1. Investment Proposal
2U (TWOU)
September 22, 2015

2. Table of Contents
I. Executive Summary
II. Main Business
III. Long-Term Strategy
IV. Catalysts/Opportunities for Further Value Creation
V. In the News
VI. Online Education Industry Background
I. Academic Support
II. Online Education Market
VII.Industry Landscape
VIII. Risk Factors
IX. Stock Performance Overview
X. Valuation
XI. Prevailing Opinions
XII.Recommendations
I. Closing Statement
XIII.Appendix
1

3. Executive Summary

4. Executive Summary
2U’s impressive management team, business model, partnerships and market potential
make the online degree developer a great investment opportunity for the GIMG portfolio.
• 2U is the leading provider of
online degree platforms for
leading non-profit colleges
and universities. It develops
online degrees by providing
an online platform and
working with the university to
develop the content of the
program.
• The strategies the company
is engaging in promise to
enhance business
productivity, improve
management, increase
market competitive
advantage, and boost future
returns. We believe this
company would be a great
investment opportunity for
GIMG given its prestige,
constant revenue generation
and continuous increase in
brand value.
3
2U IPO, March 2014

5. Main Business

6. Main Business
The company’s revenues come from the students their clients (Universities) are able to
get. Long-term contracts are signed with the clients (averaging 10-15 years), which
include the percentage of revenues per student to 2Us
• 2U develops an online platform for universities, so that they can offer their full degrees online. This
platform contains all the material teachers and students need for the most optimal online educational
experience and, at the end of the program, students can get a full degree. Students enrolled in these
programs are also admitted to the Universities facilities, so if a student requires resources from the
university, they can most certainly have them. University of North Carolina currently has over 600
students enrolled on its online Business Degree, and was ranked the #1 Online MBA for 2015 byUS
News & World Report and The Princeton Review. The main programs their clients offer are post-
graduate programs, but they are recently developing full undergraduate degree programs.
• The company’s revenues come from the students who are enrolled in their clients’ (universities)
programs, and their ability to retain a high enrollment of these students. To get more students, they
rely on their capacity to attract new clients and, therefore, increase the student maximum capacity.
Clients are offered 2U’s programs, and then decide whether or not to partner with the company.
• 2U incurs all the costs associated with the development of the content and the platform of their
particular client. 2U’s development teams work along teachers and professionals to ensure the best
quality experience can be obtained from these classes. Their main philosophy, “No Back Row,”
ensures that every student can get the most out of the content by providing classes with 15 students
per class, and both synchronous and asynchronous content. This means students can go at their own
pace, and get all their questions answered by the teacher as quickly as possible.
https://onlinemba.unc.edu / http://www.usnews.com/education/online-education/university-of-north-carolina-at-chapel-hill-OBUS0736/mba
5

7. Long Term Strategy
2U partners with leading non-profit colleges and universities to
develop online full degrees of the best possible quality.
We have identified the main strategy of the business as being brand value
development. 2U’s goal is to become the best provider of online education
services through the prestigious clients they work with. This goal is being
pursuit by working along the universities through the whole content
development process to ensure the highest quality content is achieved. This
ensures students get the same quality experience online as if they would by
attending a normal class. Their main focus is not to reduce costs, but rather
create the highest online quality education program along with their clients, and
become the best developers in the market.
2U clearly knows that giving out classes online is different from face-to-face,
that is why they invest so much in program development, and this is where the
value can be clearly seen. 83% of their client’s students stay in their programs
because of this strategy, also known as “No Back Row.”
6

8. Long term Strategy
• Because of a great retention rate and
program quality, 2U’s student number
has grown at an average of 7.54% per
quarter since October 2012.
• We believe this student number will
continue to growth constantly due to
many factors. Every time 2U signs a
new contract, the maximum number of
students their clients can have
increases.
• Today, 2U’s biggest program (not
client) has an average of 1,000
students. They currently have 31
programs either developed or being
developed.
• Taking into account the potential
development of these programs we
believe the companies revenues will
more than double in the next 3-4
years, while costs will be adjusted and
profits will be realized.
7
Student Growth Over Time
0
2000
4000
6000
8000
10000
12000
14000
16000
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Students
Time
CAGR = 34%

9. Catalysts/Opportunities for Further Value Creation

10. Student/Revenue Growth
• 2U’s revenues are generated by the number of
students they can have
• continues to grow at 7.56% per quarter for the
next 5 years, which we believe they will, this
means revenues double about every 10
quarters, or 2 and a half years.
• At this pace, we believe the stock price of the
stock has a huge upside potential.
Constant Credibility Growth
• The company’s brand name is constantly
acquiring value, and we think this will continue
to do so as long as the company seeks
partnerships with the most prestigious colleges,
and develops new relationships with
companies.
• Big names such as Google and Goldman Sachs
publicly announced that they are going to
provide scholarships for their employees.
• We believe corporations will soon further
recognize the advantages of providing their
employees with post-graduate degrees, without
their employees having to leave the office.
• We believe the idea of being able to complete a
full MBA from home, at the office, traveling, or
wherever, is revolutionary.
9
Catalysts/Opportunities for further Value Creation
There are a number of potential near-term catalysts that could boost the
company’s future cash flows.

