Oct 27, 2015
Operator
Good day, ladies and gentlemen, and welcome to the 2U Incorporated Third Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode.
Later we'll conduct a question-and-answer session and instructions will follow at that time. [Operator instructions] As a reminder, this conference may be recorded.
I would now like to turn the conference over to Ed Goodwin, Senior Director of Investor Relations. Please go ahead sir.
Ed Goodwin
Thank you, operator. Good afternoon, everyone, and welcome to 2U's third quarter 2015 earnings conference call.
By now you should have received a copy of the earnings release for the company's third quarter 2015 results. If you've not, a copy is available on our website, investor.2U.com.
The recorded webcast of this call will be available in the IR Section of our website. Also, we routinely post announcements and information on our website, which we encourage you to access and make use of.
Today's speakers are Chip Paucek, CEO and Co-Founder, Jim Shelton, Chief Impact Officer and Cathy Graham, CFO. We've a lot to share this quarter as well as a message directly from one of our university partners.
So we expect our prepared remarks to be a bit longer than usual. Of course, we'll reserve ample time for Q&A.
During today's call, we may make forward-looking statements, including statements regarding the Company's future financial and operating results, future market conditions, and the plans and objectives of management for future operations. These forward-looking statements are not historical facts, but rather are based on our current expectations and beliefs, and are based on information currently available to us.
The outcome of the events described in these forward-looking statements is subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the result anticipated by these forward-looking statements. This includes, but is not limited to, those risks contained in the Risk Factor section of the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and other reports filed with the SEC.
All information provided in this call is as of today. Except as required by law, we undertake no obligation to update publicly any forward-looking statements made on this call to conform to statements or actual results or changes in our expectations.
Also, it is 2U's policy not to update our financial guidance other than in public communications. Non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release.
I would now like to turn the call over to Chip.
Chip Paucek
Thanks, Ed. I co-founded 2U in 2008 with a small team of incredible people on a mission to fundamentally transform higher education.
A lofty, bold ambition way back in 2008, for a small venture-backed company, transforming higher education. 2U partners with top colleges and universities to build what we believe are the world's best online degree program.
We provide a combination of SAAS technology and tech enabled services to allow the best brands in the world to create great digital versions of themselves. The universities of the caliber 2U works with are among the best in the world currently Northwestern, George Town, Yale, UNC-Chapel Hill, Simmons, Sherick Hughes are world-class institutions, hundreds of years in the marking with world-class faculty, with networks that have lasted longer than companies ever do.
These are the most enduring organizations in our entire culture. Take Coca Cola, one of the best known brands in the world.
Coke was founded in 1886. What about George Town and UNC-Chapel Hill?
Both founded in 1789. They've a 100 hundreds years on Coke while delivering high quality education and changing people's lives in the process, creating networks across barriers in a way you simply don't see elsewhere.
But does an institution like George Town or UNC-Chapel Hill or Yale deal with the disruptive power of the Internet? How do they adapt?
How do they bring the best of what they have to offer to our current on demand culture? The story of 2U is a story about technology, infrastructure and people, which we provide in a bundled approach over a decade long agreement, but is much more.
It's the story of institutional will. Great universities are asking themselves is it possible to give online students an experience is as good or even better than the campus students.
Can we end the segregation of the online student? Can we offer the same degree as the on-campus with no after risk and make them full members of the community with the same rising responsibilities as the campus student?
Can we do all of that and preserve the quality and reputation we build over generations. Our partners are proving the answers to these questions is a resounding yes.
A degree of the best tickets with better lives. As a first generation college student, I say it proudly with passion.
Attending to Washington University utterly changed my life. It's a big part of what made me who I am today.
My world was open. I was exposed to people that I've never been exposed to otherwise.
I met my wife there. I created some of the most formidable relationships of my life.
I loved. I laughed.
I learned. It rocked my world totally.
Outcomes matter, network matter, great universities matter, degrees matter. But the question one has to ask is what you have to pick yourself around the degree?
Why should it not sit around you? What can't it be more flexible, more nimble, more modern?
Why should you have to pick up life, quit your job and move to attend a top business school or nursing school or any school? If you could harness what the great schools have to offer, the faculties, the network, the experience, the degree with the power of great technology you could create something profound, you could change the world.
Now we had skeptics then and we have them now. A basic tenant of the incredible culture at 2U is that we don’t let the skeptic win.
