Q4 2021 2U Inc Earnings Call

Speaker 1: The investor relations website investor.to you.com has our earnings press release and slide presentation as well as a simultaneous webcast of this call. A webcast replay of this call will be made available for the next 90 days.

Investor Dot <unk> Dot com as our earnings press release, and slide presentation as well as a simultaneous webcast of this call a webcast replay of this call will be made available for the next 90 days.

Speaker 1: Statements made on this call may include forward-looking statements regarding our financial and operating results, the continued impact of the COVID-19 pandemic, plans and objectives of management for future operations, the integration of edX, student and university demands, and other matters. These such statements are subject to risks, uncertainties, and assumptions. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duties to update.

Statements made on this call may include forward looking statements regarding our financial and operating results. The continued impact of the COVID-19, pandemic plans and objectives of management for future operations, the integration of Fedex student and University demand and other matters. These statements are subject to risks uncertainties and assumptions.

Any forward looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them.

Please refer to the earnings press release and in the risk factors described in.

Speaker 1: Please refer to the earnings press release and to the risk factors described in the documents we filed with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2020, and our most recent quarterly report on Form 10-Q for information on risks, uncertainties, and assumptions that may cause our actual results to differ materially from those of course in such states.

The documents, we filed with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2020, and our most recent quarterly report on Form 10-Q for information on risks and uncertainties and assumptions that may cause actual results to differ materially from those in such statements.

Speaker 1: In addition, during today's call, we will discuss non-gen financial measures, which we believe are useful as supplemental measures to use performance.

In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of <unk> performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations.

Speaker 1: These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, and on the investor relations website, page of our website.

With comparable GAAP results in our earnings press release and on the Investor Relations website page of our website with that let me hand, the call over to chip. Thank you Mark as you've seen in the numbers today, we delivered strong performance in 2021, and a competitive digital marketing environment, all while continuing to deliver world class learning experiences and unmatched student outcomes.

Speaker 1: With that, let me hand the call over to Chip. Thank you, Mark. As you've seen in the numbers today, we delivered strong performance in 2021 in a competitive digital marketing environment.

Speaker 1: all while continuing to deliver world-class learning experiences and unmatched student outcomes, and positioning our company to become the leading education platform globally.

And positioning our company to become the leading education platform globally, we believe that our business is sustainable and resilient and our 2000 22021 numbers reflect that strength.

Speaker 2: We believe that our business is sustainable and resilient, and our 2021 numbers reflect that strength.

Speaker 2: To use 21 results, we're led by revenue growth in excess of 20% in both our degree and alternative credential business, with particularly strong demand for our undergraduate offer.

To use 21 results were led by revenue growth in excess of 20% and both our degree an alternative credential business with particularly strong demand for our undergraduate offering.

Speaker 2: We also delivered on profitability, ending the year with an adjusted EBITDA margin of 7%, a 5% improvement from last year.

We also delivered on profitability ending the year with an adjusted EBITDA margin of 7%.

5% improvement from last year.

And this past November we completed our acquisition of Nx, one of the world's leading online education platform.

Speaker 2: And this past November , we completed our acquisition of edX, one of the world's leading online education platforms.

Speaker 2: With this industry redefining combination, we've expanded our company to become one of the world's most complete online learning platforms and have gained a powerful driver of profitable growth and margin improvement.

With this industry redefining combination we've expanded our company to become one of the world's most complete online learning platforms and obtained a powerful driver of profitable growth and margin improvement.

On the call today I will first provide some additional details about how annex currently enhancing our business second our map out our key strategic priorities for 2022, and lastly, I'll share how these priorities translate into our mid term performance targets.

Speaker 2: On the call today, I'll first provide some additional details about how edX currently can Margaret.

Speaker 2: Second, I'll map out our key strategic priorities for 2022. And lastly, I'll share how these priorities translate into our midterm performance targets.

Let's start off with Fedex.

Speaker 2: With edX as our consumer brand, QU is positioned to continue to lead the growing online education market and deliver powerful societal impact.

With <unk>, our consumer brand to us positioned to continue to lead the growing online education market and deliver powerful idle impact.

Speaker 2: Together at X and QU, now serve 43 million registered learners. It increased to over 3 million learners since we joined forces.

Either Nx and two you know serve $43 million registered learners and increase of over 3 million learners since we joined forces.

They also support more than 230 partners, including 38 of the top 50 University globally and offer over 3600 digital programs on the world's most comprehensive freedom degree online education marketplace.

Speaker 2: They also support more than 230 partners, including 38 of the top 50 universities globally, and offer over 3,600 digital programs on the world's most comprehensive free-to-degree online education market.

Speaker 2: Demonstrating their support of the combination, more than 27 2U partners have already committed to delivering free and open course content to millions of edX learners.

Demonstrating their support of the combination more than 2007, two new partners have already committed to delivering free and open course content to millions of Nx learners.

Speaker 2: And edX Learners can now find hundreds of two U-powered programs from leading universities on edX.org, including technology-focused boot camps, get smarter executive education, disruptively priced undergraduate degrees, and masters and doctorate degrees in fields from nursing and education to business and law. These offerings are easily discoverable. You can now go and see them for yourself. And they expand edX's portfolio into new disciplines with higher learner demand.

And Alex learners can now find hundreds of <unk> powered programs from leading universities on Nx stockhorn, including technology focused boot camps get smarter executive education.

Relatively priced undergraduate degrees and masters and doctorate degree in fields from nursing and education business and law. These offerings are easily discoverable you can now go and see them for yourself and they expand access portfolio into new disciplines with higher learner demand.

Speaker 2: In the past few months, we've also launched new products that leverage the combined strengths of two UN edXs to meet the demands of the market and drive affordability in higher education, like Harvard's first microvascular certificate in chemist.

In the past few months, we've also launched new products that leverage the combined strengths of <unk> to meet the demands of the market and drive affordability in higher education like Harvard first micro Bachelors certificate in chemistry.

Through these innovative accessible and affordable programs, we continue to deliver life changing outcomes for learners and broader societal impact while helping universities transform themselves for the digital age.

Speaker 2: Through these innovative, accessible and affordable programs, we continue to deliver life-changing outcomes for learners and broader societal impact, while helping universities transform themselves from the digital age.

Speaker 2: In 2022, we plan on maintaining our commitment to profitability as we transform to you into a leading education platform company with at the center driving unmatched outcomes for millions of learners worldwide.

In 2022, we plan on maintaining our commitment to profitability as we transform <unk> into a leading education platform company with excellence at the center driving unmatched outcomes for millions of learners worldwide.

We expect the three key drivers will improve our profitability in 2022.

Speaker 2: We expect that three key drivers will improve our profitability in 2022. Number one, strengthen our degree segment. Number two, international and enterprise expansion. And number three, scale in...

Number one strengthen our degree segment.

<unk> International and enterprise expansion.

And number three scale and operational efficiency.

Together, we believe these will deliver substantially improved performance to our bottom line, while delivering meaningful growth.

Speaker 2: Together we believe these will deliver substantially improved performance to our bottom line while delivering meaningful growth.

And our degree segment, which just delivered 20 plus percent margin, we remain focused on launching quality programs that can deliver profitability.

Speaker 2: In our degree segment, which just delivered 20 plus percent margin, we remain focused on launching quality programs that can deliver profitability.

Speaker 2: In Q4, we made the decision to wind down the Stimman Hybrid on-ground undergraduate program. Although our degree segment would have delivered double-digit growth with this program in 2022, we recognized that it would negatively impact profitability and was not part of our long-term product strategy.

In Q4, we made the decision to wind down the <unk> hybrid on ground undergraduate program.

Although our degree segment would have delivered double digit growth with this program in 2022, we recognize that it would negatively impact profitability and was not part of our long term product strategy.

We also pushed out the launch dates are a few of our contracted degree programs impacting this year's cadence. This.

Speaker 2: We also pushed out the launch dates of a few of our contracted degree programs, impacting this year's cadence. This includes Arcadia's hybrid physician assistance degree, which is based on accreditation delays, which we've seen from time to time in various programs over the years. However, the degree programs that are on our 2022 roadmap are expected to be diverse and significant drivers of long-term profitability.

This includes our Katy is hybrid physician assistant degree, which is based on accreditation delays, which we've seen from time to time in various programs over the years.

However, the degree programs that are on our 2022 roadmap are expected to be diverse and significant drivers of long term profitability.

Speaker 2: In the coming weeks, we expect to announce a new online undergraduate program, already under contract, as well as the first master's degree from a long time edX moved part.

In the coming weeks, we expect to announce a new online undergraduate program already under contract as well as the first master's degree from a longtime Nx MOOC partner.

Both at World class institutions.

Speaker 2: Both at world class institutions, both disruptively priced.

Disruptive we priced.

Speaker 2: It's notable that if we stop launching programs at the end of 2022, we project our degree business alone with scale to 800 million in steady state revenue, with margins in excess of 35%.