11. Catalysts/Opportunities for Further Value Creation
• Client Acquisition
2U has now19 clients. Big client names include University of South California, University of
North Carolina Chapel Hill, Northwestern University, Yale School of Medicine, Berkeley School
of Medicine, etc. New York University partnered with 2U on the 2Q 2015. All of these new
partnerships boost 2U’s credibility, and give potential clients more security about 2U’s success.
• Student Retention
2U’s “No Back Row” method has proven incredibly effective. 2U’s programs retain 83% of the
students that currently study in their programs, or that have already graduated. This means
2U’s main business product is incredibly effective. We believe that if 2U maintains this retention
rate, it will further improve credibility for current and future clients.
• Unique Business Model
The business model is very particular. They have an incredibly scalable business, which relies
on the number of students their clients can get. If retention rates are maintained and the quality
of the content offered remains, more prospective students will be interested in 2U’s programs,
which are said to be as effective as a real life classroom.
• Evident Demand for Online Degrees
Online education is a market that is growing on an average of 10% every year, compared to the
2.0% of normal college enrollments. We see a big opportunity in the online education industry if
the content is developed properly. There is a growing demand for online education courses
from both corporations and individuals. Right now, there are about 1,2 million students enrolled
in either undergrad or post-grad online degrees. We believe 2U will be able to acquire about
2% of this market in the next 4-5 years.
10

12. Catalysts/Opportunities for further Value Creation
Credibility Leverage
• James Sheldon, the ex secretary deputy of the United States, joined 2U as the Chief
Impact Officer.
• We believe this demonstrates the value of their services and the quality of the
programs they develop.
• There is a lot of stigma surrounding online education, and his role is “making an impact
in peoples’ lives.” We believe online education can have a very positive impact on the
lives of people if done correctly, and James Sheldon carries the experience and the
knowledge to make this happen.
• Credibility is also increased by having such an important figure in the work
environment, giving 2U an aggregate brand value.
11

13. Catalysts/Opportunities for Further Value Creation
One of the factors that could also drive 2U’s business is student dropouts joining online
programs. The following graph shows evidence that students drop out of full degrees
because the cannot physically be there for reasons other than affordability.
12

14. In the News
2U is becoming more and more renowned.
http://2u.com/about/press/?page=1 (All images from 2U’s website)
13

15. Industry Background

16. • Chief academic officers are
reporting their personal
perceptions about the relative
quality of online and face-to-face
instruction
• The proportion of academic
leaders who report that online
learning is critical to their
institution’s long term strategy
has grown from 48.8% in 2002
to 70.8% this year.
• The proportion of chief academic
leaders that say online learning
is critical to their long-term
strategy is at an all-time high.
• The proportion of institutions
reporting online education is not
critical to their long-term strategy
has dropped to a new low of
8.6%.
15
Online Education Industry Background
Academic Leaders all over the country now have the highest
Percentage of Institutions that see Online
Education as a Part of their Long-term Business Strategy
http://www.onlinelearningsurvey.com/reports/gradelevel.pdf

17. Academic Support
This graph shows how academic officers have changed their perspective of the impact of online
education. Many agree nowadays that online education can equate face to face education.
16
The amount of academic officers that consider that online education can be the same quality as face to face
has dramatically increased. Academic leaders, therefore, are now more prone to include online education in
their long term business strategy.

