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Last week, the big topic of conversation across the online learning community was 2U. A great number of universities (including my own) collaborate with 2U, either as degree partners or in nondegree online programs through the edX platform, which 2U acquired for $800 million in 2021. The trigger for these conversations about 2U within and across our universities was the Feb. 12 fourth-quarter and full-year earnings call. That call was followed by Phil Hill’s piece “2U’s Potential End Days Becoming More Clear” and “Online Course Provider 2U Faces Doubts It Can Continue” in Inside Higher Ed.
At 2U, the person I’ve known the longest is Andrew Hermalyn. Over the years and through a number of leadership roles at 2U (he is now president of the degree program segment), Andrew has developed a reputation in our university community as a straight shooter, a good listener and someone with deep integrity. I wanted to hear from Andrew to get his take on 2U’s ability to be a long-term partner for our universities. He graciously agreed to this Q&A.
Q: How should those of us in universities understand this language in the Feb. 12 earnings call?
“The company expects that if it does not amend or refinance its term loan, or raise capital to reduce its debt in the short term and in the event the obligations under its term loan accelerate or come due within 12 months from the date of its financial statement issuance in accordance with its current terms, there is substantial doubt about its ability to continue as a going concern.”
How do we explain to our deans, provost, CFO or president that it is a good idea for us to partner with 2U or edX on a degree or nondegree program?
A: First, let me emphasize that there is a lot to be confident and excited about when working with 2U. 2U has had a distinctive leadership position in the education sector for over 15 years, based on our strong network of partners, expansive global reach and our unmatched people, services and technology. None of that has changed.
To address the language you shared, “going concern” is a specific accounting requirement related to our ability to address our debt, a proportion of which matures in 2025. Nothing about the going concern inhibits our ability to maintain operations. We expect to refinance our debt between now and the end of the year.
The most important thing for our partners to understand about our financial position is that we are taking actions to position 2U for long-term success. We are engaged in constructive discussions with our lenders to reach a resolution regarding our capital structure, and importantly, we have sufficient time and liquidity to do so. We have already taken steps to shore up our liquidity and have also kicked off working capital improvement initiatives to further enhance liquidity. When combined with the approximately $73.4 million we had in cash on hand at the end of Q4, these actions put us in a strong position to operate the business going forward.
We have the best set of offerings—from free courses to degrees—that we’ve ever had, and our portfolio is only growing. In 2024, for example, we’re targeting 60 new degree program launches and a variety of alternative credential offerings in high-demand, high-impact topics such as AI and sustainability.
We are also more flexible than ever in terms of how we work with universities.
And finally, we remain committed to being a leader in innovation and helping our partners navigate the fast-changing online education landscape today and well into the future.
Q: How is 2U operating the business in order to create a sustainable company with solid financials? Our time horizons at universities are very long, and we look for partners that have a similar long-term orientation.
A: We are focused on delivering great outcomes for our students and our partners. To best support them long term, we need a healthy and strong foundation. Our strategic initiatives are critical to our ability to bolster our operational structure and financial performance, and the measures we have implemented are already enhancing our operational efficiency and improving our cash flow. We are confident that we can navigate some of our current challenges while maintaining the quality of our offerings and ensuring day-to-day operations continue as normal.
Our approach to partnerships has always been and will continue to be strategic and long term in nature. Our relationships with universities are deeply collaborative and inherently strategic. When a college or university chooses to partner with us, it’s not for a short-term project or a single initiative—it’s a decision to work together toward achieving their online educational goals over the long haul. This kind of partnership requires time, commitment and a shared vision for the future. We think in terms of years, not weeks or months. This aligns perfectly with the time horizons of universities, ensuring that we are not only in sync with our partners’ current needs but are also jointly planning for a future that is both sustainable and prosperous.
Q: The culture of higher education places enormous value on transparency, collegiality and a willingness to be critical of one’s own actions. How is 2U currently thinking about its communications strategy with the university community?
A: At 2U, we pride ourselves on the principle that relationships matter. We approach every partnership with a focus on building trust, creating space for two-way feedback and maintaining a human touch. This approach has always been the hallmark of our institutional partnerships, many of which have lasted over a decade.
In January, we announced a new lineup of outreach and events to share the latest company news with our partners, provide insights on the online education landscape and create more opportunities for candid, honest and open discussions between partners and our leadership team and in-house experts.
This week, we pulled together our partners for a Q&A session, which I hope left everyone feeling clear-eyed on some of the complex topics from our earnings call. We will continue to keep our university community engaged, informed and aligned on our path forward.