It's notable that if we start launching programs at the end of 2022, we project our degree business alone with scale to $800 million in steady state revenue with margins in excess of 35%.

Speaker 2: That's pretty remarkable, we're not stopping. We expect our launch cadence to go back up in 2023.

That's pretty remarkable where nonstop.

We expect our launch cadence to go back up in 2023.

As one example, we're planning for our institutional deal with UNC Chapel Hill to deliver multiple programs next year it.

Speaker 2: As one example, we're planning for our institutional deal with UNC Chapel Hill to deliver multiple programs next year. You couldn't be prouder of our relationship there, and UNC is not the only one expanding.

It couldnt be prouder of our relationship there and UNC is not the only one expanding.

We're also launching and expanding partnerships with top universities and international markets to meet the growing demand for flexible high quality online education overseas.

Speaker 2: About 80% of the NXS community of registered learners resides outside of the United States. And Marketplace data shows us that degree programs are in particularly high demand.

About 80% of <unk> community of registered learners resides outside of the United States.

In marketplace data shows us the degree programs are in particularly high demand.

Speaker 2: You can already see the strategy in action. This afternoon, we announced that we've expanded our relationship with boot camp partner and University of Sydney, one of the best universities in Australia, consistently ranked as the top 50 university in the world. We'll be covering four of their online graduate degrees launching in 2023.

You can already see this strategy in action. This afternoon, we announced that we've expanded our relationship with boot camp partner University of Sydney, One of the best universities in Australia consistently ranked as a top 50 University in the World will.

We will be powering for their online graduate degrees launching in 2023.

Next as we told you before enterprise is currently the fastest growing part of our business.

Speaker 2: Next, as we told you before, enterprise is currently the fastest-burying part of our business.

Speaker 2: Enterprise revenue doubled year over year from 2020 to 2021. And in 2022, we're planning to build on that momentum to again, double its size under the edX for business brand.

Enterprise revenue doubled year over year from 2020 to 2021 and in 2022, we're planning to build on that momentum to again double its size under the annex for business brand.

Together <unk> and <unk> currently have more than 200 enterprise clients.

Speaker 2: Together, two UN edX currently have more than 1200 enterprise clients.

Speaker 2: We believe we can serve these organizations even better by cross-sounding across our broader portfolio of up-skilling and re-skilling programs, including boot camps and high demand discipline, like coding, data analytics, cyber security and product management, executive education and key leadership topics, and at-axis expansive course libraries.

We believe we can serve these organizations, even better by cross selling across our broader portfolio of Upskilling and reskilling programs, including boot camps and high demand disciplines like coding data analytics, cyber security and product management.

<unk> education, and key leadership topics and exits expansive course library.

We also plan to build on our relationships with distribution partners like Guild, and bright horizons to bring online degree an alternative credential programs to more employees and some of the largest businesses in the world.

Speaker 2: We also plan to build on our relationships with distribution partners like Guilden, Bregrisans to bring online degree in alternative credential programs to more employees at some of the largest businesses in the world.

Speaker 2: But the great resignation underway, we believe there's growing recognition from businesses worldwide, that up to killing and re-skilling employees, it's imperative to build a sustainable talent pipeline that enables them to execute their business plans. We're ready to meet those needs.

With the great resignation underway, we believe there is growing recognition from businesses worldwide.

Julian recently employee is imperative to build a sustainable talent pipeline that enables them to execute their business plan, we're ready to meet those needs.

Lastly for 2022, the shift to becoming a platform company will be central to our strategy. We're currently integrating the <unk> and <unk> teams with the goal of better supporting partners and students and accelerating the growth and the impact of FX.

Speaker 2: Lastly, for 2022, the shifts of a coming platform company will be central to our strategy for currently integrating the two UN edX teams with the goal of better supporting partners and students and accelerating the growth and impact of edX.

Speaker 2: This year, our best in class marketing team will work to both significantly grow the edX community and deliver learners a more intuitive user experience so they can explore the edX marketplace with ease and confidence. This includes new search and e-commerce features like personalized recommendations, geotargeting, and mobile checkout.

This year, our best in class marketing team will work to both significantly grow the <unk> community and deliver learners a more intuitive user experience. So they can explore the IDEXX marketplace with ease and confidence.

This includes new surge in e-commerce features like personalized recommendations.

We're getting and mobile checkout.

We also plan to expand and expand cross selling opportunities from Ibm's, New blockchain Essentials certificate to the nation's top ranked online MBA, we believe the breadth quality and relevance of the <unk> two new portfolio is unmatched.

Speaker 2: We also plan to expand cross-selling opportunities. From IBM's new blockchain essential certificate to the nation's top ranked online MBA, we believe the breadth, quality, and relevance of the edX2U portfolio is unmatched.

Speaker 2: You'll see us presenting our offerings in smarter ways, including bundling and stacking, complimentary programs to create clear and more affordable pathways for learners to achieve their goals.

Youll see us presenting our offerings in smarter ways, including bundling and stacking complementary programs to create clear and more affordable pathways for learners to achieve their goals.

Speaker 2: Just one example of this strategy, in action, students can now earn up to six credits in SMU's data analytics bootcamp and apply those credits to the two U-powered SMU masters in data science. We believe stackable modular education like this is the future of higher education.

Just one example of this strategy in action students can now earn up to six credits and SMU data analytics bootcamp and apply those credits to the to your powered SMU Masters in data science.

We believe stackable modular education like this is the future of higher education.

Speaker 2: Finally, before I turn it over to Paul, I want to hear more about our longer term plans for two you and what we expect that to mean for mid-term performance targets.

Finally, before I turn it over to Paul I want to share more about our longer term plans for to you and what we expect that to mean for midterm performance targets.

<unk> has always had a bold vision for the future looking beyond 2022, our ambition is to be the most important education company in the world The Premier Education platform company with Addax at the center.

Speaker 2: To you has always had a bold vision for the future. Looking beyond 2022, our ambition is to be the most important education company in the world. The premier education platform company with at-access at the center.

Speaker 2: And as we transform to edX, serving the needs of the edX community of learners over their lives and careers will become the number one priority for the business.

And as we transform and Nx, serving the needs of the <unk> community of learners over their lives and careers will become the number one priority for the business.

Speaker 2: The pandemic has not only accelerated the adoption of online learning, but has also permanently shifted the power dynamics and higher education toward consumers. Consumers are becoming the dominant force in higher ed. They have more choice over what, when, where, and how they want to learn. They're seeking greater flexibility in personal relevance, placing a premium on convenience and affordability, and increasingly choosing online options.

The pandemic has not only accelerated the adoption of online learning.

Also permanently shifted the power dynamics in higher education toward consumers consumer.

Consumers are becoming the dominant force in higher Ed.

Have more choice over what when where and how they want to learn they're seeking greater flexibility and personal relevance, placing a premium on convenience and affordability and increasingly choosing online option.

Speaker 2: and they'll find those options at NX, the right learning at the right time from the world best institution, delivering great outcomes for students.

And they'll find those options at Nx, the right learning at the right time from the world's best institutions delivering great outcomes for students.

The IDEXX platform makes us a better business longer term as such I want to share some of our mid term targets to provide a sense of our current expectations.

Speaker 2: The edX platform makes us a better business longer term. And such, I want to share some of our midterm targets to provide a sense of our current expectations.

Speaker 2: By the end of 2025, we're targeting a keger of at least 12.5% and consolidated adjusted even a margin between 15% and 20%.

By the end of 2025, we're targeting a CAGR of at least 12, 5% and consolidated adjusted EBITDA margin between 15% and 20%.

Speaker 2: But we're also targeting to be free cash flow positive by the end of 2024, with crossover in the back half of 2023.

We're also targeting to be free cash flow positive by the end of 2024 with crossover in the back half of 2023.

Additionally, our goal is to grow annual enterprise bookings to $150 million by the end of 2024 and in doing so expand our reach to more learners worldwide.

Speaker 2: Additionally, our goal is to grow annual enterprise bookings to 150 million by the end of 2024 and in doing so, expand our reach to more learners worldwide.

Speaker 2: As we expand our reach, we believe we will expand our impact by continuing to lead the industry in quality, transparency, and life-changing student outcomes.

As we expand our reach we believe we will expand our impact by continuing to lead the industry in quality transparency and life changing student outcomes.

Speaker 2: In December , we released two U's second annual industry leading transparency report. One expression of our continued commitment to prioritizing student success and everything we do.

In December we released to US second annual industry, leading transparency report one expression of our continued commitment to prioritizing student success in everything we do.

Speaker 2: Let me close by highlighting just a few stats we shared in that report. Average term one, determined to retention across our partners online degree programs, increased by 4% at points to 90% in 2020 from 86% in 2019. Already low 38%.

Let me close by highlighting just a few stats we shared in that report.

