Significant Accounting Policies	6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and six months ended June 30, 2024 and 2023 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2023 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. As further discussed in the Reverse Stock Split section below, all per share amounts and common share amounts have been adjusted on a retrospective basis to reflect the Reverse Stock Split (as defined below). Going Concern At each annual and interim period, the Company evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The evaluation is based on relevant conditions or events that are known or reasonably knowable at the date that the consolidated financial statements are issued. Pursuant to the Second Amended Credit Agreement, as defined in Note 8, if more than $40 million of the Company’s 2025 Notes, as defined below, remain outstanding on January 30, 2025, the maturity date of the outstanding term loan balance of $372.4 million springs forward to January 30, 2025. As disclosed in Note 15, on July 24, 2024, the Debtors entered into the RSA with certain creditors, including (i) the Consenting Noteholders comprising certain holders of the 2025 Notes, (ii) the Consenting Noteholders comprising certain holders of the 2030 Notes, and (iii) the Consenting Lenders comprising certain lenders under the Second Amended Credit Agreement. As set forth in the RSA, including in the Restructuring Term Sheet, the parties to the RSA have agreed to the principal terms of a proposed financial restructuring of the Debtors. Pursuant to the RSA, on July 24, 2024, the Debtors commenced solicitation of votes on its Plan, and on July 25, 2024, the Debtors commenced voluntary cases under the Bankruptcy Code in the Bankruptcy Court providing for a court-administered reorganization pursuant to the Plan. The Debtors expect to continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The filing of the Chapter 11 Cases constituted an event of default under the 2025 Notes Indenture, the 2030 Notes Indenture, and the Second Amended Credit Agreement (the “Debt Instruments”) that accelerated obligations under the Debt Instruments. The amount outstanding under each Debt Instrument as of the Petition Date was: approximately $380.0 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the 2025 Notes Indenture; approximately $147.0 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the 2030 Notes Indenture; and approximately $414.3 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the Second Amended Credit Agreement. The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases and the holders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code. Pursuant to the RSA, the Consenting Lenders have committed to amend and restate the Second Amended Credit Agreement to provide for, among other things, (i) a revised covenant package that does not require that the Company achieve a minimum level of Recurring Revenue and (ii) an extended maturity date for the borrowings thereunder that is 27 months following the effective date of the Plan. In addition, the Second Amended Credit Agreement also contains a financial covenant that requires the Company to maintain at least $900 million of Recurring Revenues (as defined by the Second Amended Credit Agreement) as of the last day of any period of four consecutive fiscal quarters. The Recurring Revenue for the four consecutive quarters ending June 30, 2024 was less than $900 million and accordingly the Company was not in compliance with this covenant under the Second Amended Credit Agreement. Although failure to comply with this financial covenant without being able to cure or otherwise obtain a waiver could cause the obligations under the Second Amended Credit Agreement to accelerate, any efforts to enforce such acceleration under the Second Amended Credit Agreement is automatically stayed as a result of the Chapter 11 Cases and the lenders’ rights of enforcement in respect of the Second Amended Credit Agreement are subject to the applicable provisions of the Bankruptcy Code. In light of the foregoing, substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date that the condensed consolidated financial statements are issued. The Company’s ability to continue as a going concern is contingent upon, among other things, its ability to, subject to approval by the Bankruptcy Court, implement the Transaction, successfully emerge from the Chapter 11 Cases and generate sufficient liquidity following the Transaction to meet its obligations and operating needs. The Transaction contemplated by the RSA, including the Restructuring Term Sheet, is subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated on the expected terms, if at all. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, nor do they include adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Nasdaq Listing Status On March 14, 2024, the Company received a written notification from Nasdaq that it had failed to comply with Nasdaq’s minimum bid price requirement. In accordance with Nasdaq rules, the Company had a period of 180 calendar days, or until September 10, 2024 to regain compliance with the minimum bid price requirement. As part of the Company’s efforts to regain compliance with Nasdaq’s minimum bid price requirement, the Company effected a 1-for-30 reverse stock split on June 13, 2024 and the Company’s common stock began trading on a post-split adjusted basis on June 14, 2024. See below for a discussion of the Reverse Stock Split. On July 1, 2024, the Company received a written notification from Nasdaq that for the prior 10 consecutive business days, the closing bid price of the Company’s common stock had been at $1.00 per share or greater. Accordingly, the Company regained compliance with the minimum bid price requirement. On July 29, 2024, the Company was notified by Nasdaq that it had determined to delist the Company’s common stock pursuant to Nasdaq Listing Rules 5101, 5110(b), and IM‑5101-1 as a result of the commencement of the Chapter 11 Cases. The Company does not intend to appeal this determination. Trading of the Company’s common stock was suspended at the opening of business on August 7, 2024, and a Form 25-NSE will be filed with the SEC, which will remove the Company’s common stock from listing and registration on Nasdaq. Effective August 7, 2024, the Company’s common stock began being quoted on the OTC Pink Market operated by OTC Markets Group Company under the symbol “TWOUQ”. Reverse Stock Split On May 20, 2024, the Company’s stockholders voted to approve amendments to the Company’s Eighth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effect a reverse stock split of all of the outstanding shares of the Company’s common stock, par value $0.001 per share, at a ratio ranging from any whole number between 1-for-10 and 1-for-40, with the