segment, the development of content is part of the Company’s single performance obligation and is considered a contract fulfillment cost. The content development costs that qualify for capitalization are third-party direct costs, such as videography, editing and other services associated with creating digital content. Additionally, the Company capitalizes internal payroll and payroll-related costs incurred to create and produce videos and other digital content utilized in the university clients’ offerings for delivery via the Company’s online learning platform. Capitalization ends when content has been fully developed by both the Company and the university client, at which time amortization of the capitalized content development costs begins. The capitalized costs for each offering are recorded on a course-by-course basis and included in capitalized content costs in amortizable intangible assets, net on the Company’s consolidated balance sheets. These costs are amortized using the straight-line method over the estimated useful life of the respective course, which is generally four to five years . The estimated useful life corresponds with the planned curriculum refresh rate. This refresh rate is consistent with expected curriculum refresh rates as cited by faculty members for similar on-campus offerings. |
Evaluation of Long-Lived Assets | Evaluation of Long-Lived Assets The Company reviews long-lived assets, which consist of property and equipment, capitalized technology costs, capitalized content development costs and acquired finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. In order to assess the recoverability of the capitalized technology and content development costs, the costs are grouped by the lowest level of independent cash flows (i.e., by degree program or short course, for content development costs). Recoverability of a long-lived asset is measured by a comparison of the carrying value of an asset or asset group to the future undiscounted net cash flows expected to be generated by that asset or asset group. If such assets are not recoverable, the impairment to be recognized is measured by the amount by which the carrying value of an asset exceeds the estimated fair value (discounted cash flow) of the asset or asset group. The Company’s impairment analysis is based upon cumulative results and forecasted performance. |
Non-Cash Long-Lived Asset Additions | Non-Cash Long-Lived Asset Additions During the year ended December 31, 2018 , the Company had capital asset additions of $87.4 million in property and equipment and capitalized technology and content development, of which $5.3 million consisted of non-cash capital expenditures, primarily related to the acquisition of certain long-lived assets for which a liability was accrued. Due to extended payment terms associated with the timing of cash capital expenditures made more than 90 days after the date of purchase, an additional $4.9 million was classified as cash flows from financing activities in the consolidated statement of cash flows for the year ended December 31, 2018 . During the year ended December 31, 2017 , the Company had capital asset additions of $62.3 million in property and equipment and capitalized technology and content development, of which $11.2 million consisted of non-cash capital expenditures, primarily related to landlord funded leasehold improvements. |
Goodwill | Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of the business acquired. The Company’s goodwill balance relates to the acquisition of GetSmarter in 2017. The Company reviews goodwill at least annually, as of October 1. Between annual tests, goodwill is reviewed for possible impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the two-step goodwill impairment review. The Company will review goodwill for impairment using the two-step process if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon the completion of the two-step process, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the goodwill recorded. |
Employee Benefits | Employee Benefits The Company offers a variety of benefits to its employees (e.g., healthcare, gym memberships and tuition reimbursement). The Company accounts for costs related to providing employee benefits as incurred, unless there is a service requirement, in which case, such costs are recognized over the service commitment period. |
Government Grants | Government Grants Government grants awarded to the Company in the form of forgivable loans are recorded as “deferred government grant obligations” within long-term liabilities on the consolidated balance sheets until all contingencies are resolved and the grant is determined to be realized. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements. Under this method, the deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of the assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on the deferred tax assets and liabilities is recognized in earnings in the period when the new rate is enacted. Deferred tax assets are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company considers all positive and negative evidence relating to the realization of the deferred tax assets in assessing the need for a valuation allowance. The Company currently maintains a full valuation allowance against deferred tax assets in the U.S. and certain entities in the foreign jurisdictions. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating tax positions. Step one, recognition, occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Step two, measurement, determines the amount of benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur if the Company subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations and comprehensive loss. |
Marketing and Sales Costs | Marketing and Sales Costs The majority of the marketing and sales costs incurred by the Company are directly related to acquiring students for its university clients’ graduate programs, with lesser amounts related to acquiring students for its short course and marketing and advertising efforts related to the Company’s own brand. For the years ended December 31, 2018 , 2017 and 2016 , costs related to the Company’s marketing and advertising efforts of its own brand were not material. All such costs are expensed as incurred and reported in marketing and sales expense on the Company’s consolidated statements of operations and comprehensive loss. As of December 31, 2018 and 2017 , the Company had $10.3 million and $11.7 million , respectively, of accrued marketing costs included in accounts payable and accrued expenses on the Company’s consolidated balance sheets. |
Leases | Leases The Company leases all of its office facilities and enters into various other lease agreements in conducting its business. At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease. Additionally, many of the Company’s lease agreements contain renewal options, tenant improvement allowances, rent holiday and/or rent escalation clauses. The Company defers tenant improvement allowances and amortizes such balances as a reduction of rent expense over the term of the lease. When rent holidays or rent escalations are included in a lease agreement, the Company records a deferred rent asset or liability on the consolidated financial statements, and records these items in rent expense evenly over the term of the lease. The Company is also required to make additional payments under operating lease terms for taxes, insurance and other operating expenses incurred during the operating lease period; such items are expensed as incurred. Rental deposits are included as other assets on the consolidated financial statements for lease agreements that require payments in advance or deposits held for security that are refundable, less any damages, at the end of the respective lease. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation awards based on the fair value of the award as of the grant date. For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense on a straight-line basis over the awards’ requisite service period. Effective April 1, 2017, expected volatility is based on the historical volatilities of the Company’s common stock. Prior to January 1, 2017, the Company adjusted stock-based compensation expense for estimated forfeitures of stock-based awards. As described in the “Recent Accounting Pronouncements” section of this Note, beginning on January 1, 2017, the Company accounts for forfeitures (and the impact on stock-based compensation expense) as they occur. For awards subject to both performance and service-based vesting conditions, the Company recognizes stock-based compensation expense using an accelerated recognition method when it is probable that the performance condition will be achieved. |