Average term one to term to retention across our partners' online degree programs increased by four percentage points to 90% in 2020 from 86% in 2019 already low 38%.

To 31%.

Speaker 2: The number of students of color increased across our partners bootcamp getting more diverse.

The number of students of color increased across our partners boot camps.

Getting more diverse pipelines of talent.

Speaker 2: and thousands of aspiring nurses, counselors, and teachers completed over 3.5 million hours of virtual and in-person field placement to take people in communities across all.

And thousands of aspiring nurses counselors and teachers completed over $3 5 million hours of virtual and in person field placements to Kate people in communities across all.

50 states.

Super.

Found in positive effect on people around the world, we see a better future for themselves and for society through education and that is why we do what we do.

Speaker 2: found in positive effects on people around the world who see a better future for themselves and for society through education. And that is why we do what we do. And now Paul will take you through current results and I'll return for Q&A. Thanks, Jeff, and good afternoon everyone.

And now Paul will take you through current results and I'll return for Q&A. Thanks.

Thanks, Jeff and good afternoon, everyone.

Speaker 1: As you've seen from our press release, we had a nice entity here, notable in the...

As you've seen from our press release, we had a nice end to the year, notably.

All while diligently prioritizing integration about it.

Speaker 1: all while diligently prioritizing the integration of that.

Speaker 1: They're also seeing strength and needing indicators, which gives us confidence in the resilience of our business model.

We are also seeing strength in leading indicators, which gives us confidence.

The resilience of our business model.

Speaker 1: I'd like to start with a discussion of results both for the quarter and the year. Then I'll provide enough data on balance sheet and cash flow statement and conclude with some thoughts on our financial outlook for 2020.

Today I'd like to start with a discussion of results both for the quarter and the year.

Then I'll provide an update on our balance sheet and cash flow statement and conclude with some thoughts on our financial outlook, our 2000 sites.

Taking a closer look at our results.

Speaker 1: Revenue for the quarter totaled $243.6 million of 13% from a year ago.

Revenue for the quarter totaled $243 6 million up 13% from a year ago.

Speaker 1: For the full year revenue grew 22% to $945.7 million, a $100.1 million increase over 2020.

On a full year revenue grew 22% to $945 7 million, a $171 1 million increase over 2012.

And of course equivalent enrollment or SCE.

Speaker 1: on course equivalent enrollment or FCEs. So sold.

Totaled 8100 planning for the quarter.

Ftes remained relatively flat on a year over year basis, and increased 3% on a sequential basis change in trajectory from the third quarter of 2021.

Speaker 1: FTEs remain relatively flat in a year-to-year basis and increase 3% of sequential basis, changing the trajectory from the third quarter of 2021.

Moving onto our sentiments regarding segment revenue in the fourth quarter totaled $162 4 million growth of 17% from the fourth quarter of 2020.

Speaker 1: Moving on to our segments. The green segment revenue in the fourth quarter, so it's a $152.4 million.

Speaker 3: rules of 17% from the bullet quarter of 2020.

Speaker 1: that the bridge was driven by higher student enrollment and the acceleration of $8000,000 from the transitioning of our Ed Simmons on-ground program.

This increase was driven by higher student enrollment and the acceleration of $2 million from the transitioning of our and Simmons Unbound program.

On a full year basis degree segment revenue increased 22% to $592 3 million.

Speaker 1: On a full year basis, degree segment revenue increased 22% to $592.3 million. Driven by a 20% increase in FCE, and a 2% increase in average revenue for FCE.

Given by a 20% increase in FTE.

And a 2% increase in average revenue per FTE.

Speaker 1: Prevenue from the alternative financial segment, total $91.2 million, rose to the eighth percent from the fourth quarter of last.

Revenue from the alternative credential segment totaled $91 2 million growth of 8% from the fourth quarter of last year.

Speaker 1: This increase includes 6% growth in boot camp revenue, a 5.2 million dollar contribution from edX, offset by a 5% decrease in executive education revenue.

This increase includes 6% growth in boot camp revenue.

$5 2 million dollar contribution from FX.

Offset by a 5% decrease in executive education revenue.

On a full year basis.

Speaker 1: On a full year basis, alternative financial revenue increased 23% to $353.4 million. Driven by a 15% increase in average revenue per F.

Alternative credential revenue increased 93%.

$353 4 million.

Driven by a 15% increase in average revenue per FTE.

The alternative credential segment showed strong sequential growth in both revenue and FTE. This.

Speaker 1: The alternative credential segment shows strong sequential growth in both revenue and FCEs. This is notable, particularly in an environment of elevated cost per leak. Now...

This is notable particularly in an environment of elevated cost per lead.

Now, let's take a look at costs and expenses.

Operating expense for the quarter totaled $293 3 million up 20% from last year.

Speaker 1: Operating expense for the quarter, so $293.3 million of 20% from last

Speaker 1: full year operating expense for the $1.1 billion of 17% in a year of a year basis, compared to revenue growth of 22%.

Full year operating expenses totaled $1 $1 billion of.

Of 17% on a year over year basis compared to revenue growth of 22%.

This increase in operating expense included $14 4 million from the addition of Fedex.

Speaker 1: This increase in operating expense increases $14.4 million from the addition of edicts.

On a year over year basis, marketing and sales expense grew 17% down two percentage points as a percent of total revenue to 48%.

Speaker 1: On a year-rear basis, marketing and sales expense grew 17% down 2% at points as a percent of total revenue to 48%. That's a notable and respects the discipline in an environment of elevated cost per day.

This is notable and reflects the disciplined in an environment of elevated cost per lead.

Personnel and personnel related expense, our largest expense item decreased $10 9 million for the quarter to $121 $3 million with <unk> contributing $5 7 million.

Speaker 1: Personal and personal related expense are the largest expense item and create $10.9 million per quarter to $1201.3 million with MX contributing $5.7 million.

For the year personnel and personnel related expense increased $19 3 million to $468 3 million.

Speaker 1: For the year, first and unpersonally related expenses increased $19.3 million to $468.3 million.

We ended the year with head count of 3900 <unk>.

Speaker 1: ended the year with headcounts of 3,982 relatively flat year over year while supporting 20 plus percent revenue growth.

Relatively flat year over year.

While supporting 20 plus percent revenue growth.

16% year over year, demonstrating continued improvement.

Speaker 1: 16% year of a year demonstrating continued improvement in operating efficient.

And operating efficiencies and productivity.

Speaker 1: Moving on to profitability. Net loss for the quarter totaled $67.3 million, and increased of $29.6 million from the fourth quarter left.

Moving on to profitability.

Net loss for the quarter totaled $6 to $7 3 million.

An increase of $29 $6 million from the fourth quarter of last year.

<unk> higher interest expense from our term loan facility.

Speaker 1: reflecting higher interest expense for our term loan facility, convertible notes, and a 14.4 million dollar addition of operating expense from the end of the year.

Convertible notes and a $14 4 million dollar edition of operating expense.

From the <unk> acquisition.

Speaker 1: For the year, net loss sold to $194.8 million, an improvement of $21.7 million over last year, driven by better operating conditions.

For the full year net loss totaled $194 8 million, an improvement of $21 7 million over last year, driven by better operating efficiency.

Adjusted EBIT for the quarter totaled $21 million, an increase of $2 $2 million in the fourth quarter of 2020.

Speaker 1: Adjust the evener for quarter total 21 million dollars and increase of 2.2 million dollars from the fourth quarter of 2020

Speaker 1: Driving full year adjusted to even a $66.6 million. And increase of $60.5 million from the prior year.

Driving full year adjusted EBITDA of $66 6 million, an increase of $55 million from the prior year.

Speaker 1: Adjusted even a margin in degree segment was 21% for the year, and 11 point improvement over 2020, showing the inherent profitability of the degree segment business model.

Adjusted EBITDA margin in <unk> segment was 21% for the year, an 11 point improvement over 2012, showing the inherent profitability of the degree segment business model.

Adjusted EBITDA margin in the alternative credential segment was a loss of 17% largely driven by increased marketing and sales expense.

Speaker 1: Adjusting even a margin in the alternative credential segment was a loss of 17%. Larger driven might increase marketing and sales expense, and then the $11.7 million in back from PEDEX expenses. Now.

And then $11 7 million impact from <unk> expenses.

Now for a discussion of the balance sheet and cash flow statement.

We ended the quarter with cash and cash equivalents of $249 9 million a decrease of $701 $4 million in the September quarter.

Speaker 1: The end of the quarter with cash and cash equivalence of $249.9 million and the increase of $701.4 million in the September quarter. This decrease was a result of closing the edX acquisition in November with a preliminary purchase price of $773 million and the payment of $13.8 million in related intubation and transaction.

This decrease was a result of closing the <unk> acquisition in November with a preliminary purchase price of $773 million.

And the payment of $13 8 million orders and related integration and transaction fees.