exact ratio within such range to be determined by the Company’s Board of Directors (the “Board”) in its discretion, subject to the Board’s authority to abandon such amendments. On June 5, 2024, the Board approved the amendment to the Certificate of Incorporation effecting the reverse stock split at a ratio of 1-for-30 (the “Reverse Stock Split”). On June 13, 2024, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. The Reverse Stock Split became effective on June 13, 2024 and trading on the Nasdaq Global Select Market on a post-split basis began on June 14, 2024. Following the Reverse Stock Split, the number of authorized shares of the Company’s common stock remained at 200,000,000. The Reverse Stock Split reduced the total number of issued and outstanding shares of common stock from 82,260,619 to 2,741,980 as of December 31, 2023. The par value of the Company’s common stock remained at $0.001. The Company’s stockholders’ equity, in the aggregate, remained unchanged following the Reverse Stock Split. Per share net loss increased because there were fewer shares of the Company’s common stock outstanding. There were no other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, that arose as a result of the Reverse Stock Split. No fractional shares were issued in conjunction with the Reverse Stock Split. Instead, stockholders who would otherwise have been entitled to receive fractional shares as a result of the Reverse Stock Split received a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price per share of the common stock (as adjusted for the Reverse Stock Split) on the Nasdaq Global Select Market on June 13, 2024. These cash payments were immaterial to the Company’s condensed consolidated financial statements. The Reverse Stock Split impacted all stockholders uniformly and did not affect any stockholder’s percentage of ownership or proportionate voting power other than very minor impacts from the treatment of fractional shares. Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill, indefinite-lived intangible assets and long- lived assets, deferred tax assets, and the fair value of the convertible senior notes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis. Fair Value Measurements The carrying amounts of certain assets and liabilities, including cash and cash equivalents, receivables, advances to university clients, accounts payable and accrued expenses and other current liabilities, approximate their respective fair values due to their short-term nature. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability. U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 3 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows: •Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; •Level 2—Observable inputs, other than quoted prices in active markets, that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and •Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of June 30, 2024 and December 31, 2023. Refer to Note 8 for more information regarding the Company’s convertible senior notes. Long-lived Assets The Company reviews long-lived assets, which consist of property and equipment, capitalized technology, capitalized content development and acquired finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. In order to assess the recoverability of the capitalized technology and content development, the amounts are grouped by the lowest level of independent cash flows. Recoverability of a long-lived asset is measured by a comparison of the carrying value of an asset or asset group to the future undiscounted net cash flows expected to be generated by that asset or asset group. If such assets are not recoverable, the impairment to be recognized is measured by the amount by which the carrying value of an asset exceeds the estimated fair value (discounted cash flow) of the asset or asset group. The Company’s impairment analysis is based upon cumulative results and forecasted performance. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows, and discount rates and royalty rates used to determine fair values. During the three and six months ended June 30, 2024, the Company recorded impairment charges of $56.2 million related to intangible and other long-lived assets within the Alternative Credential Segment, of which $32.2 million related to university client relationships, $10.3 million related to capitalized technology, $5.2 million related to right-of-use assets, $4.4 million related to trade names and domain names, $2.4 million related to capitalized content development, and $1.7 million related to fixed assets. During the three and six months ended June 30, 2023, the Company did not record impairment charges related to its long-lived assets. Goodwill and Other Indefinite-lived Intangible Assets The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, as of October 1, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill or an indefinite-lived asset below its carrying value. Goodwill Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit. During the second quarter of 2023, the Company completed the update of its internal financial reporting structure to better align with the executive structure following the 2022 Strategic Realignment. As a result of this update, the Company’s three reporting units within the Alternative Credential Segment (Executive Education, Boot Camp, and Open Courses) were combined into a single reporting unit (Alternative Credential). The Degree Program Segment continues to have one reporting unit (Degree Program). The Company performed impairment assessments before and after the change in reporting units. Refer to the Interim Impairment Assessments section below for further information regarding the results of these assessments. The Company determines the fair value of a reporting unit by utilizing a weighted combination of the income-based and market-based approaches. The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, and forecasts of revenue and margins. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns. In addition, the value of a reporting unit using the market-based approach is estimated by comparing the reporting unit to other publicly traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of a reporting unit is based on pricing multiples of certain financial parameters observed in the comparable companies. The Company also makes estimates and assumptions for market values to determine a reporting unit’s estimated fair value. Other Indefinite-lived Intangible Assets In November 2021, the Company acquired an indefinite-lived intangible asset, which represented the established edX trade name. The Company concluded that due to changes in facts and circumstances, effective July 1, 2023, the edX trade name should no longer have an indefinite useful life. The Company began amortizing the edX trade name on a straight-line basis over its estimated remaining useful life of 25 years. The Company determined the fair value of its indefinite-lived asset utilizing the income-based approach. The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, forecasts of revenue and margins, and royalty rates. When determining these assumptions and preparing these estimates, the Company considers historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, the continued efforts of competitors to gain market share and prospective student enrollment patterns. Interim Impairment Assessments During the second quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill and indefinite-lived intangible asset. In addition, as a result of the change in the Company’s reporting units in the second quarter of 2023, the Company performed interim impairment assessments before and after the change in reporting units. The Company performed these interim impairment assessments as of May 1, 2023. For the quantitative interim impairment assessment performed as of May 1, 2023, before the change in reporting units, management determined the carrying value of the Open Courses reporting unit and the carrying value of an indefinite-lived intangible asset, both within the Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended June 30, 2023, the Company recorded impairment charges of $16.7 million to goodwill, all of which related to the Open Courses reporting unit, and $117.4 million to the indefinite-lived intangible asset. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more. For the interim impairment assessment performed as of May 1, 2023, after the change in reporting units, management determined it was not more likely than not that the fair values of the Degree Program reporting unit and the Alternative Credential reporting unit were less than their respective carrying amounts. As such, the Company concluded that the goodwill relating to those reporting units was not impaired and further quantitative impairment assessment was not necessary. During the third quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of September 30, 2023. The estimated fair value of each of the Company’s reporting units exceeded their respective carrying value by more than 10%. Based on the qualitative assessment performed as of October 1, 2023, the date of the annual goodwill impairment assessment, the Company had no reporting units whose estimated fair value exceeded their carrying value by less than 10%. During the fourth quarter of 2023, the Company experienced a significant decline in its market capitalization. In addition, the Company made updates to certain long-term financial projections. Management deemed these factors to be triggering events related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of December 31, 2023 and determined the carrying value of its Alternative Credential reporting unit exceeded its estimated fair value. As a result, during the three months ended December 31, 2023, the Company recorded impairment charges of $62.8 million to goodwill. This charge is included within operating expense on the Company’s consolidated statements of operations. The estimated fair value of the Degree Program reporting unit exceeded its carrying value by more than 10%. During the second quarter of 2024, the Company experienced a significant decline in its market capitalization. In addition, the Company updated its long-term financial projections in connection with contingency planning related to the Chapter 11 Cases. Management deemed these factors to be triggering events related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of May 31, 2024 and determined the carrying value of its Alternative Credential reporting unit exceeded its estimated fair value. As a result, during the three and six months ended June 30, 2024, the Company recorded impairment charges of $339.9 million to goodwill. This charge is included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of the Degree Program reporting unit exceeded its carrying value by more than 10%. It is possible that future changes in circumstances or in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, could require us to record additional impairment charges in the future. For each of the interim impairment assessments, the Company utilized a weighted combination of an income-based approach and market-based approach to determine the fair value of each reporting unit and an income-based approach to determine the fair value of its indefinite-lived intangible asset. Key assumptions used in the income-based approach included discount rates based upon each respective reporting unit’s or indefinite-lived intangible asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment, terminal growth rates, forecasts of revenue and margins, and royalty rates. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result. Convertible Senior Notes In April 2020, the Company issued the 2025 Notes in an aggregate principal amount of $380 million, including the exercise by the initial purchasers of an option to purchase additional 2025 Notes, in a private offering. Refer to Note 8 for more information regarding the 2025 Notes. In January 2023, the Company issued the 2030 Notes in an aggregate principal amount of $147.0 million in a private offering. Refer to Note 8 for more information regarding the 2030 Notes. Pursuant to ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, the Company’s convertible senior notes are accounted for as a single instrument. Debt Issuance Costs Debt issuance costs are incurred as a result of entering into certain borrowing transactions and are presented as a reduction from the carrying amount of the debt liability on the Company’s condensed consolidated balance sheets. Debt issuance costs are amortized over the term of the associated debt instrument. The amortization of debt issuance costs is included as a component of interest expense on the Company’s condensed consolidated statements of operations and comprehensive loss. If the Company extinguishes debt prior to the end of the underlying instrument’s full term, some or all of the unamortized debt issuance costs may need to be written off, and a loss on extinguishment may need to be recognized. Refer to Note 8 for further information about the Company’s debt. Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This ASU defers the sunset date from December 31, 2022 to December 31, 2024 and is effective immediately. The Company will adopt the standard when LIBOR is discontinued and does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023 and should be adopted on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires new disclosures about income taxes, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. The ASU is effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related disclosures.

