Business Profile
2U, Inc. operates as an education technology company in the United States, Hong Kong, South Africa, and the United Kingdom. It operates in two segments, Graduate Program Segment and Short Course Segment.
Business Growth
In addition, operating income is another positive feature of TWOU.The company’s operating income grows at 1% y/y. Regarding the share count, investors will not like that the shares outstanding increased a 12%.In short, the intrinsic valuation of each share declined.
Balance Sheet
With an asset/liability ratio of more than 2x, TWOU’s balance sheet seems very solid.In Q4, 2U Inc reported $1544 million in assets, with total liabilities of $603 million.TWOU reports $500 million in cash and cash equivalents.As for me, I think that the company has a good amount of cash to conduct additional R&D and increase its marketing efforts.The balance sheet shows deferred revenue of $75 million, which I appreciate.
Deferred revenue represents a prepayment by the company’s clients that have yet to be delivered.In short, the company receives cash in advance of it being earned.In addition, 2U Inc has positive working capital, which shareholders will like.It means that the company can cover its short-term liabilities when they come due.
In my view, 2U Inc reports a significant amount of goodwill.It is equal to $415 million.It is difficult to know the real value of intangibles and goodwill.Therefore, there is a potential goodwill impairment risk.The company could review and impair intangible assets, which could lead to a decline in the share price.
TWOU’s short term debt is less significant than the cash in hand.As for me, I think that 2U Inc may not have to worry about any liquidity risk.TWOU’s debt to equity ratio is below 2x.In summary, the debt level is under control.Notice that 2U Inc reports cash and cash equivalents of $500 million, and net debt of $-144 million.
Quarterly Results
In Q4 TWOU reported quarterly sales of $215 million, and gross profit of $385 million.The gross profit ratio was equal to 179%.I believe that the company’s performance is beneficial
If you spot an error that warrants correction, please contact the editor. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We don’t own TWOU’s shares.