Foreign Currency Translation | Foreign Currency Translation For the portion of the Company’s non-U.S. business where the local currency is the functional currency, operating results are translated into U.S. dollars using the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of stockholder’s equity and comprehensive loss. For any transaction that is in a currency different from the entity’s functional currency, the Company records a gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) as other income (expense), net on the consolidated statements of operations and comprehensive loss. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which requires customers in cloud computing arrangements that are service contracts to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted this ASU as of July 1, 2018 under the prospective method. During the six months ended December 31, 2018 since the adoption of this ASU, the Company capitalized $0.4 million of implementation costs incurred in its cloud computing arrangements that are service contracts. In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements , which clarifies and corrects unintended applications of guidance, and makes improvements to several Accounting Standards Codification topics. The applicable amendments in this ASU will be effective for the Company in annual periods beginning after December 15, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share-based payments to nonemployees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which eliminates step two from the goodwill impairment test and requires an entity to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company expects that the adoption of this standard will impact its consolidated financial statements and related disclosures only to the extent that a future goodwill impairment test results in the recognition of an impairment charge. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice surrounding how certain transactions are classified in the statement of cash flows. The amendments in this ASU were effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018. Adoption of this standard did not have a material impact on the Company’s consolidated statements of cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . The ASU simplifies various aspects related to the accounting and presentation of share-based payments. The guidance also allows employers to withhold shares to satisfy minimum statutory withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. Additionally, the guidance stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax withholding purposes should be classified as a financing activity on the statement of cash flows, and allows companies to elect an accounting policy to either estimate the share-based award forfeitures (and expense) or account for forfeitures (and expense) as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017. In connection with the adoption of this standard, the Company elected to no longer apply an estimated forfeiture rate and will instead account for forfeitures as they occur. Accordingly, the Company applied the modified retrospective adoption approach, which resulted in a $0.1 million cumulative-effect reduction to retained earnings with an offset to additional paid-in-capital. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The ASU introduces a model for lessees requiring most leases to be reported on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and the Company will adopt this ASU in the first quarter of 2019. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements . ASU No. 2018-10 clarifies ambiguous or potentially conflicting guidance in ASU No. 2016-02, but is not expected to have a material impact on the Company. ASU No. 2018-11 provides entities with an additional transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new lease standard at the adoption date, rather than at the beginning of the earliest period presented, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected this transition method upon the adoption date of January 1, 2019. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors , to add clarity to lessor accounting for sales taxes, certain lessor costs and certain requirements related to variable payments in contracts. ASU No. 2018-20 is not expected to have a material impact on the Company. A number of optional practical expedients may be applied in transition. The Company does not intend to recognize right-of-use assets or lease liabilities for leases with a term of 12 months or less, as permitted by the short-term lease practical expedient. In transition, the Company plans to apply the package of practical expedients that permit entities to not reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for expired or existing leases, or (iii) whether previously capitalized initial direct costs would qualify for capitalization under the new standard. The Company plans to apply the practical expedient that permits a lessee to account for lease and non-lease components in a contract as a single lease component. In addition, the Company does not intend to use hindsight during transition. The Company is currently evaluating the effect that this ASU will have on its consolidated financial statements and related disclosures and is in the process of considering changes to its systems and processes. Upon adoption, the Company expects to record right-of-use assets of approximately $33 million , which have been adjusted for accrued rent, and the remaining balance of any lease incentives upon transition, and corresponding lease liabilities of approximately $58 million on the consolidated balance sheets for its operating leases. This ASU is not expected to have a material impact on the consolidated statements of operations and comprehensive loss or the consolidated statements of cash flows. |
Business Combination (Tables)
Business Combination (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of estimated fair values of the assets acquired and liabilities assumed | The Company has completed its valuation of the assets acquired and liabilities assumed of GetSmarter. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition: Estimated Average Purchase Price (in thousands) Cash and cash equivalents $ 1,584 Current assets 3,676 Property and equipment, net 479 Amortizable intangible assets: Capitalized technology 3 2,800 Capitalized content development 4 5,000 University client relationships 9 28,000 Trade names and domain names 10 8,900 Goodwill 68,172 Current liabilities (9,031 ) Non-current liabilities (10,894 ) $ 98,686 |
Schedule of unaudited pro forma combined revenue and net loss | The following table presents the Company’s unaudited pro forma combined revenue, pro forma combined net loss and pro forma combined net loss per share for the year ended December 31, 2017 as if the acquisition of GetSmarter had occurred on January 1, 2017: Year Ended Year Ended (in thousands, except per share amounts) Pro forma revenue $ 294,446 Pro forma net loss (37,267 ) Pro forma net loss per share, basic and diluted $ (0.76 ) |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment, Net | |