The accompanying unaudited condensed consolidated financial statements, which include the assets, liabilities, results of operations and cash flows of the Company have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “SEC”). As permitted under such rules, certain notes and other financial information normally required by U.S. GAAP have been condensed or omitted. The Company believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and six months ended June 30, 2024 and 2023 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. All significant intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet data as of December 31, 2023 was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. As further discussed in the Reverse Stock Split section below, all per share amounts and common share amounts have been adjusted on a retrospective basis to reflect the Reverse Stock Split (as defined below).

At each annual and interim period, the Company evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The evaluation is based on relevant conditions or events that are known or reasonably knowable at the date that the consolidated financial statements are issued.

As disclosed in Note 15, on July 24, 2024, the Debtors entered into the RSA with certain creditors, including (i) the Consenting Noteholders comprising certain holders of the 2025 Notes, (ii) the Consenting Noteholders comprising certain holders of the 2030 Notes, and (iii) the Consenting Lenders comprising certain lenders under the Second Amended Credit Agreement. As set forth in the RSA, including in the Restructuring Term Sheet, the parties to the RSA have agreed to the principal terms of a proposed financial restructuring of the Debtors. Pursuant to the RSA, on July 24, 2024, the Debtors commenced solicitation of votes on its Plan, and on July 25, 2024, the Debtors commenced voluntary cases under the Bankruptcy Code in the Bankruptcy Court providing for a court-administered reorganization pursuant to the Plan. The Debtors expect to continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

The filing of the Chapter 11 Cases constituted an event of default under the 2025 Notes Indenture, the 2030 Notes Indenture, and the Second Amended Credit Agreement (the “Debt Instruments”) that accelerated obligations under the Debt Instruments. The amount outstanding under each Debt Instrument as of the Petition Date was: approximately $380.0 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the 2025 Notes Indenture; approximately $147.0 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the 2030 Notes Indenture; and approximately $414.3 million of borrowings (plus any accrued but unpaid interest in respect thereof) under the Second Amended Credit Agreement. The Debt Instruments provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases and the holders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code. Pursuant to the RSA, the Consenting Lenders have committed to amend and restate the Second Amended Credit Agreement to provide for, among other things, (i) a revised covenant package that does not require that the Company achieve a minimum level of Recurring Revenue and (ii) an extended maturity date for the borrowings thereunder that is 27 months following the effective date of the Plan.

