e-Literate

Present is Prologue

Tag: OESP

  • 2U Learning Platform Update: Removal of Moodle, addition of accessibility options

    2U has now been a public company for over a year, and that had what is easily the most successful education IPO in recent history. Shares have almost doubled from $13.00 at IPO to $25.50 last week. At the same time, there is a swirl of news around their new partner Yale and the Physician Assistant’s program – first the announcement of program from one of the elite of elite schools, second the news that accreditation approval for the new program is not going to be as easy as hoped.

    While both aspects are newsworthy, I’d like to dive deeper into their infrastructure and learning platforms. The company is far from complacent, as they continue to make significant changes. (more…)

  • Update on 2U: First full quarterly earnings and insight into model

    2U, the online service provider that went public in the spring, just released its financial report for the first full quarter of operations as a public company. The company beat estimates on total revenue and also lost less money than expected. Overall, it was a strong performance (see WSJ for basic summary or actual quarterly report for more details). The basics:

    • Revenue of $24.7 million for the quarter and $51.1 m for the past six months, which represents year-over-year increase of 32 and 35%;
    • EBITDA Losses of $7.1 m for the quarter and $10.9 m for the past six months, which represents year-over-year increase of -2% and 12%; and
    • Enrollment growth of 31 – 34% year-over-year.

    Per the WSJ coverage of the conference call:

    “I’m very pleased with our second quarter results, and that we have both the basis and the visibility to increase all of our guidance measures for 2014,” said Chip Paucek, 2U’s Chief Executive Officer and co-founder. “We’ve reached a turning point where, even with continued high investment for growth, our losses have stopped accelerating. At the midpoint of our new guidance range, we now expect our full year 2014 adjusted EBITDA loss to improve by 17% over 2013. Further, we’ve announced a schedule that meets our stated annual goal for new program launches through 2015.”

    The company went public in late March at $14 / share and is still at that range ($14.21 before the quarterly earnings release – it might go up tomorrow). As one of only three ed tech companies to have gone public in the US over the past five years, 2U remains worth watching both for its own news and as a bellwether of the IPO market for ed tech.

    Notes

    The financials provide more insight into the world of Online Service Providers (OSP, aka Online Program Management, School-as-a-Service, Online Enablers, the market with no name). On the conference call 2U’s CEO Chip Paucek reminded analysts that they typically invest (money spent – revenue) $4 – $9 million per program in the early years and do not start to break even until years 3 – 4. 2U might be on the high side of these numbers given their focus on small class sizes at big-name schools, but this helps explain why the OSP market typically focuses on long-term contracts of 10+ years. Without such a long-term revenue-sharing contract, it would difficult for an OSP to ever break even.

    (more…)

  • Clarifications on UF Online Payments to Pearson Embanet

    I wrote a post over the weekend that included information from the Gainesville Sun about the University of Florida Online (UF Online) program and its expected payments to Pearson Embanet. Chris Newfield from Remaking the University also wrote on the subject today. Chris raises some very important issues in his post, including his point:

    Universities may have a cost disease, but they now have a privatization disease that is even worse.

    In the article, however, there seems to be a misunderstanding of how the revenue sharing agreement works. Given the importance of the questions that Chris raises, I think it is important to understand the payment model used by most Online Service Providers (OSP) such as in place at UF Online.

    The part of the blog post that is mistaken, in my understanding, is this [emphasis added]: (more…)

  • Embanet and 2U: More financial insight into Online Service Providers

    While I have written recently about UF Online and 2U, there is actually very little insight into the operations and finances of the market segment for Online Service Providers (OSP, also known as School-as-a-Service, Online Program Management). Thanks to 2U going public yesterday and the Gainesville Sun doing investigative work on UF Online, we have more information on one of the highest growth segments for educational technology and online learning.

    2U’s IPO

    2U went public yesterday, initially offered at $13.00 per share and closing the day at $13.98 (a 7.5% gain). The following is not intended to be a detailed stock market evaluation – just the basics to present the general scale of the company as insight into the market. While there is not a direct comparison, this IPO is a much better IPO than the most recent ed tech offering when Chegg (down 2.7% its first day and down 26% to date). Based on 2U’s first day of trading and the IPO filing: (more…)

  • 2U’s Upcoming IPO: Filing estimates $533 million company value

    One month ago 2U filed its registration for an IPO in 2014. 2U is an online service provider that helps traditional universities develop fully-online programs, currently based on 9 customers at the master’s level (see here for summary of revenue per student and per customer). On Monday the company set the terms for the IPO, as described by Bill Flook in the Washington Business Journal.

    2U Inc. on Monday set terms for its upcoming initial public offering. The Landover-based ed-tech company plans to sell 8 million shares at between $11 to $13 apiece. Selling stockholders plan to offload another 1.17 million shares in the offering.

    Altogether, the IPO would raise a total $110 million, assuming the 2U prices at the mid-point of that range. The company plans to list on the Nasdaq under the ticker symbol “TWOU.”

    (more…)

  • Four numbers to consider from 2U’s IPO filing

    With the emergence of large-scale MOOCs over the past few years, it has become common to hear discussions of online education in terms of access and scale – access to low or no cost courses and scale of tens or hundreds of thousands of students. Of course MOOCs are but one form of online ed, and with 2U, Inc filing for an IPO in 2014, we have another example of a very different, and lucrative, approach to online education. 2U’s model extends high-tuition, elite programs to a small group of students. To get a sense of this approach, consider four remarkable numbers that are based on 2U’s S-1 filing.

    To provide context for these numbers, 2U’s model is somewhat unique, as described in Techonomy:

    . . . 2U offers weekly live online (synchronous) classes and a sophisticated social networking platform that lets students and instructors interact. Most degrees offered through 2U also require completion of physical components such as global MBA residencies, student teaching apprenticeships, and, for nursing students, operating room training on campus and clinical experience in their communities. [snip]

    Another difference is that 2U classes are small—just 10 to 15 students and a professor onscreen in a Brady Bunch grid—so admission is selective.

    2U makes $10,000 – $15,000 in revenue per student per year

    From our inception through December 31, 2013, a total of 8,540 unique individuals have enrolled as students in our clients’ programs. [p 1]

    For the years ended December 31, 2011, 2012 and 2013, our revenue was $29.7 million, $55.9 million and $83.1 million, respectively. [p 2]

    (more…)

  • 2U registration for IPO offers insight into Online Service Provider market

    One of the biggest growth areas in education has been the Online Service Provider market. Alternatively known as Online Education Service Provider (OESP), School-as-a-Service, or Online Program Management (OPM), this market offers services to traditional colleges and universities that are creating online programs. In August I listed the LMS used by the top OSP providers, and while the data for this table is a year old, it does give a sense of who the major players are.

    SaaS LMS Chart 2

     

     

     

     

     

     

    How big are these companies? EmbanetCompass had estimated 2012 revenues of $130 million when Pearson acquired the company for $650 million. Deltak had estimated 2012 revenues of $54 million when Wiley acquired the company for $220 million. Academic Partnerships had estimated 2012 revenues of $43 million. I don’t have updated 2013 numbers, but various estimates have this market growing at 50% or more per year.

    Yesterday 2U, Inc submitted a S-1 document with the SEC, registering the company’s intention to go public in 2014. (more…)