Schedule of property and equipment, net | Property and equipment, net consisted of the following as of: December 31, December 31, (in thousands) Computer hardware $ 5,114 $ 2,663 Furniture and office equipment 14,888 11,210 Leasehold improvements 45,158 42,086 Leasehold improvements in process 1,940 194 Total 67,100 56,153 Accumulated depreciation and amortization (14,801 ) (7,098 ) Property and equipment, net $ 52,299 $ 49,055 |
Goodwill and Amortizable Inta_2
Goodwill and Amortizable Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The table below summarizes the changes in the carrying amount of goodwill by reportable segment: Graduate Program Segment Short Course Segment Total (in thousands) Balance as of December 31, 2016 $ — $ — $ — Acquisition of GetSmarter — 68,172 68,172 Foreign currency translation adjustments — 3,816 3,816 Balance as of December 31, 2017 — 71,988 71,988 Foreign currency translation adjustments — (10,136 ) (10,136 ) Balance as of December 31, 2018 $ — $ 61,852 $ 61,852 |
Schedule of amortizable intangible assets | Amortizable intangible assets consisted of the following as of: December 31, 2018 December 31, 2017 Estimated Average Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Capitalized technology 3-5 $ 68,291 $ (16,945 ) $ 51,346 $ 27,108 $ (9,486 ) $ 17,622 Capitalized content development 4-5 79,725 (31,662 ) 48,063 55,872 (21,417 ) 34,455 University client relationships 9 25,616 (4,269 ) 21,347 29,443 (1,636 ) 27,807 Trade names and domain names 8-10 18,793 (2,944 ) 15,849 12,119 (1,242 ) 10,877 Total amortizable intangible assets, net $ 192,425 $ (55,820 ) $ 136,605 $ 124,542 $ (33,781 ) $ 90,761 |
Schedule of estimated future amortization expense for amortizable intangible assets | As of December 31, 2018 , the estimated future amortization expense for amortizable intangible assets placed in service is as follows (in thousands): 2019 $ 25,244 2020 21,814 2021 16,420 2022 12,405 2023 7,690 Thereafter 12,730 Total $ 96,303 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments to university clients | As of December 31, 2018 , the future minimum payments due to university clients were as follows (in thousands): 2019 $ 10,125 2020 625 2021 625 2022 625 2023 625 Thereafter 3,775 Total future minimum payments to university clients $ 16,400 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Leases, Operating [Abstract] | |
Schedule of future minimum lease payments | As of December 31, 2018 , the future minimum lease payments were as follows (in thousands): 2019 $ 12,941 2020 14,020 2021 13,900 2022 13,633 2023 13,959 Thereafter 68,347 Total future minimum lease payments $ 136,800 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule components of loss before income taxes | The following table presents the components of loss before income taxes: Year Ended December 31, 2018 2017 2016 (in thousands) Loss before income taxes: United States $ (33,339 ) $ (25,002 ) $ (20,684 ) Foreign (9,858 ) (5,718 ) — Total $ (43,197 ) $ (30,720 ) $ (20,684 ) |
Schedule of reconciliation of the statutory federal income tax rate to the actual effective income tax rate | A reconciliation between the Company’s statutory federal income tax rate and the effective tax rate is presented below: Year Ended December 31, 2018 2017 2016 U.S. statutory federal income tax rate 21.0 % 35.0 % 35.0 % Increase (decrease) resulting from: U.S. state income taxes, net of federal benefits 0.9 9.9 5.5 Foreign tax rate differential 1.1 (1.4 ) — Non-deductible expenses (2.6 ) (1.8 ) (1.5 ) Stock-based compensation 30.0 40.9 (2.9 ) Change in valuation allowance (39.3 ) 29.8 (36.6 ) Change in tax rate (0.1 ) (108.0 ) — Other 0.3 (0.2 ) 0.5 Effective tax rate 11.3 % 4.2 % 0.0 % |
Schedule of significant components of deferred tax assets and liabilities | The significant components of the Company’s deferred tax assets and liabilities are as follows: As of December 31, 2018 2017 (in thousands) Deferred tax assets: Accrued expenses and other $ 2,580 $ 2,395 Accrued compensation and related benefits 3,395 3,524 Rebate reserve 5 20 Deferred rent 6,388 6,924 Stock-based compensation 8,279 6,874 Deferred income 257 191 Foreign net operating loss carryforwards 1,543 1,704 U.S. net operating loss carryforwards 96,809 69,425 Valuation allowance (88,061 ) (71,101 ) Total deferred tax assets $ 31,195 $ 19,956 Deferred tax liabilities: Prepaid expenses and other $ (95 ) $ (355 ) Capitalized content development costs (11,866 ) (8,600 ) Capitalized software development costs (13,388 ) (4,356 ) Property and equipment (4,038 ) (4,720 ) Intangibles (8,757 ) (12,012 ) Total deferred tax liabilities $ (38,144 ) $ (30,043 ) Net deferred tax liabilities $ (6,949 ) $ (10,087 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Schedule of shares of common stock reserved for future issuance | As of December 31, 2018 , the Company had reserved a total of 12,352,406 of its authorized shares of common stock for future issuance as follows: Outstanding stock options 4,057,788 Outstanding restricted stock units 1,139,045 Available for future issuance under Amended and Restated 2014 Equity Incentive Plan 6,219,244 Available for future issuance under 2017 Employee Stock Purchase Plan 936,329 Total shares of common stock reserved for future issuance 12,352,406 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stock-Based Compensation | |
Schedule of stock-based compensation expense related to stock-based awards | Stock-based compensation expense related to stock-based awards, as well as the ESPP, is included in the following line items on the accompanying consolidated statements of operations and comprehensive loss: Year Ended December 31, 2018 2017 2016 (in thousands) Curriculum and teaching $ 14 $ 3 $ — Servicing and support 4,764 4,036 3,245 Technology and content development 4,094 3,306 2,392 Marketing and sales 2,743 1,742 1,317 General and administrative 19,795 12,843 8,869 Total stock-based compensation expense $ 31,410 $ 21,930 $ 15,823 |
Stock options | |
Stock-Based Compensation | |
Schedule of assumptions used for estimating the fair value of the stock options granted | The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the periods presented. Year Ended December 31, 2018 2017 2016 Risk-free interest rate 2.3% - 3.0% 2.0% - 2.1% 1.1% - 1.9% Expected term (years) 5.97 - 6.77 6.00 - 6.08 5.43 - 6.50 Expected volatility 44% - 45% 46% - 49% 50% Dividend yield 0% 0% 0% |
Schedule of stock option activity | The following is a summary of the stock option activity for the year ended December 31, 2018 : Number of Options Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding balance as of December 31, 2017 4,559,176 $ 15.10 5.89 225,283 Granted 668,390 84.06 8.76 Exercised (1,012,473 ) 7.27 2.34 Forfeited (157,305 ) 45.59 Expired — — Outstanding balance as of December 31, 2018 4,057,788 27.23 5.95 113,211 Exercisable as of December 31, 2018 2,910,317 14.07 4.91 104,444 |
Restricted stock units | |
Stock-Based Compensation | |
Schedule of restricted stock unit activity | The following is a summary of restricted stock unit activity for the year ended December 31, 2018 : Number of Restricted Stock Units Weighted-Average Grant Date Fair Value per Share Outstanding balance as of December 31, 2017 1,413,423 $ 29.95 Granted 536,502 81.55 Vested (595,866 ) 25.79 Forfeited (215,014 ) 50.90 Outstanding balance as of December 31, 2018 1,139,045 52.47 |
Net Loss per Share (Tables)
Net Loss per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of potential dilutive securities that would have been anti-dilutive due to net loss | The following securities have been excluded from the calculation of weighted-average shares of common stock outstanding because the effect is anti-dilutive for the years ended December 31, 2018 , 2017 and 2016 : Year Ended December 31, 2018 2017 2016 Stock options 4,057,788 4,559,176 4,882,237 Restricted stock units 1,139,045 1,413,423 1,412,934 |
Schedule of calculation of basic and diluted net loss per share | Basic and diluted net loss per share is calculated as follows: Year Ended December 31, 2018 2017 2016 Numerator (in thousands): Net loss $ (38,330 ) $ (29,423 ) (20,684 ) Denominator: Weighted-average shares of common stock outstanding, basic and diluted 55,833,492 49,062,611 46,609,751 Net loss per share, basic and diluted $ (0.69 ) $ (0.60 ) $ (0.44 ) |