In addition, the Second Amended Credit Agreement also contains a financial covenant that requires the Company to maintain at least $900 million of Recurring Revenues (as defined by the Second Amended Credit Agreement) as of the last day of any period of four consecutive fiscal quarters. The Recurring Revenue for the four consecutive quarters ending June 30, 2024 was less than $900 million and accordingly the Company was not in compliance with this covenant under the Second Amended Credit Agreement. Although failure to comply with this financial covenant without being able to cure or otherwise obtain a waiver could cause the obligations under the Second Amended Credit Agreement to accelerate, any efforts to enforce such acceleration under the Second Amended Credit Agreement is automatically stayed as a result of the Chapter 11 Cases and the lenders’ rights of enforcement in respect of the Second Amended Credit Agreement are subject to the applicable provisions of the Bankruptcy Code.

In light of the foregoing, substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date that the condensed consolidated financial statements are issued. The Company’s ability to continue as a going concern is contingent upon, among other things, its ability to, subject to approval by the Bankruptcy Court, implement the Transaction, successfully emerge from the Chapter 11 Cases and generate sufficient liquidity following the Transaction to meet its obligations and operating needs. The Transaction contemplated by the RSA, including the Restructuring Term Sheet, is subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated on the expected terms, if at all.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, nor do they include adjustments to reflect the possible future effects of

On March 14, 2024, the Company received a written notification from Nasdaq that it had failed to comply with Nasdaq’s minimum bid price requirement. In accordance with Nasdaq rules, the Company had a period of 180 calendar days, or until September 10, 2024 to regain compliance with the minimum bid price requirement. As part of the Company’s efforts to regain compliance with Nasdaq’s minimum bid price requirement, the Company effected a 1-for-30 reverse stock split on June 13, 2024 and the Company’s common stock began trading on a post-split adjusted basis on June 14, 2024. See below for a discussion of the Reverse Stock Split.

On July 29, 2024, the Company was notified by Nasdaq that it had determined to delist the Company’s common stock pursuant to Nasdaq Listing Rules 5101, 5110(b), and IM‑5101-1 as a result of the commencement of the Chapter 11 Cases. The Company does not intend to appeal this determination. Trading of the Company’s common stock was suspended at the opening of business on August 7, 2024, and a Form 25-NSE will be filed with the SEC, which will remove the Company’s common stock from listing and registration on Nasdaq. Effective August 7, 2024, the Company’s common stock began being quoted on the OTC Pink Market operated by OTC Markets Group Company under the symbol “TWOUQ”.

On May 20, 2024, the Company’s stockholders voted to approve amendments to the Company’s Eighth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effect a reverse stock split of all of the outstanding shares of the Company’s common stock, par value $0.001 per share, at a ratio ranging from any whole number between 1-for-10 and 1-for-40, with the exact ratio within such range to be determined by the Company’s Board of Directors (the “Board”) in its discretion, subject to the Board’s authority to abandon such amendments.

On June 5, 2024, the Board approved the amendment to the Certificate of Incorporation effecting the reverse stock split at a ratio of 1-for-30 (the “Reverse Stock Split”). On June 13, 2024, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. The Reverse Stock Split became effective on June 13, 2024 and trading on the Nasdaq Global Select Market on a post-split basis began on June 14, 2024. Following the Reverse Stock Split, the number of authorized shares of the Company’s common stock remained at 200,000,000. The Reverse Stock Split reduced the total number of issued and outstanding shares of common stock from 82,260,619 to 2,741,980 as of December 31, 2023. The par value of the Company’s common stock remained at $0.001.

The Company’s stockholders’ equity, in the aggregate, remained unchanged following the Reverse Stock Split. Per share net loss increased because there were fewer shares of the Company’s common stock outstanding. There were no other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, that arose as a result of the Reverse Stock Split. No fractional shares were issued in conjunction with the Reverse Stock Split. Instead, stockholders who would otherwise have been entitled to receive fractional shares as a result of the Reverse Stock Split received a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price per share of the common stock (as adjusted for the Reverse Stock Split) on the Nasdaq Global Select Market on June 13, 2024. These cash payments were immaterial to the Company’s condensed consolidated financial statements. The Reverse Stock Split impacted all stockholders uniformly and did not affect any stockholder’s percentage of ownership or proportionate voting power other than very minor impacts from the treatment of fractional shares.