18. 17
Online Education Market
• One in four secondary-education
students have taken an online class.
• Approximately 12% of secondary-
education students are enrolled
exclusively in online courses.
• Exactly 22.0% of graduate students
are enrolled exclusively in online
courses.
• Economic pressure to work while
going to school and increasing
familiarity with online courses is
pushes growth in enrollment.
• Private, nonprofit four-year
institutions have seen the largest
boost in online enrollment.
• Source: National Center for Education Statistics (2012)
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
STUDENTS ENROLLED IN
ONLINE EDUCATION
CAGR = 46%

19. Industry Landscape
Competitor’s Business Models
• Devry (DV) is a provider of education services
with programs in business, healthcare and
technology, and accounting and finance. They
plan to continue focusing in providing
secondary education services with their own
curriculum. Devry had a 14.1% decrease in
undergraduate student enrollment from 2013-
2014.
• Apollo (APOL) is a private education services
provider which provides online and on-campus
educational programs. Significant university
platforms include the University of Phoenix.
Future development will focus on their online
master-degree programs.
• American Public (APEI) is a provider of online
and on-campus post-secondary education. They
also have four physical nursing campuses in
Ohio. They plan to continue their business model
of providing their own curriculum online to
students.
• Strayer (STRA) provides post-secondary
education through online education and 80
physical locations. They have no new plans for
expansion
• Capella (CPLA) is an online post-secondary
education services company. They have an
international footprint operating in Africa, Asia,
and Europe.
Source: Company Filings
Profitability
Faculty and Education Costs as a Percent of
Revenue
0%
52%
43%
35%
53%
44%
No TRUE competitors exist currently because of their niche business model

20. Risk Factors

21. Risk Factors
Even thought we think this company is a great investment opportunity, we have
identified the risks that could potentially affect the company.
• Failure to acquire more clients and attract more students could drastically hurt the
development and credibility of the company.
• Online education has been highly stigmatized during the last years. Failure to
demonstrate product effectiveness could discourage clients to maintain their
contracts with 2U, drastically hurting credibility and development.
• 2U’s online platform is what gives their programs the credibility they generate.
Failure to maintain the security of the platform (against viruses, hacks, lags) and
efficiency of the platform could drastically affect credibility from clients and
students alike.
• Failure to fundraise to maintain development of programs could mean the
company would not be able to develop new programs, and therefore reduce
expansion.
• 2U makes contracts with universities that may limit 2U’s ability to partner with
other universities. Failure to rearrange terms with some of the clients could retain
further expansion.
20

22. Stock Performance Overview

23. 2U Stock Performance Overview
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
Rate hike scare
Fed inaction on rates
UNC
Ranked #1
Online
MBA
Whitman’s Online MBA
Program Ranked #8 Globally2Q Results: 32%
Revenue Increase
Rate Hike
Speculation

24. Valuation

25. Discounted Cash Flow
.
24
DCF model
(in million) Actual CAGR Forecast period
2012 2013 2014 (06 - 09) 2015 2016 2017 2018 2019
Sales 55.9 83.1 110.2 40.5% 148.8 193.5 241.8 290.2 333.7
% growth 48.8% 32.6% 35.0% 30.0% 25.0% 20.0% 15.0%
COGS 20.4 37.9 43.9 46.8% 59.2 73.1 86.6 98.1 106.1
% sales 36.4% 45.5% 39.8% 39.8% 37.8% 35.8% 33.8% 31.8%
EBITDA -20.2 -23.6 -22.2 4.9% -18.0 -8.0 2.1 14.1 29.6
% margin -36.1% -28.4% -20.1% -12.1% -4.1% 0.9% 4.9% 8.9%
Depreciation & Amortization: 2.9 4.3 4.3 -7.1 -9.3 -11.6 -13.9 -16.0
% sales 5.1% 5.2% 3.9% 4.8% 4.8% 4.8% 4.8% 4.8%
EBIT -23.04 -27.95 -26.52 7.3% -25.2 -17.3 -9.5 0.2 13.6
EBIT Margin -41.2% -33.6% -24.1% -16.1% -8.1% -0.1% 3.9% 7.9%
Taxes (30%) -16.1 -19.6 -18.6 -17.6 -12.1 -6.6 0.2 9.5
Capex 2.3 2.4 3.8 6.0 7.9 10.0 12.1 14.2
% sales 2.8% 3.4% 4.0% 4.1% 4.1% 4.2% 4.2%
Increase/Decrease in NWC 6.6 4.7 13.7 17.1 20.8 22.0 18.5
Unlevered Free Cash Flow -15.5 -11.0 -13.3 -17.0 -12.2 -7.4 -3.9 -2.1
WACC 12.7%
Present value of free cash flow -15.1 -9.6 -5.2 -2.4 -1.2