This decrease in cash was partially offset by $99 9 million net proceeds from incremental borrowings under our terminal incentives.

Speaker 1: This decrease in cash was partially offset by $99.9 million in net proceeds from incremental borrowing under our terminal and decedent.

Our accounts receivable balance totaled $67 3 million down $28 $1 million from the end of the previous quarter and up $26 million from last year.

Speaker 1: Our accounts for safe will balance total $67.3 million, down $28.1 million from the end of the previous quarter, and about $20.6 million from last.

Speaker 1: fluctuation in our accounts for CIFL balance reflects the timing of payments from our university partners, which often matches the

Fluctuation in our accounts receivable balance.

Reflects the timing of payments from our University partners, which often matches the academic calendar.

Speaker 1: And the results we typically experience increased collections in the course of order.

As a result, we typically experienced increased collections in the fourth quarter.

Speaker 1: The year we are increased is representative of revenue growth in our business and the addition of receivables from the edX acquisition of $6.9 million.

The year over year increase is representative of revenue growth in our business and the addition of receivables from the <unk> acquisition of $6 9 million.

Unlevered free cash flow usage on a trailing 12 month basis was $33 9 million.

Speaker 1: On level three, cashflow usage and a training 12 month basis was 33.9 million dollars compared to a net use of 5.2 million dollars at the end of the third quarter.

<unk> to a net use of $5 $2 million at the end of the third quarter.

This decline reflects the rolling off of the fourth quarter of 2020, where we had substantial improvement in networking capital.

Speaker 1: This decline reflects the rolling off of the fourth quarter of 2020, where we had substantial improvement in networking capital.

Speaker 1: To expand further, as previously highlighted last year, our fourth quarter of 2020 included favorability from better management of networking capital as we drove increased collection.

If I expand further as previously highlighted last year, our fourth quarter of 2020 included favorability from better management of net working capital as we drove increased collection.

Speaker 1: of accounts receivable and customized vendor relations.

Of accounts receivable and optimize vendor relationships.

Speaker 3: While we continue to maintain the improvement put in place in the fourth quarter of 2020, the incremental benefit has less of an impact.

While we continue to maintain the improvements put in place in the fourth quarter of 2009 the.

The incremental benefit as less of an impact.

Now for a discussion of guidance on our long term financial goals.

Speaker 3: Now for a discussion of guidance on our long-term financial rules.

Our priorities for 2020 to center around the integration of <unk>.

Speaker 3: Our priorities for 2022 center around the integration of ethics continue to invest in our degree program segment and improve profitability in the alternative potential sector.

The new investments in our degree program segment and improved profitability in the alternative credential segment.

Our guidance for 2022 calls for revenue to range from one through $5 billion.

Speaker 3: Our guidance for 2022 calls for revenue to range from $1.05 billion to $1.09 billion. Representing growth of 13% at the midpoint.

109 billion.

Representing growth of 13% at the midpoint.

Adjusted EBITDA is expected to range from $70 million to $90 million representing growth of 20% at midpoint.

Speaker 3: adjusted even as expected the range from 70 to 90 million dollars representing growth of 20% of the

Speaker 3: Even mine that this increase in adjusted EBITOP includes 30 to 40 million dollars of dilution from the addition of edicts.

Keep in mind that this increase in adjusted EBITDA.

<unk> $30 million to $40 million of dilution from the addition of Eric.

In other words on an organic basis, we expect adjusted EBITDA to increase by more than 50%.

Speaker 3: In other words, on an organic basis, we expect adjusted even to increase by more than 50%.

In addition, we expect capital expenditures to be approximately $80 million and weighted average shares outstanding to be approximately $78 million.

Speaker 3: In addition, we expect capital expenditures to be approximately $80 million. And weighted average shares of spending to be approximately 78 million.

Our guidance reflects prudence in an unpredictable digital marketing environment and it provides flexibility for us to proactively manage our marketing spend.

Speaker 3: Our guidance reflects through this in an unpredictable digital marketing environment and it provides flexibility for us to proactively manage our marketing spend.

In addition, we expect capital expenditures to be approximately $80 million.

Speaker 3: In addition, we expect capital expenditures to be approximately $80 million.

Speaker 3: Let me provide some color on our expectation on the distribution of our revenue as we progress through the year.

Let me provide some color on our expectation on the distribution of our revenue as we progress through the year.

Speaker 3: First, we expect revenue to increase quarter of a quarter to well a year.

First we expect revenue to increase quarter over quarter throughout the year.

Additionally, we expect the revenue growth to accelerate in the second half of the year, but the first quarter, having sequential growth in the mid single digits.

Speaker 3: Nationally, we expect the revenue growth to accelerate in the second half of the year, but the first quarter having sequential growth in the mid-single vision.

Over the years, we believe that we've launched and grown enough degree programs demonstrate that we have a sustainable business with an upfront investment that ultimately produces strong margins at maturity.

Speaker 3: Over the years, we believe that we've launched and grown enough degree programs to demonstrate that we have a scalable business with an upfront investment that ultimately produces strong more margins as maturity. This concept is reflected in the overall margins of the degree program cycle.

This concept is reflected in the overall margin Green program segment.

And in 2021, our mature cohort produce margins that are above our steady state expectation in fact, those margins are close to 35%.

Speaker 3: And in 2021, our mature cohort produced margins that are above our steady state expectation. In fact, those margins are close to 35.

For the alternative credential segment, we have harmonized the two acquisitions in that segment trilogy and get smarter.

Speaker 3: For the alternative prudential segment, we have harmonized the two accusations in that segment, strategy and gets smarter. And with the addition of addicts markedly, we expect in the alternative prudential segment to generate positive margins.

And with the addition of <unk> marketplace.

We expect in the alternative credential segment will generate positive margins.

Speaker 3: in 24 to 36 months, depending on the dilution of ethics.

24 to 36 months, depending on the dilution of ethics.

If we look out over the mid term, we expect the nx platform and marketplace to be critical components as we deliver growth profitability and cash flows.

Speaker 3: If we look out over the mid-term, we expect the edX platform and marketplace to be critical components as we deliver growth, profitability, and cash.

This transformational acquisition combines the unique strengths and complementary capabilities of two pioneers and online education.

Speaker 3: This transformational acquisition combines the unique strengths and complementary capabilities of two pioneers in online education. It also brings together a conference

It also brings together a comprehensive set of offerings.

Speaker 3: Access to a large global basis, cards and potential learners, and they consume a grant.

Access to a large global base of current and potential learners and the consumer brand.

Speaker 3: importantly, we believe in positions of the deliver 10-15% efficient fees in marketing costs by the end of 2023 in till 2024.

Fortunately, we believe it positions us to deliver and 15% efficiency and marketing costs by the end of 2023 into 2024.

Speaker 3: Looking out over the midterm, our goal is to deliver at least 12.5% revenue growth at a compound and annual basis, 2021 to 2025. But consolidated adjusted even in margins, the range between 15% and 20% by 2025, resulting in more than four times in 2021 level of ECO.

Looking out over to mid term our goal is to deliver at least 12, 5% revenue growth on a compounded annual basis 2021 to 2025.

The consolidated adjusted EBITDA margin to range between 15% and 20% by 2025.

Belting and more than four times.

2021 level of detail.

In addition, our goal is to generate positive unlevered free cash flow for the full year 2024.

Speaker 3: Innovation, our goal is to generate positive on leverage free cash over, all year 2024. Driven by higher program launches, growth in registered learners, lower marketing and sales expense, and greater contribution from enterprise revenue.

By higher program launches growth in registered learners, lower marketing and sales expense and greater contribution from enterprise revenue.

Speaker 3: Over the next four years, we expect to increase the Green Program launches while decreasing the cumulative and national point for programs.

Over the next four years, we expect to increase the Green program launches, while decreasing the cumulative cash flow point per program.

Speaker 3: He also expects to double register learners, participating in our plan.

So expect to double the registered learners participating in our platform.

Speaker 3: Marketing and sales expense as a percentage of revenue is expected to decrease That's been 40% by 2025

Marketing and sales expense as a percentage of revenue is expected to decrease less than 40% by 2025.

To conclude our 2021 results showed strength and resiliency in the face of difficult year over year comparison.

Speaker 3: To conclude, our 2021 results showed strength and resiliency in the face of difficult year-of-year and part of our 2021 results showed strength and resiliency in the face of difficult year-of-year

We maintained our spending discipline and volatile market environment and made important improvements to our marketing infrastructure.

Speaker 3: He maintained our spending discipline in volatile marketing environment and made important improvements to our marketing infrastructure.

We ended the year with another good quarter and include a notable sequential improvement in key indicators, which we believe points to rebound.

Speaker 3: The end of the year with another good quarter that included notable sequential improvements in key indicators, which we believe point to rebound in revenue growth, particularly in the alternative credential segment in 2020.

Revenue growth, particularly in the alternative credential segment in 2022.

