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An IPO Analysis: 2U Inc.

An IPO Analysis: 2U Inc. . Wall Street Wizards Brittni Bremner, Jeremy Kelly, Justin Lebans, Justine Rancy, Elliott Ryan, Emmanuel Adeniyi. Table of Contents. Introduction and Growth Market/Industry Analysis IPO candidate Assessment of Prospectus and Company Competition

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An IPO Analysis: 2U Inc.

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  1. An IPO Analysis: 2U Inc. Wall Street WizardsBrittni Bremner, Jeremy Kelly, Justin Lebans, Justine Rancy, Elliott Ryan, Emmanuel Adeniyi

  2. Table of Contents • Introduction and Growth • Market/Industry Analysis • IPO candidate • Assessment of Prospectus and Company • Competition • Enterprise value, share price, outstanding shares • Conclusion

  3. Introduction and Growth • Founded in 2008 • Technology Based Company • Partners with Colleges and Universities • Currently has 8 clients, 10 different degrees • Market for online education fairly new • Not been able to meet its debt obligations in its first years of operation (interest coverage ratio of -.947) • 2011 to 2013, growing revenues from $29,733(in thousands) to $83,127(in thousands), 48.76% • Expand on the academic disciplines currently offered, increase enrollment, and acquire new clients as well as adding new programs with already existing clients.

  4. Industry and Market Analysis Industry Market Rising in demand in post secondary education ($550 billion in US) Online market has grown (flexible, convenient) Challenges (funding, volatility) • Technology is on the rise • Colleges and universities becoming more inclined to offer online programs • Online learning: not traditional

  5. Candidate Material • Pros • Connects through cloud based software • student able to access materials, engage in lectures, and perform testing all from the comfort of their computer • Issue equity to fund growth, cover costs • Strong growth capability • Robust software • Cons • High net losses • No history to rely on • Highly dependent on other institutions

  6. Assessment of Prospectus of IPO • Cloud based first, technology second • Flexible, highly scalable • Small classroom numbers • Enrollment rose 49% 2011-2013 • Long term growth promising • Stepping stones for higher education • Heavy costs with new programs • Strong Underwriters behind them

  7. Competition • Well established and emerging companies • New entrants as market continues growing • Larger universities offer eLearning already • Larger firms have financial resources 2U lacks

  8. Competition Deltak Innovations Pearson Embanet Pearson PLC Another primary competitor Education division Many online solutions • John Wiley and Sons • Large publishing company • Primary competitor • Similar strategies

  9. Expected Growth Factors Estimated Numbers 2014-2019: Negative EBITDA 2020E: $55,568,507 EBITDA 94% of Sales = Cost • 49 % Compounded Annually • 5.3% decrease in operational cost relative to revenue • Emerging growth company until $1billion in sales.

  10. IPO Valuation Public Competitors Estimated Values DCF Method Share Price : $12.20 MV Firm/Sales = $11.00 Shares Outstanding = 31,130,140 Enterprise Value = $555,685,000 • NASDAQ: EDMC • NYSE : DV • NYSE: ESI • NASDAQ: APOL • NYSE : PSO

  11. Conclusion • Internet use and online education increasing • Technology advancements • Managers have to look at the way they do business with the same objective eye that an outsider would to evaluate their performance • Need to address and overcome challenges faced with • Plans for excess funds • Patient investors…succesfull rewards

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