26. DCF
25
Terminal Value
Terminal Year Free Cash Flow -2.1
Perpetuity Growth Rate 3.0%
Terminal Year Revenue 333.7
Terminal Value 3,003.6
Implied Exit Multiple 9.0x
Discount Period 5.0
Discount Factor 0.1
Present Value of Terminal Value 1,654
% of Enterprise Value 102%
(in million) Actual Forecast period
Net Working Capital 2012 2013 2014 2015 2016 2017 2018 2019
Account receivables 0.248 1.835 0.350 0.350 0.360 0.370 0.380 0.390
Inventory 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Prepaid expenses and other 1.300 2.300 2.700 44.1% 3.891 5.608 8.082 11.647 16.785
Total Current Assets 1.548 4.135 3.050 4.241 5.968 8.452 12.027 17.175
% sales 2.8% 5.0% 2.8% 2.8% 3.1% 3.5% 4.1% 5.1%
Account payable 3.00 5.10 2.30 3.47 3.57 3.67 3.77 3.87
Accrued Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Current Liabilities 8.00 15.10 21.50 63.9% 35.25 53.93 77.12 102.56 126.15
Total Current Liabilities 11.00 20.20 23.80 38.72 57.50 80.79 106.33 130.02
% sales 19.7% 24.3% 21.6% 26.0% 29.7% 33.4% 36.6% 39.0%
Net Working Capital -9.5 -16.1 -20.8 -34.5 -51.5 -72.3 -94.3 -112.8
% sales -17% -19% -19% -23% -27% -30% -32% -34%

27. 26
Company
Levered Beta
(1)
Market Value of
Debt (2)
Market Value of
Equity (3)
Debt/
Equity
Equity/ Total
Assets
Marginal
Tax Rate
Unlevered
Beta (4)
Devry 1.47 0 1800 0.0% 100.0% 6% 1.47
Apollo 1.76 55.47 1220 4.5% 95.7% 46% 1.72
American Public 1.23 0 391 0.0% 100.0% 39% 1.23
Strayer 1.55 115.86 631 18.4% 84.5% 40% 1.40
Capella 1.58 0 623 0.0% 100.0% 40% 1.58
Median 1.55 0.0% 100.0% 1.47
Mean 1.52 4.6% 96.0% 1.48
(1) From Bloomberg
(2) Book Value of Debt
(3) From Bloomberg
(4) Unlevered Beta = Predicted Levered Beta / (1 + Debt/Equity) x (1-t))
Relevered Beta Mean Unlevered
Beta
Debt/ Equity Target
Marginal
Tax Rate
Relevered
Beta
Target Company 1.48 0.0% 30% 1.48
Comparable Companies Unlevered Beta
DCF

28. DCF
27
(1) Wacc Calculation Enterprise value
Capital Structure Present value of Free Cash Flow -33.5
Debt to Total Capitalization 0.0%
Equityto Total Capitalization 100.0% Terminal Value 3,100
Debt to EquityRatio 0.0% Discount Factor 12.7%
Present Value of Terminal Value 1,707.6
Cost of Equity % of Enterprise Value 102%
Risk-free rate (2) 2.2%
Market risk Premium (3) 7.1% Enterprise value 1,674
Levered Beta (4) 1.48 Less: Total debt 0
Cost of Equity 12.7% Plus: Cash and Cash Equi. 87
Noncontrolling Interests 0
Cost of Debt Net Operating Losses -116
Cost of Debt 0.0%
Taxes 30.0% Implied Equity Value 1,877
After Tax Cost of Debt 0.0% Diluted outstanding shares 41.7
Implied share price $44.97
WACC 12.7% Current share price $35.21
Implied share difference 28%
DCFmodel
OutputInput

29. DCF
28
DCF model
Sensitivity Analysis
Perpetuity growth %
1,621 1,621 2.0% 2.5% 3.0% 3.5% 4.0%
WACC
9.4% 1,886 1,886 1,886 1,886 1,886
10.4% 1,801 1,801 1,801 1,801 1,801
11.4% 1,720 1,720 1,720 1,720 1,720
12.4% 1,644 1,644 1,644 1,644 1,644
13.4% 1,572 1,572 1,572 1,572 1,572
Annual sales growth %
#REF! 1,621 40.0% 42.0% 44.0% 46.0% 48.0%
EBITDA%
12.3% 1,823 1,849 1,874 1,899 1,924
13.3% 1,829 1,855 1,880 1,905 1,930
14.3% 1,835 1,861 1,886 1,911 1,937
15.3% 1,841 1,867 1,892 1,917 1,943
16.3% 1,847 1,873 1,898 1,924 1,949
Implied Exit Multiple
#REF! $43.70 8 8.5 9 9.5 10
WACC
10.4% 43.03 45.47 47.91 50.35 52.78
11.4% 41.33 43.66 45.99 48.32 50.65
12.4% 39.71 41.94 44.17 46.40 48.63
13.4% 38.18 40.31 42.44 44.58 46.71
14.4% 36.73 38.77 40.81 42.85 44.89