Segment and Geographic Inform_2
Segment and Geographic Information (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of revenue, segment profitability and segment profitability margin by segment | The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented: Year Ended December 31, 2018 2017 2016 (in thousands) Revenue by segment* Graduate Program Segment $ 348,361 $ 270,432 $ 205,864 Short Course Segment 63,408 16,320 — Total revenue $ 411,769 $ 286,752 $ 205,864 Segment profitability** Graduate Program Segment $ 16,839 $ 13,022 $ 4,541 Short Course Segment 816 (1,606 ) — Total segment profitability $ 17,655 $ 11,416 $ 4,541 Segment profitability margin*** Graduate Program Segment 4.8 % 4.8 % 2.2 % Short Course Segment 1.3 (9.8 ) — Total segment profitability margin 4.3 3.9 2.2 * The Company has excluded approximately $44,000 of intersegment revenues from the year ended December 31, 2018 . ** The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization expense, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period. *** The Company defines segment profitability margin as segment profitability as a percentage of the respective segment’s revenue. |
Schedule of reconciliation of net loss to total segment profitability | The following table reconciles net loss to total segment profitability: Year Ended December 31, 2018 2017 2016 (in thousands) Net loss $ (38,330 ) $ (29,423 ) $ (20,684 ) Adjustments: Interest income (5,173 ) (371 ) (383 ) Interest expense 108 87 35 Foreign currency loss 1,722 866 — Depreciation and amortization expense 32,785 19,624 9,750 Income tax benefit (4,867 ) (1,297 ) — Stock-based compensation expense 31,410 21,930 15,823 Total adjustments 55,985 40,839 25,225 Total segment profitability $ 17,655 $ 11,416 $ 4,541 |
Schedule of total assets by segment | The Company’s total assets by segment are as follows: December 31, December 31, (in thousands) Total assets Graduate Program Segment $ 702,827 $ 359,597 Short Course Segment 104,527 122,465 Total assets $ 807,354 $ 482,062 |
Segment trade accounts receivable and contract liabilities | The Company’s trade accounts receivable and contract liabilities in each segment are as follows: December 31, December 31, (in thousands) Trade accounts receivable Graduate Program Segment accounts receivable, net of allowance for doubtful accounts of $0 for all periods presented $ 31,110 $ 12,520 Graduate Program Segment unbilled revenue 265 666 Short Course Segment accounts receivable, net of allowance for doubtful accounts of $257 and $287 as of December 31, 2018 and 2017, respectively 982 988 Total trade accounts receivable $ 32,357 $ 14,174 Contract liabilities Graduate Program Segment deferred revenue $ 2,864 $ 2,523 Short Course Segment deferred revenue 5,481 4,501 Total contract liabilities $ 8,345 $ 7,024 |
Quarterly Financial Informati_2
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of unaudited quarterly results | The following tables set forth certain unaudited quarterly financial data for 2018 and 2017 . This unaudited information has been prepared on the same basis as the audited information included elsewhere in this Annual Report and includes all adjustments necessary to present fairly the information set forth therein. The operating results are not necessarily indicative of results for any future period. Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except share and per share amounts) Revenue $ 92,288 $ 97,423 $ 106,963 $ 115,095 Costs and expenses Curriculum and teaching 4,307 6,007 6,351 6,625 Servicing and support 15,233 17,297 16,586 18,087 Technology and content development 13,840 15,235 16,361 18,376 Marketing and sales 53,058 58,376 60,548 49,033 General and administrative 21,869 22,480 18,974 19,666 Total costs and expenses 108,307 119,395 118,820 111,787 Income (loss) from operations (16,019 ) (21,972 ) (11,857 ) 3,308 Interest income 342 912 1,799 2,120 Interest expense (27 ) (27 ) (27 ) (27 ) Other expense, net (395 ) (825 ) (273 ) (229 ) Income (loss) before income taxes (16,099 ) (21,912 ) (10,358 ) 5,172 Income tax benefit (expense) 1,228 3,565 414 (340 ) Net income (loss) $ (14,871 ) $ (18,347 ) $ (9,944 ) $ 4,832 Net income (loss) per share, basic $ (0.28 ) $ (0.33 ) $ (0.17 ) $ 0.08 Net income (loss) per share, diluted $ (0.28 ) $ (0.33 ) $ (0.17 ) $ 0.08 Weighted-average shares used in computing net income (loss) per share, basic 52,687,299 54,981,192 57,663,361 57,924,666 Weighted-average shares used in computing net income (loss) per share, diluted 52,687,299 54,981,192 57,663,361 60,666,682 Three Months Ended March 31, June 30, September 30, December 31, (in thousands, except share and per share amounts) Revenue $ 64,829 $ 64,995 $ 70,250 $ 86,678 Costs and expenses Curriculum and teaching — — 1,792 4,817 Servicing and support 10,925 13,458 12,939 13,445 Technology and content development 9,205 11,140 12,735 12,846 Marketing and sales 34,670 37,242 41,311 37,700 General and administrative 13,664 13,930 17,227 17,844 Total costs and expenses 68,464 75,770 86,004 86,652 Income (loss) from operations (3,635 ) (10,775 ) (15,754 ) 26 Interest income 196 53 18 104 Interest expense — (1 ) (36 ) (50 ) Other income (expense), net — (1,031 ) 59 106 Income (loss) before income taxes (3,439 ) (11,754 ) (15,713 ) 186 Income tax benefit (expense) — — 974 323 Net income (loss) $ (3,439 ) $ (11,754 ) $ (14,739 ) $ 509 Net income (loss) per share, basic $ (0.07 ) $ (0.25 ) $ (0.30 ) $ 0.01 Net income (loss) per share, diluted $ (0.07 ) $ (0.25 ) $ (0.30 ) $ 0.01 Weighted-average shares used in computing net income (loss) per share, basic 47,237,341 47,668,397 48,961,914 52,330,067 Weighted-average shares used in computing net income (loss) per share, diluted 47,237,341 47,668,397 48,961,914 56,593,108 |
Organization (Details)
Organization (Details) | 12 Months Ended |
Dec. 31, 2018segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments (in segments) | 2 |
Number of reportable segments (in segments) | 2 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2017 | |
Property and Equipment, Net | ||||
Investments | $ 25,000 | $ 25,000 | $ 0 | |
Non-Cash Long-Lived Asset Additions | ||||
Capital asset additions during the period | 87,400 | 62,300 | ||
Additional cash classified as cash flows from financing activities | $ (4,900) | |||
Marketing and Sales Costs | ||||
Capitalized software implementation costs | 400 | |||
Minimum | ||||
Amortizable Intangible Assets | ||||
Estimated useful life of intangible assets | 3 years | |||
Maximum | ||||
Amortizable Intangible Assets | ||||
Estimated useful life of intangible assets | 10 years | |||
Accounts payable and accrued expenses | ||||
Marketing and Sales Costs | ||||
Accrued marketing costs | $ 10,300 | $ 10,300 | 11,700 | |
Computer hardware | Minimum | ||||
Property and Equipment, Net | ||||
Useful lives | 3 years | |||
Computer hardware | Maximum | ||||
Property and Equipment, Net | ||||
Useful lives | 5 years | |||
Furniture and office equipment | Minimum | ||||
Property and Equipment, Net | ||||
Useful lives | 5 years | |||
Furniture and office equipment | Maximum | ||||
Property and Equipment, Net | ||||
Useful lives | 7 years | |||
Leasehold improvements | Minimum | ||||
Property and Equipment, Net | ||||
Useful lives | 4 years | |||
Leasehold improvements | Maximum | ||||
Property and Equipment, Net | ||||
Useful lives | 11 years | |||
Landlord funded leasehold improvements | ||||
Non-Cash Long-Lived Asset Additions | ||||
Non-cash capital expenditure | $ 5,300 | $ 11,200 | ||
Internally-developed software | Minimum | ||||
Amortizable Intangible Assets | ||||
Estimated useful life of intangible assets | 3 years | |||
Useful life of capitalized content development costs | 4 years | |||
Internally-developed software | Maximum | ||||
Amortizable Intangible Assets | ||||
Estimated useful life of intangible assets | 5 years | |||
