2U Inc Value Stock - Dividend - Research Selection

We are a leading education technology company that well-recognized nonprofit colleges and universities trust to bring them into the digital age. Our comprehensive platform of tightly integrated technology and services provides the digital infrastructure universities need to attract, enroll, educate and support students at scale. With our platform, students can pursue their education anytime, anywhere, without quitting their jobs or moving; and university clients can improve educational outcomes, skills attainment and career prospects for a greater number of students.

Over the past decade, we have developed new and innovative tools within our platform to enhance the effectiveness of instructional methods and improve student outcomes and the student experience. During that time, we have also refined our program selection algorithm and improved our data-driven digital marketing capabilities across our ecosystem of offerings to generate increased student enrollments in a cost effective manner. As a result, demand for our comprehensive platform of integrated technology and services has increased significantly. Since 2008, we have expanded our university client base from one to 24 across our entire portfolio of offerings, increased the number of 2U-powered graduate programs from one to 37, and enrolled over 33,000 graduate students.

Our core strategy is to launch graduate programs and short courses with new and existing university clients and to increase student enrollments across our portfolio. We are also committed to continuously improving our platform to deliver high-quality university and student experiences and outcomes at scale.

Business Segments

Beginning in July 2017, with the closing of our acquisition of GetSmarter, we began offering premium online short courses to students not seeking a full graduate degree. As a result of the GetSmarter acquisition, we have two reportable segments: the Graduate Program Segment and the Short Course Segment.

In both our Graduate Program Segment and our Short Course Segment, we provide well-recognized nonprofit colleges and universities with the comprehensive infrastructure they need to attract, enroll, educate and support students in their 2U-enabled graduate program or short course. In our Graduate Program Segment, we target students seeking a full graduate degree of the same quality they would receive on-campus. In our Short Course Segment, we target working professionals seeking career advancement through skills attainment.

The reportable segments represent businesses for which separate financial information is utilized by the chief operating decision maker for the purpose of allocating resources and evaluating performance. Our Graduate Program Segment derives revenue primarily from a contractually specified percentage of the amounts our university clients receive from their students in the 2U-enabled graduate program for tuition and fees, less credit card fees and other specified charges we have agreed to exclude in certain of our university client contracts. The Short Course Segment derives revenue directly from students for the tuition and fees paid to enroll in and progress through our short courses. A contractually specified percentage of the tuition and fees received from students is shared with the university client. For additional information regarding our segments, see Note 13 Segment and Geographic Information in the accompanying notes to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Our Platform

Our platform consists of front-end and back-end cloud-based SaaS technology and technology-enabled services. These two components are tightly integrated and each is optimized with data analysis and machine learning techniques.

Front-End Technology and Services

We provide the following front-end technology and services to students enrolled in our offerings and to faculty members and university administrators supporting our offerings:

• Online Learning Platform. Our online learning platform is a secure and accessible learning and teaching platform, where our university clients can reliably deliver their high-quality educational content to students in a live, intimate and engaging setting, all accessible through proprietary web and mobile applications. Our online learning platform allows our university clients to provide a personalized learning environment for faculty and students as well as a robust online educational community. Students can also download their asynchronous coursework for convenient offline consumption.

On January 19, 2018, we entered into an agreement to purchase a perpetual source code license for the Learn.co platform from Flatiron School, Inc., a wholly owned subsidiary of WeWork Companies, Inc. Once integrated into our online learning platform, we expect that Learn.co will enhance the learning experience of students and instruction capabilities of faculty across our entire portfolio of offerings.

• Student and Faculty Support. We augment each student's academic experience by providing ongoing personalized non-academic support. We also provide a dedicated team to support and train university administration and faculty on how to use our platform to facilitate outstanding live instruction.

• Accessibility. For students with disabilities, we are able to facilitate accessibility across our platform. This includes providing screen-reading technology, captioning, subtitling and voice-over descriptions for asynchronous content, and sign language interpretation and real time captioning for live classes.

• Admissions Application Advising. Leveraging our customer relationship management deployments and other technology, our graduate program-dedicated teams work with prospective students as they consider and apply to a program. Once a student has submitted a completed admissions application package, it is routed to and reviewed by the university admissions office, which renders the final admission decision.

• In-Program Student Field Placements. Leveraging our nationwide network of clinics, hospitals, schools and other sites, our field placement team is dedicated to securing in-program field placement opportunities for students enrolled in our university clients' graduate programs that have a field placement component. Leveraging a geo-location database, we work closely with faculty to identify and approve sites that meet curriculum requirements.

• Immersion Support. Many of our university clients' graduate programs require students to attend immersions and intensive residencies where students travel to a university client's physical campus and other locations, where they can engage in collaborative learning experiences with their classmates and professors in person, and develop invaluable personal and professional relationships. We provide the resources and technology to support our university clients in facilitating these experiences.

• Faculty Recruiting. Using our platform, our university clients can identify and employ highly qualified teaching faculty without geographic constraint. We effectively act as a search firm by attracting, cultivating and vetting a pool of faculty candidates for our university clients.

Back-End Technology and Services

We provide the following back-end technology and services to launch and operate our offerings:

• Graduate Program Launch and Operations Applications. We use an application we call Central Park to unify our suite of applications and better automate the standup of technology infrastructure for new graduate programs. We also use an application we call Uber-Conf to translate graduate program-specific code into a common language to simplify program-specific complexity. These applications simplify the effort to launch new graduate programs and enable non-technology oriented employees to support the data analytics and operational needs across our business.

• University Systems Integration Applications. We use an application we call Port Authority to integrate our technology with our university clients' information technology systems. This application automates the student enrollment process, which allows us to more efficiently and quickly enroll students, thereby increasing our student-to-support staff ratios, while reducing the potential for human error.

• Content Management System. Our content management system enables us and our university clients to author, review and deploy the asynchronous content for our offerings. The content management system includes a set of project management and collaboration tools that allow our university clients' faculty to seamlessly integrate their work with that of our course production and content development staff.

• Admissions Application Processing Portal. Our proprietary admissions application system, known as the Online Application and Recommendation System, or OARS, automates the graduate program admissions application process. OARS is integrated with the primary marketing site for each graduate program and directly using data analysis and machine learning techniques, funnels prospective students into each university client's existing admissions application process and provides automated workflow for that process.

• Customer Relationship Management. We have developed customer relationship management deployments configured for each university client's specific graduate program. Each deployment serves as the data hub for scheduling, student acquisition, student application, faculty admissions review, enrollment and student support. Our university clients and our employees review, maintain and track this information to ensure proper coordination.

• Content Development. Leveraging our content management system, our content development staff works closely with our university clients' faculty in a collaborative process to produce high-quality, engaging online coursework and content.

• Student Acquisition. Leveraging data analytics and machine learning techniques, we develop targeted, offering-specific digital marketing campaigns that can reach and engage interested and qualified prospective students in a cost-effective manner. Our marketing teams also develop creative assets, such as websites related to the graduate program and short course fields of study, and execute search engine optimization and paid search campaigns aimed at acquiring students cost-effectively.

• State Authorization Services. Many of our offerings must comply with state authorization requirements in each state where students reside. We work with most of our university clients to identify and satisfy a complex array of state authorization requirements.