30. Name Ticker
Last
Period
EndDate
EV/Sales
TTM
EV/Sales
FY1
EV/Sales
FY2
EV/EBITD
A
TTM
EV/EBITD
A
FY1
EV/EBITD
A
FY2
EV/EBIT
TTM
EV/EBIT
FY1
EV/EBIT
FY2
Total
Debt/
EV
Total
Debt/
Equity
Net
Debt/
Equity
Total
Debt/
EBITDA
FY1
Net
Debt/
EBITDA
FY1
EBITDA/
Int.Exp.
FY1
EBITDA-
Capex/
Int.Exp.
FY1
EBIT/
Int.Exp.
FY1
DEVRYEDUCATIONGROUPINC. DV-N 6/30/2015 0.74 0.77 0.77 5.65 4.83 4.57 8.87 7.08 6.61 0 0 -0.23 0 -1.26 54.95 38.25 37.48
APOLLOEDUCATIONGROUP,INC. APOL-O 5/31/2015 0.12 0.13 0.15 1.19 0.97 1.2 2.42 1.63 2.19 0.17 0.05 -0.81 0.16 -2.83 47.82 34.44 28.63
AMERICANPUBLICEDUCATION,INC. APEI-O 6/30/2015 0.84 0.87 0.88 3.73 4.06 4.09 4.82 5.53 5.72 0 0 -0.45 0 -1.47- - -
CapellaEducationCompany CPLA-O 6/30/2015 1.15 1.14 1.1 5.47 5.28 4.99 7.34 7.16 6.7 0 0 -0.65 0 -1.4- - -
STRAYEREDUCATION,INC. STRA-O 6/30/2015 1.26 1.27 1.24 5.99 6.4 6.06 7.55 8.16 7.67 0.21 0.96 -0.66 1.34 -0.93 16.67 14.42 13.09
2U,INC. TWOU-US6/30/2015 10.67 9.29 7.15NEG NEG NEG NEG NEG NEG 0 0 -1.09 0 9.87 -16.34 -23.88 -33.88
Mean 2.463333 2.245 1.881667 4.406 4.308 4.182 6.2 5.912 5.778 0.063333 0.168333 -0.64833 0.25 0.33 25.775 15.8075 11.33
Median 0.995 1.005 0.99 5.47 4.83 4.57 7.34 7.08 6.61 0 0 -0.655 0 -1.33 32.245 24.43 20.86
High 10.67 9.29 7.15 5.99 6.4 6.06 8.87 8.16 7.67 0.21 0.96 -0.23 1.34 9.87 54.95 38.25 37.48
Low 0.12 0.13 0.15 1.19 0.97 1.2 2.42 1.63 2.19 0 0 -1.09 0 -2.83 -16.34 -23.88 -33.88
29
Comparable Companies

31. Prevailing Opinions

32. Prevailing Opinions
• Management is on track, even very likely to be, ahead of schedule to
achieving their goal of a positive adjusted EBITDA by 2017 (Three years
within IPO date)
• An increase in growth rate from four new programs a year to six new
programs a year, due to the massive market opportunity
• The company is already committed with six programs in 2016 out of the
eleven they are negotiating with.
• It is beginning to establish stronger bonds with previous partners as they
have announced four new programs – three with NYU and its third with
USC (the company’s longest standing partner)
• There is a highly-visible revenue model. A significant portion of 2U’s
revenue is based on returning students; therefore, by February
management has visibility into more than 75% of full-year revenue.
Barrington Research, BMO Capital Markets and Credit Suisse
31
Most if not every equity report has indicated that 2U will outperform the market

33. Recommendations

34. Closing Statement
After evaluating 2U’s
fundamentals, we conclude
that it’s growth potential is
very evident. Accounting for all
the possible catalysts that
could improve the company’s
brand name, market
advantage and long-term
growth, this company’s stock
price has a very big upside in
the long term. Based on a
Discounted Cash Flow
analysis, the average figure
after a sensitivity analysis is a
price of 43$, compared to 35$
today (22% upside), even
though we think it could be
more (50$). We recommend a
Solid Buy due to the amount
of catalysts that will most
probably boost stock
performance. 33

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36. Appendix

37. % of Revenues per Program (Biggest clients taken into account)
Data obtained from 2U’s 10K
36

38. Predicted Student Growth Data
37

39. Cost Analysis
Based on Data made on Excel and obtained from 2U’s 10K
38

40. Cost Analysis
39