Useful life of capitalized content development costs | 5 years | |||
Graduate Program Segment | Minimum | ||||
Property and Equipment, Net | ||||
Terms of contract with customer | 10 years | 10 years | ||
Graduate Program Segment | Maximum | ||||
Property and Equipment, Net | ||||
Terms of contract with customer | 15 years | 15 years | ||
Short Course Segment | Minimum | ||||
Property and Equipment, Net | ||||
Terms of contract with customer | 42 days | 42 days | ||
Short Course Segment | Maximum | ||||
Property and Equipment, Net | ||||
Terms of contract with customer | 112 days | 112 days | ||
ASU 2016-09 | Additional Paid-In Capital | ||||
Marketing and Sales Costs | ||||
Cumulative effect of new accounting policy | $ 100 | |||
ASU 2016-09 | Accumulated Deficit | ||||
Marketing and Sales Costs | ||||
Cumulative effect of new accounting policy | $ (100) | |||
ASU 2016-02 | ||||
Marketing and Sales Costs | ||||
Right-of-use asset | $ 33,000 | $ 33,000 | ||
Lease liability | $ 58,000 | $ 58,000 |
Business Combination - Estimate
Business Combination - Estimated Fair Value (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Acquisition | ||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||
Goodwill | $ 61,852 | $ 71,988 | $ 0 | |
University client relationships | ||||
Acquisition | ||||
Estimated useful life of intangible assets | 9 years | |||
GetSmarter | ||||
Acquisition | ||||
Cash consideration | $ 98,700 | |||
Potential earn-out payment | 20,000 | |||
Cash and cash equivalents | 1,584 | |||
Current assets | 3,676 | |||
Property and equipment, net | 479 | |||
Goodwill | 68,172 | |||
Current liabilities | (9,031) | |||
Non-current liabilities | (10,894) | |||
Total | $ 98,686 | |||
GetSmarter | Capitalized technology | ||||
Acquisition | ||||
Estimated useful life of intangible assets | 3 years | |||
Amortizable intangible assets | $ 2,800 | |||
GetSmarter | Capitalized content development | ||||
Acquisition | ||||
Estimated useful life of intangible assets | 4 years | |||
Amortizable intangible assets | $ 5,000 | |||
GetSmarter | University client relationships | ||||
Acquisition | ||||
Estimated useful life of intangible assets | 9 years | |||
Amortizable intangible assets | $ 28,000 | |||
GetSmarter | Trade names and domain names | ||||
Acquisition | ||||
Estimated useful life of intangible assets | 10 years | |||
Amortizable intangible assets | $ 8,900 |
Business Combination - Pro Form
Business Combination - Pro Forma Information (Details) $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2017USD ($)$ / shares | |
Business Combinations [Abstract] | |
Pro forma revenue | $ 294,446 |
Pro forma net loss | $ (37,267) |
Pro forma net loss per share, basic and diluted (in dollars per share) | $ / shares | $ (0.76) |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment, Net | |||
Property and equipment, gross | $ 67,100 | $ 56,153 | |
Accumulated depreciation and amortization | (14,801) | (7,098) | |
Property and equipment, net | 52,299 | 49,055 | |
Depreciation expense | 8,900 | 5,500 | $ 1,700 |
Computer hardware | |||
Property and Equipment, Net | |||
Property and equipment, gross | 5,114 | 2,663 | |
Furniture and office equipment | |||
Property and Equipment, Net | |||
Property and equipment, gross | 14,888 | 11,210 | |
Leasehold improvements | |||
Property and Equipment, Net | |||
Property and equipment, gross | 45,158 | 42,086 | |
Leasehold improvements in process | |||
Property and Equipment, Net | |||
Property and equipment, gross | $ 1,940 | $ 194 |
Goodwill and Amortizable Inta_3
Goodwill and Amortizable Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill [Line Items] | ||
Goodwill | $ 71,988 | $ 0 |
Acquisition of GetSmarter | 68,172 | |
Foreign currency translation adjustments | (10,136) | 3,816 |
Goodwill | 61,852 | 71,988 |
Graduate Program Segment | ||
Goodwill [Line Items] | ||
Goodwill | 0 | 0 |
Acquisition of GetSmarter | 0 | |
Foreign currency translation adjustments | 0 | 0 |
Goodwill | 0 | 0 |
Short Course Segment | ||
Goodwill [Line Items] | ||
Goodwill | 71,988 | 0 |
Acquisition of GetSmarter | 68,172 | |
Foreign currency translation adjustments | (10,136) | 3,816 |
Goodwill | $ 61,852 | $ 71,988 |
Goodwill and Amortizable Inta_4
Goodwill and Amortizable Intangible Assets - Amortizable Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 192,425 | $ 124,542 |
Accumulated Amortization | (55,820) | (33,781) |
Net Carrying Amount | $ 136,605 | 90,761 |
Minimum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 3 years | |
Maximum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 10 years | |
Capitalized technology | ||
Goodwill and Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 68,291 | 27,108 |
Accumulated Amortization | (16,945) | (9,486) |
Net Carrying Amount | $ 51,346 | 17,622 |
Capitalized technology | Minimum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 3 years | |
Capitalized technology | Maximum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 5 years | |
Capitalized content development | ||
Goodwill and Amortizable Intangible Assets | ||
Gross Carrying Amount | $ 79,725 | 55,872 |
Accumulated Amortization | (31,662) | (21,417) |
Net Carrying Amount | $ 48,063 | 34,455 |
Capitalized content development | Minimum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 4 years | |
Capitalized content development | Maximum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 5 years | |
University client relationships | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 9 years | |
Gross Carrying Amount | $ 25,616 | 29,443 |
Accumulated Amortization | (4,269) | (1,636) |
Net Carrying Amount | 21,347 | 27,807 |
Trade names and domain names | ||
Goodwill and Amortizable Intangible Assets | ||
Gross Carrying Amount | 18,793 | 12,119 |
Accumulated Amortization | (2,944) | (1,242) |
Net Carrying Amount | $ 15,849 | 10,877 |
Trade names and domain names | Minimum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 8 years | |
Trade names and domain names | Maximum | ||
Goodwill and Amortizable Intangible Assets | ||
Estimated Average Useful Life (in years) | 10 years | |
In process capitalized technology and content development | ||
Goodwill and Amortizable Intangible Assets | ||
Net Carrying Amount | $ 40,300 | $ 15,600 |
Goodwill and Amortizable Inta_5
Goodwill and Amortizable Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||
Payments to acquire software | $ 9.5 | |
Payments for website | 7.6 | |
WeWork Companies Inc. | ||
Finite-Lived Intangible Assets [Line Items] | ||
Agreement to offer scholarships | 5 | |
Software development license and services agreement | Flatiron School, Inc | ||
Finite-Lived Intangible Assets [Line Items] | ||
Payments to acquire software | 13.2 | |
Cost of services licenses of source code and software | $ 14.5 | |
License and software software services fee payable | $ 1.3 |
Goodwill and Amortizable Inta_6
Goodwill and Amortizable Intangible Assets - Estimated Future Amortization Expense and License agreement (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $ 23,900 | $ 14,000 | $ 8,000 |
Future amortization expense | |||
Net Carrying Amount | 136,605 | $ 90,761 | |
Excluding in process capitalized technology and content development | |||
Future amortization expense | |||
2,019 | 25,244 | ||
2,020 | 21,814 | ||
2,021 | 16,420 | ||
2,022 | 12,405 | ||
2,023 | 7,690 | ||
Thereafter | 12,730 | ||
Net Carrying Amount | $ 96,303 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Future minimum payments to clients | |
2,019 | $ 10,125 |
2,020 | 625 |
2,021 | 625 |
2,022 | 625 |
2,023 | 625 |
Thereafter | 3,775 |
Total future minimum payments to university clients | $ 16,400 |
Leases (Details)
Leases (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Future minimum lease payments | |||
2,019 | $ 12,941,000 | ||
2,020 | 14,020,000 | ||
2,021 | 13,900,000 | ||
2,022 | 13,633,000 | ||
2,023 | 13,959,000 | ||
Thereafter | 68,347,000 | ||
Total future minimum lease payments | 136,800,000 | ||
Deferred rent liability | 8,900,000 | $ 6,500,000 | |
Sublease income | 0 | 0 | $ 300,000 |