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. Significant items subject to such estimates include, but are not limited to, the measurement of provisions for credit losses, implied price concessions, acquired intangible assets, the recoverability of goodwill, indefinite-lived intangible assets and long-

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous, market for the specific asset or liability.

U.S. GAAP provides for a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges. The Company remeasures non-financial assets such as goodwill, intangible assets and other long-lived assets at fair value when there is an indicator of impairment, and records them at fair value only when recognizing an impairment loss. The fair value hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. Refer to Note 3 for further discussion of assets measured at fair value on a nonrecurring basis. The three tiers are defined as follows:

The Company has financial instruments, including cash deposits, receivables, accounts payable and debt. The carrying values for such financial instruments, other than the Company’s convertible senior notes, each approximated their fair values as of June 30, 2024 and December 31, 2023. Refer to Note 8 for more information regarding the Company’s convertible senior notes.

The Company reviews long-lived assets, which consist of property and equipment, capitalized technology, capitalized content development and acquired finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. In order to assess the recoverability of the capitalized technology and content development, the amounts are grouped by the lowest level of independent cash flows. Recoverability of a long-lived asset is measured by a comparison of the carrying value of an asset or asset group to the future undiscounted net cash flows expected to be generated by that asset or asset group. If such assets are not recoverable, the impairment to be recognized is measured by the amount by which the carrying value of an asset exceeds the estimated fair value (discounted cash flow) of the asset or asset group. The Company’s impairment analysis is based upon cumulative results and forecasted performance. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows, and discount rates and royalty rates used to determine fair values.

During the three and six months ended June 30, 2024, the Company recorded impairment charges of $56.2 million related to intangible and other long-lived assets within the Alternative Credential Segment, of which $32.2 million related to university client relationships, $10.3 million related to capitalized technology, $5.2 million related to right-of-use assets, $4.4 million related to trade names and domain names, $2.4 million related to capitalized content development, and $1.7 million related to fixed assets. During the three and six months ended June 30, 2023, the Company did not record impairment charges related to its long-lived assets.

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s goodwill balance relates to its acquisitions of GetSmarter in July 2017, Trilogy in May 2019 and edX in November 2021. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment review. The Company reviews goodwill for impairment using a quantitative approach if it decides to bypass the qualitative assessment or determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on a qualitative assessment. Upon completion of a quantitative assessment, the Company may be required to recognize an impairment based on the difference between the carrying value and the fair value of the reporting unit.

During the second quarter of 2023, the Company completed the update of its internal financial reporting structure to better align with the executive structure following the 2022 Strategic Realignment. As a result of this update, the Company’s three reporting units within the Alternative Credential Segment (Executive Education, Boot Camp, and Open Courses) were combined into a single reporting unit (Alternative Credential). The Degree Program Segment continues to have one reporting unit (Degree Program). The Company performed impairment assessments before and after the change in reporting units. Refer to the Interim Impairment Assessments section below for further information regarding the results of these assessments.

The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, and forecasts of revenue and margins. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, market capitalization, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

In November 2021, the Company acquired an indefinite-lived intangible asset, which represented the established edX trade name. The Company concluded that due to changes in facts and circumstances, effective July 1, 2023, the edX trade name should no longer have an indefinite useful life. The Company began amortizing the edX trade name on a straight-line basis over its estimated remaining useful life of 25 years.

The Company determined the fair value of its indefinite-lived asset utilizing the income-based approach. The income-based approach requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include, but are not limited to, discount rates, terminal growth rates, forecasts of revenue and margins, and royalty rates. When determining these assumptions and preparing these estimates, the Company considers historical results and current operating trends, revenue, profitability, cash flow results and forecasts, and industry trends. These estimates can be affected by a number of factors including, but not limited to, general economic and regulatory conditions, the continued efforts of competitors to gain market share and prospective student enrollment patterns.

During the second quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill and indefinite-lived intangible asset. In addition, as a result of the change in the Company’s reporting units in the second quarter of 2023, the Company performed interim impairment assessments before and after the change in reporting units. The Company performed these interim impairment assessments as of May 1, 2023.