Looking out beyond 2022, we have laid out a roadmap for creating sustainable shareholder value, including our goals for revenue margins and cash flow.

Speaker 3: Looking out beyond 2022, we have laid out a rule of map for creating sustainable shareholder value, including our roles for revenue, margins, and cash.

Speaker 3: The entire 2D is focused, excited and motivated to execute against these groups.

The entire <unk> team is focused excited and motivated to execute against these goals.

Speaker 3: We have followed through a strong 2022. And with that, we open the call for questions and answers, operator.

We look forward to a strong 2020.

With that we'll open the call for questions and answers operator.

As a reminder to ask a question you will need to press star one on your telephone so let's start your question press the pound key please standby, while we compile the Q&A roster.

Speaker 4: As a reminder, to ask a question you want to address to our one on your telephone, to withdraw your question, press the pound key. Please stand by, while we compile the Q&A roster.

Our first question comes from the line of Stephen Sheldon with William Blair.

Speaker 4: Your first question comes from the line of Steven Sheldon with William Blair.

Hey, Thanks, I guess.

Speaker 2: Hey, thanks. I guess, first here on the 2022 revenue guidance, can you just frame the impact of some of the one-off items you talked about with the Simmons undergraduate program wind down and pushing out a launch for a few programs? And then on the Simmons wind down, just I guess what's about the physical pressures where you face in the air, in terms of the probability?

Firstly on the 2022 revenue guidance can you just.

Frame the impact of some of the one off items, we talked about with the SMN undergraduate program wind down and pushing out the launch of a few programs and then on the Ascendant wind down just I guess what.

The application of our pressures, where you're facing there in terms of profitability.

Speaker 3: Let me start off, I think we'll double-peam this one here. The impact on 2021 is $0.2 million. On the 2022 guidance perspective, it was about...

Let me start off I think we will double team. This one here.

Pass on 'twenty, and 'twenty, one $8 2 million.

On a 2022 guidance perspective.

Was about.

Speaker 3: almost $15, $16 million. But the bottom line is on the degree program segment we were expecting to run into the double digits near-year growth. However, with that being pushed out, that number is now in the single digits you can imagine.

Almost $15 $60 million the bottom line is on the degree program segments that we were expecting.

Well into the double digits year over year growth, however, with that being pushed out that number is now in the single digits as you can imagine.

Speaker 3: In terms of pressure and margin, if you can imagine that business was...

In terms of pressure on margin as you can imagine that that business was.

Speaker 3: on a revenue basis with time margins in the near term, but as we do all the same time and transfer some of the functions that we have to include as part of our operations, that's what it puts you strain on the margins in the near term. So overall it would have been in 2021 and 2022, it would have been a contrast, meaning a pressure on margin in 2022 and the benefits of margin in 2021. Good by none.

On a revenue basis with high margin in the near term, but as we go out in time and transfer some of the functions that we had to include as part of our operations that will put some strain on the margins in the near term. So overall it would've been.

And in 'twenty, one and 2022.

Would have been a contrast, meaning a pressure on margin in 2022 and the benefit to margin in 2021.

Chip I don't know if you'd add any other color to that.

The long term future of the business in terms of what we're going to focus on in that segment driving we're excited about what we're doing with <unk> from the standpoint of the online undergrad program and feel very.

Speaker 2: long-term future of the business in terms of what we're going to focus on in that segment driving. You know, we're excited about what we're doing with Simmons from one of the online undergrad program and feel very strongly about the future of that.

Very strongly about the future of that.

Speaker 2: very thankful that we were able to help Simmons get through the COVID period, but it was not strategic for us long-term and we do think would be a drag on crop mobility longer turf. So, you know, focusing on building high-quality online graduate and undergraduate programs.

Very thankful that we were able to help citizens get through the Covid period, but.

Was not strategic for us long term and we do think will be a drag on profitability longer term, so focusing on building high quality online graduate and undergraduate programs that will fit our long term profitability profile more than anything so felt very comfortable making that decision and.

Speaker 2: It will fit our long-term profitability profile more than anything. So it felt very comfortable making that decision and look forward to building the rest of the Simmons business. With regard to the...

Look forward to building the rest of the <unk> business.

With regard to the other degree programs.

Speaker 2: you know, we definitely had some move out of the cadence of 2022. You know, I mentioned one.

We definitely had some move out of the cadence of 2022.

Yeah.

I mentioned one.

Speaker 2: You know, we had several others that higher end right now is definitely seeing unprecedented leadership change just like the rest of the world from a great resignation standpoint. So you talk about a bunch of leaders changing in side of higher end that had an impact on some programs. We're pretty excited about the programs that we have in the calendar year.

We had several others that.

Higher Ed right now is definitely seeing unprecedented leadership change just like the rest of the world from a great resignation standpoint.

So you talked about a bunch of leaders changing in inside higher Ed that had an impact on some programs.

We're pretty excited about the programs that we have in the calendar year.

And we will have more to say here in the next couple of months about programs that will be there for 2023, so feel confident saying that the cadence will increase in 2023.

Speaker 2: And we'll have more to say here in the next couple of months about programs that will be there for 2023. So feel confident saying that the cadence will increase in 2023.

Got it.

Speaker 2: Got it. And then just do the follow up. We'll have some more detail on how the integration

And then interesting to follow up with less more detail on how the integration.

Two process that exit going relative to your expectations.

Speaker 2: and process with that exit going relative to your expectations. What's gone better or worse than expected and how, I think you gave some detail on potentially the marketing efficiency by 2023.

What's gone better or worse than expected and how I think you gave some detail on the.

Marketing efficiencies by 2023 I guess.

Speaker 2: How quickly do you think you could start to realize some of the marketing synergies and have you included any in your eBid and guidance for 2022?

How quickly do you think you can start to realize some of the marketing synergies and have you included any and your EBITDA guidance for 2022.

So Steven.

First of all.

I think overall we are excited.

Speaker 3: I think overall we're excited. We are in the early stages just because of the transaction post and November timeframe. When it in terms of our guidance for 2022, we are expected to realize some of the benefits as we get into the fourth quarter timeframe of 2020, but we're expecting that in the back half here. But to think there are certain things that are visible, right? Right now, it's

We are in the early stages, just because the transaction closed in November time frame.

When in terms of our guidance for 2022.

We are expected to realize some of the benefits as we get into the fourth quarter timeframe of 2020.

I think that in the back half of the year.

There are certain things that are visible right now.

If you go to <unk> you can see.

Speaker 3: You can see the listing of our offerings on the website. And...

The next thing.

Our offerings on the on the website and.

EMEA are beginning.

Speaker 3: And you are beginning to put in place all the technical pieces to start realizing synergies as we get to the back half of the year. Should I, I guess I would add, right now we feel like it's mostly on track.

Put in place all the technical pieces to start realizing synergies as we get to the back half of the year shipment I guess I would add right now we feel like it's nicely on track.

And we're excited about the transition look this is clearly a transitional year for tissue and as we've kind of a platform company.

Speaker 2: And we're excited about the transition. Look, this is clearly a transitional year for you. And as we've come up platform company, there's no question that that whole notion of the flywheel and how we bring learners in and help learners find new opportunities to learn and therefore convert them into new products. We're already seeing it today.

There is no question that that whole notion of the flywheel and how we bring learners in and help learners find new opportunities to learn and therefore convert them into new products, we're already seeing it today.

Speaker 2: And we're pretty pleased to see the number of learners go up from the time that we came together from 39 to 43 million.

And we're pretty pleased to see the.

The number of learners go up from the time that we the time that we came together.

From 39% to $43 million.

Speaker 2: pretty good increase and you know we expect that to continue There's a nice momentum around edX for business and how enterprise is working there

Pretty good increase and we expect that to continue.

Nice momentum around extra business in how enterprises working there.

Speaker 2: you know, continue to get really good feedback from the addict's clients. So, you know, we've only had a

Continue to get really good feedback from the <unk> clients.

So we've only had a couple of months.

Speaker 2: but right now, we're loving it.

But right now.

We are loving it.

Got it. Thank you for taking my question Sheldon one other comment.

Speaker 2: Got it. Thank you, sir. Taking the questions. Sheldon, one other comment I told to me clear. I want to make sure everyone's clear. When we're talking about Sim and we're talking about on-camp at that program's future.

Told to make clear I want to make sure everyone's clear when we're talking about seven we're talking about the on campus that program's future.

Your next question comes from the line of.

Oh, Ryan Macdonald with Needham.

Hi, everyone. Thanks for taking my questions.

Speaker 2: I don't know, I'm thinking of taking my questions. As we think about the guidance for fiscal 22, can you give us a bit of a sense of how that growth looks across degrees, alt-cred, and perhaps some other more color on what you think ATX can contribute to 2022 revenue here?

As we think about the guidance for fiscal 'twenty. Two can you give us a bit of a sense of how that growth looks across degrees all credit and perhaps some more color on what do you think <unk> can can contribute to 2022 revenue here.