Rent expense net of sublease income | $ 9,300,000 | $ 8,500,000 | $ 5,800,000 |
Debt (Details)
Debt (Details) | Jun. 27, 2017USD ($)employee | Jun. 22, 2017USD ($)employee | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Mar. 31, 2018USD ($) | Jun. 30, 2017USD ($)grant | Dec. 31, 2015USD ($) | Dec. 31, 2013USD ($) |
Lines of Credit | ||||||||
Aggregate borrowing base | $ 25,000,000 | $ 37,000,000 | ||||||
Amount outstanding | $ 0 | $ 0 | ||||||
Adjusted quick ratio | 12.38 | 5.44 | ||||||
Security deposit | $ 11,500,000 | $ 3,500,000 | ||||||
Government Grants | ||||||||
Amount of loan | 3,500,000 | $ 3,500,000 | ||||||
Number of government grants (in grants) | grant | 2 | |||||||
Prince George's County, Maryland | ||||||||
Government Grants | ||||||||
Amount of loan | $ 1,500,000 | |||||||
Loan interest rate (in percentage) | 3.00% | |||||||
Minimum number of employees required to avoid default of loan for payment principal and accrued interest (in employees) | employee | 650 | |||||||
Minimum number of employees required to avoid default of loan for payment prorated portion and interest (in employees) | employee | 1,300 | |||||||
Amount of prorated portion of loan per employee | $ 2,252 | |||||||
Standby letters of credit | ||||||||
Lines of Credit | ||||||||
Aggregate borrowing base | $ 10,000,000 | |||||||
Short Course Segment | ||||||||
Lines of Credit | ||||||||
Amount outstanding | $ 0 | |||||||
Interest rate (in percentage) | 10.25% | |||||||
Short Course Segment | Revolving working capital facility | ||||||||
Lines of Credit | ||||||||
Aggregate borrowing base | $ 1,900,000 | $ 1,300,000 | ||||||
Harkins Road LLC | Department of Commerce | ||||||||
Government Grants | ||||||||
Amount of loan | $ 2,000,000 | |||||||
Loan interest rate (in percentage) | 3.00% | |||||||
Minimum number of employees required to avoid default of loan for payment principal and accrued interest (in employees) | employee | 650 | |||||||
Minimum number of employees required to avoid default of loan for payment prorated portion and interest (in employees) | employee | 1,600 | |||||||
Amount of prorated portion of loan per employee | $ 2,105 | |||||||
Base rate | ||||||||
Lines of Credit | ||||||||
Applicable margin (as a percent) | 1.50% | |||||||
Federal fund rate | ||||||||
Lines of Credit | ||||||||
Applicable margin (as a percent) | 1.00% | |||||||
30 days LIBOR | ||||||||
Lines of Credit | ||||||||
Applicable margin (as a percent) | 1.00% | |||||||
LIBOR | ||||||||
Lines of Credit | ||||||||
Applicable margin (as a percent) | 2.50% | |||||||
Minimum | ||||||||
Lines of Credit | ||||||||
Covenants ratio | 1.10 |
Income Taxes - Other (Details)
Income Taxes - Other (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||||||||||
Income tax benefit | $ (340) | $ 414 | $ 3,565 | $ 1,228 | $ 323 | $ 974 | $ 0 | $ 0 | $ 4,867 | $ 1,297 | $ 0 |
Components of loss before income taxes | |||||||||||
United States | (33,339) | (25,002) | (20,684) | ||||||||
Foreign | (9,858) | (5,718) | 0 | ||||||||
Loss before income taxes | 5,172 | $ (10,358) | $ (21,912) | $ (16,099) | 186 | $ (15,713) | $ (11,754) | $ (3,439) | $ (43,197) | $ (30,720) | $ (20,684) |
Reconciliation between statutory federal income tax rate and the effective tax rate | |||||||||||
U.S. statutory federal income tax rate | 21.00% | 35.00% | 35.00% | ||||||||
U.S. state income taxes, net of federal benefits | 0.90% | 9.90% | 5.50% | ||||||||
Foreign tax rate differential | 1.10% | (1.40%) | 0.00% | ||||||||
Non-deductible expenses | (2.60%) | (1.80%) | (1.50%) | ||||||||
Stock-based compensation | 30.00% | 40.90% | (2.90%) | ||||||||
Change in valuation allowance | (39.30%) | 29.80% | (36.60%) | ||||||||
Change in tax rate | (0.10%) | (108.00%) | 0.00% | ||||||||
Other | 0.30% | (0.20%) | 0.50% | ||||||||
Effective tax rate | 11.30% | 4.20% | 0.00% | ||||||||
Deferred tax assets: | |||||||||||
Accrued expenses and other | 2,580 | 2,395 | $ 2,580 | $ 2,395 | |||||||
Accrued compensation and related benefits | 3,395 | 3,524 | 3,395 | 3,524 | |||||||
Rebate reserve | 5 | 20 | 5 | 20 | |||||||
Deferred rent | 6,388 | 6,924 | 6,388 | 6,924 | |||||||
Stock-based compensation | 8,279 | 6,874 | 8,279 | 6,874 | |||||||
Deferred income | 257 | 191 | 257 | 191 | |||||||
Foreign net operating loss carryforwards | 1,543 | 1,704 | 1,543 | 1,704 | |||||||
U.S. net operating loss carryforwards | 96,809 | 69,425 | 96,809 | 69,425 | |||||||
Valuation allowance | (88,061) | (71,101) | (88,061) | (71,101) | |||||||
Total deferred tax assets | 31,195 | 19,956 | 31,195 | 19,956 | |||||||
Deferred tax liabilities: | |||||||||||
Prepaid expenses and other | (95) | (355) | (95) | (355) | |||||||
Capitalized content development costs | (11,866) | (8,600) | (11,866) | (8,600) | |||||||
Capitalized software development costs | (13,388) | (4,356) | (13,388) | (4,356) | |||||||
Property and equipment | (4,038) | (4,720) | (4,038) | (4,720) | |||||||
Intangibles | (8,757) | (12,012) | (8,757) | (12,012) | |||||||
Total deferred tax liabilities | (38,144) | (30,043) | (38,144) | (30,043) | |||||||
Net deferred tax liabilities | $ (6,949) | $ (10,087) | $ (6,949) | $ (10,087) |
Income Taxes - Carryforwards (D
Income Taxes - Carryforwards (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Increase in valuation allowance | $ 17,000,000 |
Income tax returns currently under examination | 0 |
U.S. | |
Operating loss carryforwards | 373,500,000 |
Operating loss carryforward, subject to expiration | 254,500,000 |
Operating loss carryforward, not subject to expiration | 119,000,000 |
Foreign | |
Operating loss carryforwards | $ 5,800,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stockholders' Equity | |||
Proceeds from issuance of common stock, net of offering costs | $ 330,901 | $ 189,463 | $ 0 |
Authorized shares of capital stock | 205,000,000 | ||
Authorized shares of common stock | 200,000,000 | 200,000,000 | |
Authorized shares of preferred stock | 5,000,000 | 5,000,000 | |
Shares of common stock reserved for future issuance | |||
Outstanding stock options (in shares) | 4,057,788 | ||
Outstanding restricted stock units (in shares) | 1,139,045 | ||
Possible future issuance under 2014 Equity Incentive Plan (in shares) | 6,219,244 | ||
Available for future issuance under employee stock purchase plan (in shares) | 936,329 | ||
Total shares of common stock reserved for future issuance (in shares) | 12,352,406 | ||
Common Stock | |||
Stockholders' Equity | |||
Shares issued | 3,833,334 | 4,047,500 | 12,708 |
Common Stock | Underwriters' over-allotment option | |||
Stockholders' Equity | |||
Shares issued | 500,000 | 547,500 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Details) $ / shares in Units, $ in Millions | 12 Months Ended | |||||
Dec. 31, 2018USD ($)plan$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / shares | Jan. 01, 2019shares | Jan. 01, 2017shares | Jan. 30, 2014shares | |
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Number of share-based employee compensation plans (in plans) | plan | 2 | |||||
Common stock reserved for issuance (in shares) | 12,352,406 | |||||
Compensation cost related to the nonvested awards not yet recognized | $ | $ 28.9 | |||||
Weighted average period for recognition of compensation cost | 2 years 10 months 22 days | |||||
Total unrecognized compensation cost related to unvested RSUs | $ | $ 43.8 | |||||
Unrecognized compensation cost period expected to be realized | 2 years 2 months 16 days | |||||
Restricted stock units | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Restricted stock units outstanding (in shares) | 1,139,045 | 1,413,423 | ||||
Number of restricted stock units granted (in shares) | 536,502 | |||||
Vesting period | 4 years | |||||
Stock options | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Option to purchase common stock, outstanding (in shares) | 4,057,788 | 4,559,176 | ||||
Weighted average exercise price (in dollars per share) | $ / shares | $ 27.23 | $ 15.10 | ||||
Granted (in shares) | 668,390 | |||||
