2U, Inc. revenue jumped on 34.8% and EBITDA Margin jumped on 20.0 pp from -28.7% to -8.7%
02/11/2021 • About 2U, Inc. (
$TWOU) • By InTwits
2U, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- 2U, Inc. is a fast growth stock: 2020 revenue growth was 34.8%, 5 year revenue CAGR was 38.8% at 2020 ROIC -14.4%
- The company operates at negative EBITDA Margin: -8.7%
- 2U, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 3.1% while average EBITDA Margin was -11.9% for the sames years
- 2U, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.9%. At the same time it's in pair with industry average of 7.3%
- CAPEX is quite volatile: $7m in 2020, $13m in 2019, $12m in 2018, $27m in 2017, $8m in 2016
- The company has unprofitable business model: ROIC is -14.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 34.8%. Revenue growth showed small slowdown in 20Q4 - it was 31.9% YoY. During the last 5 years Revenue growth topped in 2018 at 43.6% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.3 pp from -3.5% to 1.9% in 2020.
Gross Margin increased slightly on 0.96 pp from 82.8% to 83.8% in 2020. SG&A as a % of Revenue decreased on 9.6 pp from 82.4% to 72.8% in 2020.
Net Income margin surged on 13.0 pp from -40.9% to -28.0% in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.84% in 2020. The company's CAPEX/Revenue decreased on 8.7 pp from 9.5% in 2017 to 0.84% in 2020. It's average level of CAPEX/Revenue for the last three years was 2.0%. During 2016-2020 CAPEX as a % of Revenue topped in 2017 at 9.5% and was declining since that time.
Return on investment
The company operates at negative ROIC (-14.4%) and ROE (-26.2%). ROIC surged on 12.7 pp from -27.2% to -14.4% in 2020. ROE increased on 7.0 pp from -33.2% to -26.2% in 2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.3x and Debt / EBITDA is . Debt surged on 14.2% while cash jumped on 193%.
2U, Inc. has no short term refinancing risk: cash is higher than short term debt (4,994.3%).
Management team
Christopher J Paucek "Chip" is a 2U, Inc.'s CEO. Christopher J Paucek "Chip" has spent 9 years with the company. Paul S Lalljie is a the company's CFO. Paul S Lalljie has spent 1 year at the company.
Financial and operational results
FY ended 12/31/2020
2U, Inc. ($TWOU) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 205.9 | 286.8 | 411.8 | 574.7 | 774.5 | 34.8% |
| Gross Profit | 164.9 | 236.0 | 344.6 | 475.8 | 648.7 | 36.3% |
| SG&A | 152.6 | 213.6 | 304.0 | 473.4 | 563.7 | 19.1% |
| EBITDA | -11.3 | -10.5 | -13.8 | -165.2 | -67.3 | |
| EBIT | -21.0 | -30.1 | -46.5 | | | |
| Interest expence | 0.0 | 0.1 | 0.1 | | | |
| Net Income | -20.7 | -29.4 | -38.3 | -235.2 | -216.5 | |
| Stock Based Compensation | 15.8 | 21.9 | 31.4 | | | |
Balance Sheet
|
|---|
| Cash | 168.7 | 223.4 | 449.8 | 170.6 | 500.6 | 193.5% |
| Accounts Receivable | 7.9 | 14.2 | 32.6 | | | |
| Accounts Payable | 3.7 | 22.6 | 27.6 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 7.3 | 10.0 | 36.9% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 313.6 | 356.4 | 13.7% |
Cash flow
|
|---|
| Capex | 7.6 | 27.3 | 12.0 | 13.4 | 6.5 | -51.4% |
| Acquisitions | | 97.1 | | | | |
Ratios
|
|---|
| Revenue growth | 37.1% | 39.3% | 43.6% | 39.6% | 34.8% | |
| EBITDA growth | -40.2% | -6.8% | 30.8% | 1,100.9% | -59.2% | |
|
|---|
| Gross Margin | 80.1% | 82.3% | 83.7% | 82.8% | 83.8% | 1.0% |
| EBITDA Margin | -5.5% | -3.7% | -3.3% | -28.7% | -8.7% | 20.0% |
| EBIT Margin | -10.2% | -10.5% | -11.3% | | |
| SG&A, % of revenue | 74.1% | 74.5% | 73.8% | 82.4% | 72.8% | -9.6% |
| SBC, % of revenue | 7.7% | 7.6% | 7.6% | | |
| Net Income Margin | -10.0% | -10.3% | -9.3% | -40.9% | -28.0% | 13.0% |
| CAPEX, % of revenue | 3.7% | 9.5% | 2.9% | 2.3% | 0.8% | -1.5% |
|
|---|
| ROIC | -10.8% | -10.2% | -8.4% | -27.2% | -14.4% | 12.7% |
| ROE | -10.6% | -10.1% | -7.0% | -33.2% | -26.2% | 7.0% |
People
|
|---|
| Insider ownership | 2.2% | 2.2% | 2.2% | | | |
| Employees | 1,119 | 1,808 | | | | |
| Revenue/Employee, th. $ | 184 | 159 | | | | |
2U, Inc. ($TWOU) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 175 | 183 | 201 | 215 | | 43.6% | 34.9% | 30.7% | 31.9% |
| EBITDA | -27 | -21 | -18 | 1 | | - | - | - | - |
| Net Income | -60 | -66 | -53 | -38 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 138 | 195 | 481 | 501 | | -67.4% | -10.9% | 212.4% | 193.5% |
| Short Term Debt | 8 | 8 | 9 | 10 | | 61.3% | 35.2% | 29.3% | 36.9% |
| Long Term Debt | 318 | 337 | 344 | 356 | | 454.6% | 10.6% | 11.4% | 13.7% |
Ratios
|
|---|
| Gross Margin | 82.6% | 83.4% | 83.8% | 84.9% | | -0.9% | 1.1% | 1.6% | 1.7% |
| EBITDA Margin | -15.3% | -11.7% | -9.0% | 0.3% | | -5.4% | 9.5% | 62.3% | 9.3% |
| Net Income Margin | -34.3% | -36.2% | -26.1% | -17.5% | | -16.6% | -15.6% | 65.6% | 9.8% |
Peers in Application Software
Below you can find 2U, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.5% |
|---|
| 2U, Inc. ($TWOU) | - | 39.3% | 43.6% | 39.6% | 34.8% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| 2U, Inc. ($TWOU) | 80.1% | 82.3% | 83.7% | 82.8% | 83.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -4.7% | -3.9% | -3.3% | 4.5% | 7.7% |
|---|
| 2U, Inc. ($TWOU) | -5.5% | -3.7% | -3.3% | -28.7% | -8.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 3.0% | 2.6% |
|---|
| 2U, Inc. ($TWOU) | 3.7% | 9.5% | 2.9% | 2.3% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.2% | -11.8% | -10.6% | -4.2% | -1.8% |
|---|
| 2U, Inc. ($TWOU) | -10.8% | -10.2% | -8.4% | -27.2% | -14.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (54 companies) | -0.9x | -0.8x | -0.7x | 0.4x | 0.2x |
|---|
