Online education platform, 2U (NASDAQ:TWOU) missed analysts' expectations in Q4 FY2023, with revenue up 8.3% year on year to $255.7 million. Next quarter's revenue guidance of $196.5 million also underwhelmed, coming in 5.7% below analysts' estimates. It made a non-GAAP profit of $0.48 per share, improving from its profit of $0.23 per share in the same quarter last year.

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2U (TWOU) Q4 FY2023 Highlights:

• Revenue: $255.7 million vs analyst estimates of $281.4 million (9.2% miss)

• EPS (non-GAAP): $0.48 vs analyst expectations of $0.64 (24.7% miss)

• Revenue Guidance for Q1 2024 is $196.5 million at the midpoint, below analyst estimates of $208.4 million

• Management's revenue guidance for the upcoming financial year 2024 is $810 million at the midpoint, missing analyst estimates by 7% and implying -14.4% growth (vs -1.7% in FY2023)

• Free Cash Flow of $12.4 million is up from -$30.35 million in the previous quarter

• Gross Margin (GAAP): 77.6%, up from 71.2% in the same quarter last year

• Market Capitalization: $65.2 million

"I am proud to lead 2U through the next chapter of its journey," said Paul Lalljie, Chief Executive Officer of 2U.

Originally named 2tor after the founder's dog Tor, 2U (NASDAQ:TWOU) provides software for universities and colleges to deliver online degree programs and courses.

Education Software

The overwhelming trend of moving work, life and consumption of content online is starting to catch up with the education sector that has until recently stuck to providing courses and degrees in the same way as they did decades ago - in person. The COVID pandemic massively accelerated adoption of online education and has forced institutions to invest in creating digital courses, which drives demand for the software that enables it.

Sales Growth

As you can see below, 2U's revenue growth has been unimpressive over the last two years, growing from $243.6 million in Q4 FY2021 to $255.7 million this quarter.

2U's quarterly revenue was only up 8.3% year on year, which might disappoint some shareholders. However, we can see that the company's revenue grew by $25.96 million quarter on quarter, re-accelerating from $7.61 million in Q3 2023.

Next quarter, 2U is guiding for a 17.6% year-on-year revenue decline to $196.5 million, a further deceleration from the 5.9% year-on-year decrease it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $810 million at the midpoint, declining 14.4% year on year compared to 1.8% drop in FY2023.