Granted options, exercise price (in dollars per share) | $ / shares | $ 84.06 | |||||
Vesting period | 4 years | |||||
Expiration period | 10 years | |||||
Weighted average grant date fair value (in dollars per share) | $ / shares | $ 39.66 | $ 19.65 | $ 11.41 | |||
Aggregate intrinsic value of employee options exercised | $ | $ 54 | $ 24.9 | $ 24.9 | |||
2008 Equity Incentive Plan | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Number of options or stock awards available for grant under the plan (in shares) | 0 | |||||
Option to purchase common stock, outstanding (in shares) | 1,370,062 | |||||
Weighted average exercise price (in dollars per share) | $ / shares | $ 4.95 | |||||
Equity Incentive Plan 2014 | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Shares authorized under the plan (in shares) | 2,800,000 | |||||
Number of shares that may be added to the 2014 Plan (in shares) | 5,943,348 | |||||
Period of annual automatic increase in the number of shares authorized | 10 years | |||||
Percentage applied on total number of shares of common stock outstanding on previous calendar year for automatic inclusion in the plan | 5.00% | |||||
Common stock reserved for issuance (in shares) | 6,219,244 | 2,896,365 | 2,625,292 | |||
Option to purchase common stock, outstanding (in shares) | 2,687,726 | |||||
Weighted average exercise price (in dollars per share) | $ / shares | $ 38.58 | |||||
Equity Incentive Plan 2014 | Maximum | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Number of options or stock awards available for grant under the plan (in shares) | 5,943,348 | |||||
Equity Incentive Plan 2014 | Restricted stock units | ||||||
Stock-based compensation expense included in the unaudited condensed consolidated statements of operations | ||||||
Restricted stock units outstanding (in shares) | 1,139,045 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stock options | ||||
Fair value assumptions and methodology | ||||
Risk-free interest rate minimum (as a percent) | 2.30% | 2.00% | 1.10% | |
Risk-free interest rate maximum (as a percent) | 3.00% | 2.10% | 1.90% | |
Expected volatility minimum (as a percent) | 44.00% | 46.00% | ||
Expected volatility maximum (as a percent) | 45.00% | 49.00% | ||
Expected volatility (as a percent) | 50.00% | |||
Dividend yield (as a percent) | 0.00% | 0.00% | 0.00% | |
Number of Options | ||||
Outstanding balance at the beginning of the period (in shares) | 4,559,176 | 4,559,176 | ||
Granted (in shares) | 668,390 | |||
Exercised (in shares) | (1,012,473) | |||
Forfeited (in shares) | (157,305) | |||
Expired (in shares) | 0 | |||
Outstanding balance at the end of the period (in shares) | 4,057,788 | 4,559,176 | ||
Exercisable at the end of the period (in shares) | 2,910,317 | |||
Weighted Average Exercise Price per Share | ||||
Outstanding balance at the beginning of the period (in dollars per share) | $ 15.10 | $ 15.10 | ||
Granted (in dollars per share) | 84.06 | |||
Exercised (in dollars per share) | 7.27 | |||
Forfeited (in dollars per share) | 45.59 | |||
Expired (in dollars per share) | $ 0 | |||
Outstanding balance at the end of the period (in dollars per share) | 27.23 | $ 15.10 | ||
Exercisable at the end of the period (in dollars per share) | $ 14.07 | |||
Weighted Average Remaining Contractual Term | ||||
Outstanding balance | 5 years 11 months 13 days | 5 years 10 months 20 days | ||
Granted | 8 years 9 months 5 days | |||
Exercised | 2 years 4 months 3 days | |||
Exercisable at the end of the period | 4 years 10 months 28 days | |||
Aggregate Intrinsic Value | ||||
Outstanding balance at the end of the period | $ 113,211 | $ 225,283 | ||
Exercisable at the end of the period | $ 104,444 | |||
Stock options | Minimum | ||||
Fair value assumptions and methodology | ||||
Expected term in (years) | 5 years 11 months 19 days | 6 years | 5 years 5 months 5 days | |
Stock options | Maximum | ||||
Fair value assumptions and methodology | ||||
Expected term in (years) | 6 years 9 months 7 days | 6 years 29 days | 6 years 6 months | |
Restricted stock units | ||||
Summary of restricted stock unit activity | ||||
Outstanding balance at the beginning of the period (in shares) | 1,413,423 | 1,413,423 | ||
Granted (in shares) | 536,502 | |||
Vested (in shares) | (595,866) | |||
Forfeited (in shares) | (215,014) | |||
Outstanding balance at the end of the period (in shares) | 1,139,045 | 1,413,423 | ||
Weighted-Average Grant-Date Fair value | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 29.95 | $ 29.95 | ||
Granted (in dollars per share) | 81.55 | |||
Vested (in dollars per share) | 25.79 | |||
Forfeited (in dollars per share) | 50.90 | |||
Outstanding at the end of the period (in dollars per share) | $ 52.47 | $ 29.95 |
Stock-Based Compensation - Empl
Stock-Based Compensation - Employee Stock Purchase Plan (Details) - USD ($) | Jun. 05, 2017 | Dec. 31, 2018 |
Employee Stock Purchase Plan | ||
Percentage of purchase price to fair market value | 85.00% | |
Maximum payroll deduction amount per calendar year | $ 25,000 | |
Issuance of common stock in connection with employee stock purchase plan | $ 3,121,000 | |
Available for future issuance under employee stock purchase plan (in shares) | 936,329 | |
Minimum | ||
Employee Stock Purchase Plan | ||
Percentage of payroll deduction | 1.00% | |
Maximum | ||
Employee Stock Purchase Plan | ||
Percentage of payroll deduction | 15.00% | |
Maximum shares of common stock issued under ESPP (in shares) | 1,000,000 | |
Common Stock | ||
Employee Stock Purchase Plan | ||
Maximum shares of common stock issued under ESPP (in shares) | 63,671 | |
Issuance of common stock in connection with employee stock purchase plan | $ 3,100,000 |
Stock-Based Compensation - St_2
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 31,410 | $ 21,930 | $ 15,823 | |
Curriculum and teaching | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 3 | 14 | 0 | |
Servicing and support | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 4,764 | 4,036 | 3,245 | |
Technology and content development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 4,094 | 3,306 | 2,392 | |
Marketing and sales | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 2,743 | 1,742 | 1,317 | |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 19,795 | $ 12,843 | $ 8,869 |
Net Loss per Share (Details)
Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Numerator | |||
Net loss | $ (38,330) | $ (29,423) | $ (20,684) |
Denominator: | |||
Weighted-average shares used in computing net loss per share, basic and diluted (in shares) | 55,833,492 | 49,062,611 | 46,609,751 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.69) | $ (0.60) | $ (0.44) |
Stock options | |||
Potential dilutive securities that would have been anti-dilutive | |||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 4,057,788 | 4,559,176 | 4,882,237 |
Restricted stock units | |||
Potential dilutive securities that would have been anti-dilutive | |||
Potential dilutive securities that would have been anti-dilutive due to net loss (in shares) | 1,139,045 | 1,413,423 | 1,412,934 |
Segment and Geographic Inform_3
Segment and Geographic Information - Narrative (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Segment Reporting Information [Line Items] | |||||||||||
Number of operating segments (in segments) | segment | 2 | ||||||||||
Number of reportable segments (in segments) | segment | 2 | ||||||||||
Accounts receivable, net | $ 32,636 | $ 14,174 | $ 32,636 | $ 14,174 | |||||||
Revenue | 115,095 | $ 106,963 | $ 97,423 | $ 92,288 | 86,678 | $ 70,250 | $ 64,995 | $ 64,829 | 411,769 | 286,752 | $ 205,864 |
Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Accounts receivable, net | 31,110 | 12,520 | 31,110 | 12,520 | |||||||
Revenue | 348,361 | 270,432 | 205,864 | ||||||||
Deferred revenue, recognized during period | 2,500 | ||||||||||
Capitalized Contract Cost, Net | 300 | 300 | |||||||||
Short Course Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Accounts receivable, net | 982 | 988 | 982 | 988 | |||||||
Revenue | 63,408 | 16,320 | $ 0 | ||||||||