Brian .

Speaker 3: Orion, a couple of things. First of all, I kind of alluded in my spread, the quarterly spread. We expect to see Q1 to be mid single digits overall growth on the top line. And then we expect that to on a sequential basis. And we expect that to continue.

All of the things first of all.

I kind of alluded in my spread a quarterly spreads we expect to see Q1 to be mid single digit overall growth on the top line and then we expect that on a sequential basis.

And we expect that to continue to increase as we go quarter over quarter throughout the year. So that's point number one.

Speaker 3: to increase as we go a quarter over quarter throughout the year. So that's point number one. Point number two.

Point number two at X.

Speaker 3: for 45 days in 2021 delivered about $5.2 million.

For 45 days in 2021 delivered about $5 2 million.

Speaker 3: Keep in mind that was net revenue recognition. So what do I mean by that? Partner fees that otherwise would have been on the res included in the revenue line, it subtracted from the revenue line in our situation. So it's anywhere between 40 and 50%.

Keep in mind that was net revenue recognition for what do I mean by that carpenter fees that otherwise would have been on the rent included in the revenue line and subtracted from the revenue line in our in our situation. So it's anywhere between 40 and 60%.

Speaker 3: reduction in revenue, if you will. So if you look at, you know, others in the space with similar type of revenue streams, they recognize revenue and growth rates. We did our diligence, that are an ounce of them.

Reduction in revenue if you will so if you look at that.

While others in the space with similar type of revenue stream. They recognize revenue on a gross basis, we did our diligence that our analysis on this and we concluded that this is a net revenue recognition for us and we expect similar type of run rate into 2022 as we saw in.

Speaker 3: and we concluded that this is a net revenue recognition for us. And we expect similar type of run rate into 2022, as we saw in the month and a few days in December , with one exception, as we look forward into 2022, there are certain things that we'll stop through it. For example, membership.

In the Q and a month and a few days.

December with one exception as we look forward into 2022, there are certain things we will stop doing it for example membership fees something thats been.

Speaker 3: something that's been recorded as revenue when ad exos discontinue as we move forward.

Recorded as revenue plan in <unk> and this continue as we move forward.

No.

Speaker 3: short of giving a number, you know, I think I

Short of giving a number I think.

Sure.

I think you're going to expect the revenue from that business.

Speaker 3: I think you can expect the revenue from that business to be somewhere between 35 and 45, depending on how quickly we roll off the membership fees. We are definitely excited about this.

Somewhere between 35 and 45, depending on how quickly we roll off the membership fees.

We are definitely excited about this.

And.

So.

Speaker 3: So the other thing I want to point out is that as we think about the degree in the all-grand business.

Other thing I want to point out is that.

Yes.

As we think about.

So the degree and the <unk> business.

Our alternative credential business, if you think of the year over year growth that we're expecting on a full year basis at 13% at the midpoint of guidance of getting magic in our internal business plan.

Speaker 3: Our our starting to our potential business, you know, if you think of the year of a year of growth that we're expected on a full year basis, that's 30% of the midpoint of guidance. As you can imagine in our internal business plan, it is a bit more aggressive than that. Number one, number two, we have certain assumptions around what cost or need is gonna do because that's a big variable as we go through the year. And I think you've seen the way we've provided guidance.

Is a bit more aggressive than that number one number two we have certain assumptions around what cost per lead is going to do because that's a big variable as we go through the year and I think you've seen the way we've provided guidance.

Speaker 3: and 2021 and 2020 and prior years. We always try to give ourselves a shot.

Funding 21 in the 2020 in prior years, we always try to give ourselves the shot and Optionality as we go through the rest of the year, meaning we have the ability to adapt our spend depending on them. So as we look out to 2022. There are degree business would have had.

Speaker 3: When optionality as we go through the rest of the year, meaning we have the ability to adapt our spend

Speaker 3: So, I mean, look out to 2022 here, our degree business would have had.

Speaker 3: double digit road race with the thousand-semin that mid single digits and then the alternative. I really appreciate that Paul. Chief one for you as a follow up. So you talk about the push out of some of the launch cadence with some of the degree program.

Double digit growth rates without Simmons, that's mid single digits, and then be outspending really appreciate that Paul chip one for you as a follow up so you talked about the pushout of some of the launch cadence with some of these degree program.

Speaker 2: You know, can you talk about what, is how that maybe translates to what you're seeing in the overall demand?

Can you talk about what it.

How that maybe translates to what youre seeing in the overall demand.

And the environment for online programs are our universities maybe you.

Speaker 2: and environment for online programs are universities. Maybe you caught rap really a bit because of the enrollment declines they're seeing or is this actually creating a larger, greater demand for new revenue streams to be able to offer both online and on ground? Thanks. Well, there's plenty of demand for...

Reeling a bit because of the enrollment declines they are seeing or is this actually creating.

Larger or greater demands for new revenue streams to be able to offer both online and on ground. While there is plenty of demand for.

Speaker 2: the online program management services from other companies. You can see that Ryan in.

The online program management services from Us and other other companies you can see that Brian .

Of of growth in the space.

Speaker 2: And if you look at, you know, you compare our growth over time to the growth in that same time period for them, you know, we're in that, you know, we're above that range. So, you know, you continue to see plenty of demand for the core services. And, you know, on some level, what you're looking at with the overall decreasing amount of undergraduate students worldwide in the US.

And if you look at you compare our growth over time to the growth and in that same time period for them.

We're in that we're above that range.

So you continue to see plenty of demand for the core services and on some level.

What youre looking at with the overall decreasing amount of undergraduate students worldwide in the U S. A significantly higher percentage of undergraduate students outside the United States and really a growing market and that's part of the reason.

Speaker 2: a significantly higher percentage of undergrad students outside the United States and really a growing market. And that's part of the reason for our announcement today with Sydney with four degree programs for

For our announcement today with Sydney with four degree programs.

For 'twenty.

Speaker 2: 2023, you know, that's a big new commitment for two you.

23.

The big new commitment for two U.

Speaker 2: So we obviously had some programs move out into 2023 and has more to do with leadership change in a variety of places than it does with the demand for the services.

So we obviously had some programs move out into 2023.

And it has more to do with leadership change and a variety of places than it does with the demand for the services.

Helpful color. Thanks, a lot.

Your next question comes from the line of George Tong with Goldman Sachs.

Speaker 4: Your next question comes from the line of George Tongue with Goldman Sachs.

Good afternoon.

Speaker 2: Afternoon. Your alternative credentials business is seeing most impact from higher lead gen costs. Can you discuss trends that you saw in the quarter around cost per lead across the business and what your guidance for 2022 and beyond assumes for lead gen costs?

Europe alternative credentials business is seeing most impact from higher lead Gen costs can you discuss trends that you saw in the quarter around cost per lead across the business and what your guidance for 2022 and beyond assumes for lead Gen costs.

So George in the fourth quarter, we saw an improvement.

Speaker 3: So through our, in the fourth quarter, we saw an improvement from the trends that we were seeing in the third quarter. If you look back at our spread through the third quarter, I think we said we were seeing almost a 70% increase in the executive as you can, in cost per day into the executive education.

The trends that we were seeing in the third quarter, if you look back.

At our sites through the third quarter I think we said we were seeing almost a 70% increase in the executive and cost per leads in the executive education.

That portion of the business.

Speaker 3: portion of the business. And then in the, in the, in the boot camp side of the house, it was almost 25%. So we were seeing much higher cost per lead. Those rates.

Then in the in the in the boot camp side of the house. It was almost 25%. So we were seeing much higher.

The cost per lead those rates decreased in the fourth quarter, but I think.

Speaker 3: decreased in the fourth quarter. But I think there are a couple of things that happen in the fourth quarter. Our teams also found ways to automate, for example, some of the marketing...

There are a couple of things that happened in the fourth quarter. Our teams also found ways to automate for example, some of the marketing.

Speaker 3: allocation of marketing dollars and those things allowed us to be more efficient in generating leads as we got through the back half of the year and I think you thought it was that occurred in the numbers right numbers in the fourth quarter in the alternative credential segment in Poole particularly if you look at it on the sequential basis

Allocation of marketing dollars and those things allowed us to be more efficient in generating leads as we got through the back half of the year and I think you thought it was that occur in our numbers right numbers in the fourth quarter and the alternative credential segment improve particularly.

If you look at it on a sequential basis.

Speaker 3: fourth quarter, over third quarter. And we expect we have assumptions into the models for 2022, that basically assume somewhere around 10 to 15% inflation and cost per lease from 2021 exit run rate.

Fourth quarter over third quarter, and we expect we have assumptions in the model for 2022.

Basically assume somewhere around 10% to 15% inflation in cost per needs from the 2000.

2021 exit run rate.