For the quantitative interim impairment assessment performed as of May 1, 2023, before the change in reporting units, management determined the carrying value of the Open Courses reporting unit and the carrying value of an indefinite-lived intangible asset, both within the Alternative Credential Segment, exceeded their respective estimated fair value. As a result, during the three months ended June 30, 2023, the Company recorded impairment charges of $16.7 million to goodwill, all of which related to the Open Courses reporting unit, and $117.4 million to the indefinite-lived intangible asset. These charges are included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of each of the remaining reporting units exceeded their respective carrying value by approximately 10% or more.

For the interim impairment assessment performed as of May 1, 2023, after the change in reporting units, management determined it was not more likely than not that the fair values of the Degree Program reporting unit and the Alternative Credential reporting unit were less than their respective carrying amounts. As such, the Company concluded that the goodwill relating to those reporting units was not impaired and further quantitative impairment assessment was not necessary.

During the third quarter of 2023, the Company experienced a significant decline in its market capitalization, which management deemed to be a triggering event related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of September 30, 2023. The estimated fair value of each of the Company’s reporting units exceeded their respective carrying value by more than 10%. Based on the qualitative assessment performed as of October 1, 2023, the date of the annual goodwill impairment assessment, the Company had no reporting units whose estimated fair value exceeded their carrying value by less than 10%.

During the fourth quarter of 2023, the Company experienced a significant decline in its market capitalization. In addition, the Company made updates to certain long-term financial projections. Management deemed these factors to be triggering events related to the Company’s goodwill. The Company performed a quantitative interim impairment assessment as of December 31, 2023 and determined the carrying value of its Alternative Credential reporting unit exceeded its estimated fair value. As a result, during the three months ended December 31, 2023, the Company recorded impairment charges of $62.8 million to goodwill. This charge is included within operating expense on the Company’s consolidated statements of operations. The estimated fair value of the Degree Program reporting unit exceeded its carrying value by more than 10%.

During the second quarter of 2024, the Company experienced a significant decline in its market capitalization. In addition, the Company updated its long-term financial projections in connection with contingency planning related to the Chapter 11 Cases. Management deemed these factors to be triggering events related to the Company’s goodwill. The Company

performed a quantitative interim impairment assessment as of May 31, 2024 and determined the carrying value of its Alternative Credential reporting unit exceeded its estimated fair value. As a result, during the three and six months ended June 30, 2024, the Company recorded impairment charges of $339.9 million to goodwill. This charge is included within operating expense on the Company’s condensed consolidated statements of operations. The estimated fair value of the Degree Program reporting unit exceeded its carrying value by more than 10%.

For each of the interim impairment assessments, the Company utilized a weighted combination of an income-based approach and market-based approach to determine the fair value of each reporting unit and an income-based approach to determine the fair value of its indefinite-lived intangible asset. Key assumptions used in the income-based approach included discount rates based upon each respective reporting unit’s or indefinite-lived intangible asset’s weighted-average cost of capital adjusted for the risk associated with the operations at the time of the assessment, terminal growth rates, forecasts of revenue and margins, and royalty rates. The income-based approach largely relied on inputs that were not observable to active markets, which would be deemed “Level 3” fair value measurements, as defined in the Fair Value Measurements section above. Key assumptions used in the market-based approach included the selection of appropriate peer group companies. Changes in the estimates and assumptions used to estimate fair value could materially affect the determination of fair value and the impairment test result.

Pursuant to ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, the Company’s convertible senior notes are accounted for as a single instrument.

Debt issuance costs are incurred as a result of entering into certain borrowing transactions and are presented as a reduction from the carrying amount of the debt liability on the Company’s condensed consolidated balance sheets. Debt issuance costs are amortized over the term of the associated debt instrument. The amortization of debt issuance costs is included as a component of interest expense on the Company’s condensed consolidated statements of operations and comprehensive loss. If the Company extinguishes debt prior to the end of the underlying instrument’s full term, some or all of the unamortized debt issuance costs may need to be written off, and a loss on extinguishment may need to be recognized. Refer to Note 8 for further information about the Company’s debt.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU is intended to provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, to ease the potential accounting and financial reporting burden associated with the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This ASU may be applied as of the beginning of any interim period that includes its effective date (i.e., March 12, 2020) through December 31, 2022. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This ASU defers the sunset date from December 31, 2022 to December 31, 2024 and is effective immediately. The

In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023 and should be adopted on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires new disclosures about income taxes, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. The ASU is effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related disclosures.