Deferred revenue, recognized during period | 4,500 | ||||||||||
Short Course Segment | Non-US | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenues | 33,900 | 10,000 | |||||||||
Long-Lived Assets | 1,200 | 700 | $ 1,200 | $ 700 | |||||||
University client A | Revenue | Customer concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 21.00% | 27.00% | |||||||||
Revenue | $ 86,900 | $ 77,600 | |||||||||
University client A | Accounts receivable | Credit concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 36.00% | 67.00% | |||||||||
Accounts receivable, net | 11,900 | 9,400 | $ 11,900 | $ 9,400 | |||||||
University client B | Revenue | Customer concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 13.00% | 17.00% | |||||||||
Revenue | $ 54,200 | $ 48,200 | |||||||||
University client B | Accounts receivable | Credit concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 36.00% | 14.00% | |||||||||
Accounts receivable, net | $ 11,800 | $ 2,000 | $ 11,800 | $ 2,000 | |||||||
University client C | Revenue | Customer concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 10.00% | 11.00% | |||||||||
Revenue | $ 42,700 | $ 30,100 | |||||||||
University client D | Revenue | Customer concentration risk | Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 10.00% | ||||||||||
Revenue | $ 28,300 | ||||||||||
3 University Clients | Revenue | Customer concentration risk | Short Course Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Percentage of concentration of credit risk | 81.00% | 82.00% |
Segment and Geographic Inform_4
Segment and Geographic Information - Segment Results of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||||||||||
Revenue | $ 115,095 | $ 106,963 | $ 97,423 | $ 92,288 | $ 86,678 | $ 70,250 | $ 64,995 | $ 64,829 | $ 411,769 | $ 286,752 | $ 205,864 |
Total segment profitability | $ 17,655 | $ 11,416 | $ 4,541 | ||||||||
Segment profitability margin | 2.20% | ||||||||||
Graduate Program Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | $ 348,361 | $ 270,432 | $ 205,864 | ||||||||
Total segment profitability | $ 16,839 | $ 13,022 | $ 4,541 | ||||||||
Segment profitability margin | 4.10% | 4.50% | 2.20% | ||||||||
Short Course Segment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | $ 63,408 | $ 16,320 | $ 0 | ||||||||
Total segment profitability | $ 816 | $ (1,606) | $ 0 | ||||||||
Segment profitability margin | 0.20% | (0.60%) | 0.00% | ||||||||
Intersegment | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Revenue | $ 44 |
Segment and Geographic Inform_5
Segment and Geographic Information - Reconciliation of Net Loss to Total Segment Profitability (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Reporting [Abstract] | |||||||||||
Net loss | $ 4,832 | $ (9,944) | $ (18,347) | $ (14,871) | $ 509 | $ (14,739) | $ (11,754) | $ (3,439) | $ (38,330) | $ (29,423) | $ (20,684) |
Interest income | (2,120) | (1,799) | (912) | (342) | (104) | (18) | (53) | (196) | (5,173) | (371) | (383) |
Interest expense | 27 | 27 | 27 | 27 | 50 | 36 | 1 | 0 | 108 | 87 | 35 |
Foreign currency loss | 1,722 | 866 | 0 | ||||||||
Depreciation and amortization expense | 32,785 | 19,624 | 9,750 | ||||||||
Income tax benefit | $ 340 | $ (414) | $ (3,565) | $ (1,228) | $ (323) | $ (974) | $ 0 | $ 0 | (4,867) | (1,297) | 0 |
Stock-based compensation expense | 31,410 | 21,930 | 15,823 | ||||||||
Total adjustments | 55,985 | 40,839 | 25,225 | ||||||||
Total segment profitability | $ 17,655 | $ 11,416 | $ 4,541 |
Segment and Geographic Inform_6
Segment and Geographic Information - Total Assets by Segment (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 807,354 | $ 482,062 |
Graduate Program Segment | ||
Segment Reporting Information [Line Items] | ||
Assets | 702,827 | 359,597 |
Short Course Segment | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 104,527 | $ 122,465 |
Segment and Geographic Inform_7
Segment and Geographic Information - Trade Accounts Receivable and Contract Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Accounts receivable, net | $ 32,636 | $ 14,174 |
Total trade accounts receivable | 32,357 | 14,174 |
Contract liabilities | 8,345 | 7,024 |
Graduate Program Segment | ||
Segment Reporting Information [Line Items] | ||
Allowance for Doubtful Accounts Receivable | 0 | 0 |
Accounts receivable, net | 31,110 | 12,520 |
Unbilled revenue | 265 | 666 |
Contract liabilities | 2,864 | 2,523 |
Short Course Segment | ||
Segment Reporting Information [Line Items] | ||
Allowance for Doubtful Accounts Receivable | 257 | 287 |
Accounts receivable, net | 982 | 988 |
Contract liabilities | $ 5,481 | $ 4,501 |
Retirement Plan (Details)
Retirement Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Retirement Benefits [Abstract] | |||
Eligible employees to contribute | 100.00% | ||
Employee contribution | 33.00% | ||
Maximum matching contributions as a percentage of eligible compensation | 6.00% | ||
Contributions made by Company | $ 2.1 | $ 1.3 | $ 1.1 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Related Party Transactions | |||
Repayment of security deposit | $ 100,000 | $ 100,000 | |
Rental income from related entity | $ 300,000 | ||
Due from (to) related party | 0 | 0 | |
Executive Officer | |||
Related Party Transactions | |||
Expenses incurred related to the services received from related party | $ 0 | $ 0 | $ 1,400,000 |
Minimum | |||
Related Party Transactions | |||
Ownership interest (as percent) | 5.00% |
Quarterly Financial Informati_3
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Revenue | $ 115,095 | $ 106,963 | $ 97,423 | $ 92,288 | $ 86,678 | $ 70,250 | $ 64,995 | $ 64,829 | $ 411,769 | $ 286,752 | $ 205,864 |
Costs and expenses | |||||||||||
Curriculum and teaching | 6,625 | 6,351 | 6,007 | 4,307 | 4,817 | 1,792 | 0 | 0 | 23,290 | 6,609 | 0 |
Servicing and support | 18,087 | 16,586 | 17,297 | 15,233 | 13,445 | 12,939 | 13,458 | 10,925 | 67,203 | 50,767 | 40,982 |
Technology and content development | 18,376 | 16,361 | 15,235 | 13,840 | 12,846 | 12,735 | 11,140 | 9,205 | 63,812 | 45,926 | 33,283 |
Marketing and sales | 49,033 | 60,548 | 58,376 | 53,058 | 37,700 | 41,311 | 37,242 | 34,670 | 221,015 | 150,923 | 106,610 |
General and administrative | 19,666 | 18,974 | 22,480 | 21,869 | 17,844 | 17,227 | 13,930 | 13,664 | 82,989 | 62,665 | 46,021 |
Total costs and expenses | 111,787 | 118,820 | 119,395 | 108,307 | 86,652 | 86,004 | 75,770 | 68,464 | 458,309 | 316,890 | 226,896 |
Loss from operations | 3,308 | (11,857) | (21,972) | (16,019) | 26 | (15,754) | (10,775) | (3,635) | (46,540) | (30,138) | (21,032) |
Interest income | 2,120 | 1,799 | 912 | 342 | 104 | 18 | 53 | 196 | 5,173 | 371 | 383 |
Interest expense | (27) | (27) | (27) | (27) | (50) | (36) | (1) | 0 | (108) | (87) | (35) |
Other expense, net | (229) | (273) | (825) | (395) | 106 | 59 | (1,031) | 0 | (1,722) | (866) | 0 |
Loss before income taxes | 5,172 | (10,358) | (21,912) | (16,099) | 186 | (15,713) | (11,754) | (3,439) | (43,197) | (30,720) | (20,684) |
Income tax benefit (expense) | (340) | 414 | 3,565 | 1,228 | 323 | 974 | 0 | 0 | 4,867 | 1,297 | 0 |
Net loss | $ 4,832 | $ (9,944) | $ (18,347) | $ (14,871) | $ 509 | $ (14,739) | $ (11,754) | $ (3,439) | $ (38,330) | $ (29,423) | $ (20,684) |
Net income (loss) per share, basic (in dollars per share) | $ 0.08 | $ (0.17) | $ (0.33) | $ (0.28) | $ 0.01 | $ (0.30) | $ (0.25) | $ (0.07) | |||
Net income (loss) per share, diluted (in dollars per share) | $ 0.08 | $ (0.17) | $ (0.33) | $ (0.28) | $ 0.01 | $ (0.30) | $ (0.25) | $ (0.07) | |||
Weighted-average shares used in computing net income (loss) per share, basic (in shares) | 57,924,666 | 57,663,361 | 54,981,192 | 52,687,299 | 52,330,067 | 48,961,914 | 47,668,397 | 47,237,341 | |||
Weighted-average shares used in computing net income (loss) per share, diluted (in shares) | 60,666,682 | 57,663,361 | 54,981,192 | 52,687,299 | 56,593,108 | 48,961,914 | 47,668,397 | 47,237,341 |
Uncategorized Items - twou-2018
Label | Element | Value |
Payments to Acquire Businesses, Net of Cash Acquired | us-gaap_PaymentsToAcquireBusinessesNetOfCashAcquired | $ 0 |