Speaker 3: And still much above the pre-COVID cost-per-lead numbers, if you will. And to some extent, that is why I described our guidance as prudent, right? That is why I use words like we have optionalities we go through the calendar year. Because if we see inflation or cost-per-lead after running at lower rates than what we assume in the model, then we have the ability to spend more dollars and stay within our numbers. Or we have the ability to have

So much above the pre COVID-19 cost per lead numbers, if you will and to some extent that is why I described our guidance is prudent right that is y.

I use words like we have optionality as we go through the calendar year, because if we see inflation or cost per lead.

Yes.

Running at lower rates than what we assumed in our model and we have the ability to spend more dollars and stay within our numbers or we have the ability to have.

Speaker 3: more leads for the same rates that we're spending. And that would allow us to have better conversion and better revenue from a flow to perspective.

More leads for the same rates that we are.

Spending on that will allow us to have better conversion and better revenue from a flow through perspective.

Speaker 3: So at this point in time,

No.

At this point in time.

I think the digital marketing environment somewhat unpredictable as all of us.

Speaker 3: You know, I think that it's still a marketing environment, someone unpredictable to all of us, but we are putting a line in the sand.

But we are we are putting a line in the sand.

Speaker 2: That's what we're predicted for the year. The only thing I would add to that, George, is that that's a good example of why our partners want our services and want to work with you in a variety of things. It's complicated and we're dealing with a scale and the complexity of it in a way that it's very difficult to do with a single university. And on top of that, it's why we want Edna.

That's what we're predicting for the year the only thing I would add to that George is that there is a good example of why our partners.

Our services and want to work with to you on a variety of things.

It's complicated.

We're dealing with the scale.

And the complexity of it.

In a way that it's very difficult to do as a single University.

On top of that it's why we bought <unk>.

Okay, Greater optionality for the company and all kinds of ways, but certainly not a small part of that.

Speaker 2: greater optionality for the company in all kinds of ways, but certainly not a small part of that is what it does from a learner perspective. And we're already seeing that today, even though we've only only...

It is what it does from a learner perspective, we're already seen that too.

Hey.

Even though we've only owned.

Speaker 5: Great, that's very helpful. And perhaps starting into edXU gave examples of how you're effectively integrating edX into the product to you.

Great that's very helpful.

Correct.

<unk> X you gave examples of how you're effectively integrating <unk> into the broader team.

Platform within the quarter and since the <unk>.

Speaker 5: platform within the quarter and since 4Q, we're edX has successfully drove traffic and converted the actual program.

Sin.

<unk> has successfully drove traffic and converted.

Yes.

Actual program attendance trends.

What kind of evidence have you seen around the synergies that you're hoping to achieve over the next 24 months.

Speaker 5: by kind of evidence that you've seen around the synodies that you're hoping to achieve over the next 24 months.

Good morning, George.

<unk>.

It's really literally been a couple of months. So we're seeing very significantly flow come into the system.

Speaker 2: It's literally been a couple of months. So we're seeing very significantly flow come into the system. You know, and we're working on, you know, a variety of different ways to convert that to you, flow across product lines. And to take a look.

And we're working on a variety of different ways to convert that lead flow across the product lines.

Okay.

Particularly pleased with what it's doing on the LSE undergraduate program.

Speaker 2: particularly pleased with what it's doing on the LFC undergraduate program. So obviously there's a very large international audience for ADEX and that program has both a brand and a price point that's clearly attractive to audience worldwide. So, you know, we're just getting going here. We do think that there's been a significant amount of demand for microbachelors and micromasters.

So obviously there is a very large international audience for IDEXX and that.

That program has both a brand and a price point, that's clearly attractive to audiences worldwide. So.

We're just getting going here, we do think that there's been a significant amount of demand for micro bachelors and micro masters.

Speaker 2: We think the product opportunities there are very much of that we're gonna be able to do this calendar year, not whether there's demand for it. If you look at something like the Harvard Microbapslers.

The product opportunities there are very much of that we're going to be able to do this calendar year not.

Not whether there's demand for it.

If you look at something like the Harvard Micro Bachelors.

Speaker 2: that we just announced a little while ago, the first microbash was from Harvard. You know, it creates credit pathways for people that need credit to attend a quality undergrad program and can do that to any program in the world that will accept those credits. So creating flexibility and pathways for people into high quality options is what this is all about.

Announced a little while ago was the first microvascular from Harvard.

<unk> credit pathways for people.

The need credit to attend quality undergrad program and can do that to any program in the world that will accept those credits, so creating flexibility and pathways for people.

Into high quality options is what this is all about.

Speaker 2: And it's part of the story of just the overall free to degree portfolio that, you know, combination of high quality free options, high quality all-cred in the forms of both boot camps and shorter courses and degrees. And, you know, we bring that full portfolio to bear. So we really do like what it says for the company over the next couple of years. we

And as part of our story of just the overall free to degree portfolio.

Combination of high quality free option high quality of credit in.

In the forms of both boot camps, and shorter courses and degrees and we bring that full portfolio to bear. So we really do like what it says for the company over the next couple of years.

Got it very helpful. Thank you.

Your next question comes from the line of Philip lightest with Barrington capital.

Speaker 4: Your next question comes from the line of Philip Lightus with Bearing Bird Capital.

Hey, guys. Thanks for taking my questions can you elaborate a little bit on the strategy with enterprise what gives me confidence landscape.

Speaker 1: Hey guys, thanks for taking my question. Can you elaborate a little bit on the strategy with enterprise? What gives you confidence, Skate?

So I mean, it's.

Speaker 2: So it's going incredibly well, very proud of both subscription days and

It's going incredibly well very proud.

Both subscription based and.

Sort of.

Okay.

Single products for both executives and a broader number of programs fulfilling.

Speaker 2: single products for both executives and a broader number of programs fulfilling, you know, you know, technical boot camps.

Technical boot camps.

Subjects really known as close to that sort of breath.

Speaker 2: subject is really no one close to that sort of breadth. And we're seeing that being very significant demand across a larger and larger list of customers, and even excited about seeing our degree business get into the action with both Gill and Bright Horizon. So enterprise right now is, it's...

And we're seeing that being very significant demand across a larger and larger list of customers.

And even excited about seeing our degree business get into the action with both Gilligan bright horizons. So <unk>.

Enterprise.

Right now is.

Okay.

I'm really going well.

Speaker 2: really going well. So we're proving to ourselves that we can be very competitive in that segment. And as we mentioned, double last year, it's going to double this year. So I think the

So we're proving to ourselves that we can be very competitive in that segment and as we mentioned double last year, it's going to double this year.

So I.

I think the.

What's key is the broader portfolio.

Speaker 2: what's key is that the broader portfolio is very significant demand for men.

He is very.

Significant demand for minerals.

Enterprises worldwide for Upskilling and Reskilling their employees and also to stay competitive in the marketplace and we're seeing that.

Speaker 2: the crisis worldwide for upskilling and re-skilling their employees and also the state competitive in the marketplace. We're seeing that.

Got it thanks.

Your next question comes from the line of Josh Baer with Morgan Stanley .

Speaker 4: Your next question comes from the line of Josh Bear with Morgan St.

Great. Thanks for the question and I appreciate the longer term frameworks and targets Sir.

Speaker 6: Great, thanks for the question, and I appreciate the longer-term frameworks and targets there. Had a question on your comments about reaching 800 million in steady state revenue and 35% margins on the degree business, if you stopped launching programs, end of 22. Well, how do you think about the timeframe for steady state?

Had a question on chip on your comments about.

Reaching $800 million in steady state revenue and 35% margins on the degree business.

If you stopped launching programs end of 'twenty two.

How do you think about the timeframe for steady state.

I guess first part of the question.

So if you look at the current 2024.

Speaker 2: So if you look at the current 2024, we'd be getting a reasonable steady state.

Get a reasonable steady state in those programs.

And part of the reason we're talking about this we built a great business here.

Speaker 2: Part of the reason we're talking about this, if we build a great business here, and we look at the...

And if you look at that.

The degree business.

Speaker 2: the degree business granted, it's clear that as we explained, we had some movement out of 2022 to 2023.

Granted it's clear.

<unk>.

And as we explained we had some movement out of 2022 to 2023.

So just trying to we're at a stage of life, we're going to do over $1 billion revenue. This year. So we're trying to build a profitable business and see that profitability come through the financial statements did not.

Speaker 2: As us trying to, you know, we're at a stage of life, we're gonna do a rebellion revenue this year. So we're trying to build a profitable business and see that profitability come through to this initial stage and not take the can down the road. And if you look at the degree business, it's just incredibly profitable today and it continues to be. So we're trying to put color around it. Jill, valuable.

Kick the can down the road.

And if you look at the degree business is just incredibly profitable day and it continues to be so.

So we're trying to put color around it.

Yes.

Valuable that businesses.

Yeah.

It's also a business that we really believe what we're seeing a significant.

Speaker 2: It's also a business that we really believe what we're seeing, a significant long-term play here. If you look at the OPM space overall, it shows the size of the screen.

Long term play here, if you look at the OPM space overall.

Data that shows the size of this.

Based on the growth and over $80.

Over 80% of the space is revenue share deals and I think there is at times a misperception.

Speaker 2: Over 80% of the space is revenue share deals and I think there's at times a misperception

This is somehow going to be a shorter term thing and we just continue every year to pull out more and more clients.

Speaker 2: This is somehow like to be a shorter term thing, which continues every year to pull out more and more clients.

It is literally one of the best institutions on the planet for brand new degrees. So it's not that we expect to stop.

Speaker 2: We literally want to invest institutions on the planet at four brand new degrees. So it's not that we expect to stop, but we want to balance the growth trajectory with greater profit companies today.

But we want to balance the growth trajectory with greater product.

The company today that we need to let that.

Come through in current periods and Thats, what you see happening so so.

Speaker 2: come through in current periods and that's what you see happening. So clearly, edX creates some shorter term evolution on the bottom line that we think is well worth the investment because of what it will do long term for the platform of the company and for the flywheel that will generate greater profitability long term.

Clearly <unk> creates some shorter term dilution on the bottom line that we think is well worth the investment because of what it will do long term.

For the platform of the company and for the flywheel it will generate greater profitability long term.

Speaker 3: But in the short term, the core business itself, you would have seen substantial earnings improvements. I mean, right, human. Yeah, I mean, that's over 50% improvement on the year of a year of business, right? The midpoint of guidance is $80 million to keep it up and the ethics solution at the midpoint is about $35 million, all right? So what we're presenting here today is

But in the short term the core business itself you would've seen substantial earnings improvements I mean, Greg you might want to.

That's over 50% improvement on a year over year basis, right at midpoint of guidance of $80 million EBITDA and the earnings dilution at the midpoint of the 30 its about 35 billion.

So.

What what we're presenting here today.

Speaker 3: Guy are also represents the choices that we've made to deliver the balanced growth and profitability and it's something that we're very proud of.

Guide our outlook represents the choices that we've made to deliver balanced growth and profitability.

It's something that we're very proud of.

We believe by 1 billion plus of revenue it is something thats necessary and.

Speaker 3: We've seen by a billion plus of revenue. It is something that's necessary. And, you know, transition. And as we get to the meeting, the new term and the long term as you see there, we can truly realize the benefits.

<unk> and as we get to the media.

Medium term and the long term as you've seen with our.

We can truly realize the benefits.

Okay.

Yes.

Original question was just if you could.

Same type of steady state.

Speaker 6: just as far as scale and state-state margins, assuming no new launches.

Sorry, just as far as scale and steady state margins, assuming no new launches.

Yes.

Speaker 3: Yeah, I mean, the all-crime business is a little bit different. Right? If you think of the two components of it before add-on.

The olive garden business is little bit different private you'd think of if you think of the two components of it before at ex.

The boot camp is more of a.

Presentation.

We've taken the subject and Youre rolling out across the partner networks that you have and then in the short course, our executive education side. It is about the presentations of new partners that you sign up so it's a relatively it's a much different business with much shorter cycles.

Speaker 3: across the partner networks that you have. And then in the short course or executive education side, it is among the free pensions of the new partners that you sign up. So it's a relatively, it's a much different business with much shorter cycles in it. How do I say this? In the degree side, student answers the program and clicks around for two and a half years. The cycles and they all start different actual sites as much much shorter. Here's what I'll say to you. If you look at the trend in the margin on the alternative potential side, 2020-2021, it's been material improvement.

<unk>.

How do I say this and the degree side.

The student enters the programming sticks around for two and a half years the cycles in the alternative credential side is much much shorter here's what I'll say is you can look at the trend and the margins on the alternative credential side 2000 22021.

Speaker 3: 2021, it's been material improvement.

It's been material improvement.

<unk>.

Speaker 3: Without the edX dilution, we probably would have seen that business crossing over into profitability as we exit 2022 into 2023. In the guide I've said 24 months of...

Without the <unk> dilution, we probably would have seen that business crossing over into profitability as we exit 2022 into 2023.

And.

And the guidance said 24 months.

Speaker 3: 24 to 36 months depending on the solution that we see from the edX addition to the portfolio. But stand alone, that business would have been profitable, I would say within.

At 24% to 36 months, depending on the evolution that we've seen from from.

From the headaches.

<unk> to the portfolio.

<unk> Standalone that business would have been profitable I would say within 12.

12 months to 18 months had we not done.

Speaker 3: 12 to 18 months had we not done the inclusion of that of Alex to it. So hopefully that gives you an insight into that. But I think the

The inclusion of that of that X through it. So hopefully that gives you an insight into that but I think the.

Speaker 3: The similar analysis to the degree of segment is probably not a fair comparison.

The similar analysis in the degree segment, it's probably not a fair comparison.

Great. Thanks.

Your next question is from the line of Brent Thill with Jefferies.

Speaker 4: Your next question is from the line of Brent Fill with Jeffrey.

Yeah.

Hey, guys. This is David on for Brian Thanks for taking the question.

Speaker 1: Hey guys, this is David on for Brent. Thanks for taking the question.

I wanted to double click on the enterprise side. It sounds like you guys think a lot of momentum I think you said the business doubled last year and expect it to double again this year, but I was wondering if you could put some more context behind that is revenue growth accelerating there.

Speaker 1: I want to double click on the enterprise side. It's not like you guys are single at the moment. I think you said the business doubled last year and expected to double again this year. I was wondering if you could put some more context behind that. Is revenue growth accelerating there? You are landing loads of deals now. Let's just talk about how that business is.

You are landing larger deals now can you just talk about how that business.

This trending would be helpful. Thanks.

So.

Speaker 2: So, you know, it's clear that this is a segment that we're going to...

It's clear that this is a segment that we're going to.

Talk a lot more about over the next couple of years and put more color on for the Investor community as we get our arms around how significant it can be.

Speaker 2: Talk a lot more about over the next couple of years and put more color on for the investor community as we dare arms around how significant it can be. But right now, pretty much all the products we have are selling.

But right now pretty much all the products, we have are selling now.

Speaker 2: So, it's a combination of the sort of two use side and the addict side coming together, offering sort of seat-based content for executives or programs like the Netflix Food Camp Probe, historically black colleges.

It's a combination of the sort of <unk> side, and the <unk> side coming together offerings are seat based content for executives or.

Programs like the Netflix bootcamp bromine historically black colleges.

And then.

Speaker 2: And then what we added to it was some high quality Hispanic serving institutions.

What we added to it was some high quality spanning serving institutions.

And that program has been a homerun and as broader applicability across.

Speaker 2: And that program has been a home run and has brought our applicability across.

Speaker 2: the business overall to many more clients because people desperately need to improve diverse pipelines of talent. That's been very popular. The edX for Enterprise side, we will run all of this as edX for Enterprise as we bring the two together. And our team is on a worldwide basis.

The business overall to many more clients because.

People desperately need to improve.

Our pipelines of talent, that's been very popular the.

The Nx for enterprise side, we will run all of this as Alex for enterprise as we bring the two together.

And our team is on a worldwide basis.

Delivering exactly through what was.

Speaker 2: delivering exact ahead through what was our get smarter business. Still today, representatives get smarter and over time, we'll become addict. So there's a lot of...

Our gift smarter business still today representatives get smarter and overtime will come at us so.

There's a lot there.

Speaker 3: And David, a couple of things. I mean, you can think of it as a channel, multi-product channel sales channel essentially. And when the addition of edX brings to us over 1200 enterprise partners.

And David a couple of things I mean, you can think of it as a as a channel multi product channel such sales, China, essentially and with the addition of <unk> brings to us over 1200 enterprise partners so to some extent.

Speaker 3: So to some extent, we've gotten the fuel in this category as well as I think...

We've gotten to the fuel in this category as well as.

I think.

Significant growth engine for us I think in chips comments, he said that bookings could be.

Speaker 2: significant real attention for us. I think in Chip's comments, he said, the bookings could be in excess of $150 million as we get to the end of 2024. Yeah, I would also note that edX brought with it some very experienced sales team members, so that's been a real positive. Thanks for the color, guys. Appreciate it. Thank you.

In excess of $150 million as we get to put that in the 2024, Yes. I would also note that <unk> brought with it some.

Our experienced sales team members. So that's been a real positive and thanks for the color guys. Appreciate it.

And then.

But we will talk to you soon.

This does concludes today's conference call. Thank you for participating you may now disconnect.

Speaker 4: This does conclude to this conference call. Thank you for participating. You may now disconnect.

Okay.

Speaker 7: The.

Yes.

Sure.

Sure.

Yes.

Sure.

Okay.

Sure.

Yes.

Okay.

Okay.

Yes.

Okay.

All right.