We lean towards yes. We drive the opportunity with passion.
Online education has been riddled with snake oil. Most of the history of online education is one who focused on profits at the expense of outcomes.
That’s why frequency notions of online education are horrible. It hasn’t been very good.
It hasn’t delivered, but that has changed. 2U commences for the early days.
There will be a long term correlation between our financial successes into an outcome. Our business model is pretty simple.
We share tuition revenue typically in the low to mid 60% coming to 2U over a minimum of a decade. Student success leads to University success.
University success leads to 2U success. So how are we doing?
Let’s look at facts speak for themselves. Student success.
With that over 17,000 students enrolled in our client's program, 17,260 to be exact, that's over 17,000 lives changed in 50 states, The District of Columbia and over 60 countries worldwide. We just surpassed -- just surpassed over 200,000 live classes, 201,527 to be exact with an average class size of only 11.8 super intimate, that’s a ton of relationship fill.
Student success leads to University success. Today we’re very proud to announce that our partners have passed an estimated $1 billion in tuition adjustment booking inception to date.
Yes that was to be. So on a time of questioning the future of higher education, our schools are improving their branch in this century, scaling their programs on a global basis while created an estimated incredible billion in tuition bookings that’s not too shabby.
How does this translate for 2U? This bold little idea is turning into a powerhouse.
We’ve created a long term sustainable business model with the kind of runway that you dream of as an entrepreneur. We've become a market leader in a huge sector of the economy dealing with massive secular change.
We provide the educational platform we think about as the capital fee with a bundle of pack-in service that allows great schools to unleash the power of their brands in this century. If the 18,000 were about Cambridge and Oxford, and the 1,900 were about U.S.
IV league, the schools that do it this wag in this century will win. The used case is just too obvious, too flexible and too dam good.
2U has shown it has the best most comprehensive solution, one that’s difficult to replicate. The market is massive.
So we've plenty of room for competitor’s and universities are built on share governance without a single point of view. So there will indeed be plenty that tried themselves.
But we’re proving that when universities partner with us, they win, so we win. We provide a comprehensive approach, think of it’s as a partnership expressed through a revenue share that's working really well.
So let’s get down to some brass tacks. This IPO we consistently exceeded our guidance across all of our financial measures and I’m proud to tell you that third quarter is no different.
Cathy will give those details on another range. Our guidance for Q4 is notable.
We expect the fourth quarter will be the first adjusted EBITDA profitable quarter for 2U in its history. In our preview of 2016, we expect to continue on the path of profitability even while launching six programs.
Our loss is decelerating faster than we expected and we’re not walking away from our commitment to be adjusted EBITDA profitable in 2017. Why, all of our launch cohorts are successful.
They’re tracking with or better than the model of economic lifecycle of a typical program. Our first core program launched between 2009 and 2011 are called the core four.
We expect this year that core four will see adjusted EBITDA margins in the high 20s this year, but we’re not a one trick pony. So how about the next cohort?
We’re now comfortable saying that we believe our 2013 launch cohort will be adjusted EBITDA positive for the full year of 2015. This is earlier than we would have predicted.
Our 2014 launch cohort while too early to discuss specific, is progressing right in line with our financial models. Now let me remind you these two cohorts launched before the advent of the 2U proprietary program selection algorithm.
It was in some ways the era where we were truly thrilled to be given the opportunity to launch the programs, but didn’t have the data to be strategic in our selections, we simply did our best. Well guess what, we like what we see.
What about the next cohort, the 2015 launch cohort? It gets even more interesting here.
Beginning with this cohort, new programs have been grated using our algorithms for both expected long-term scale potential and for expected profitability margins. Early evidence suggest they’re better.
It’s working now but while our business lacked for the long haul. Will our partners simply move at all in house.
We provide a strong comprehensive approach that others in the space don’t and our partners know it and they love it. Our partners do the things you want them to do.
We are not a university. We never will be.
This is their accreditation, their faculty, their admission decision, their financial aid, their degree. We did the things they aren’t as good at.
Technology, operational efficiency, placement, marketing and we do them really well. Are we a SaaS technology company?
Yes. Our products wouldn’t be known to the audience but if the comprehensive technology bundle to make each school great.
Online campus is the student hub or its application system. Port authority for passing data, air traffic control for monitoring live session, I do go on but I won’t.
Are we an education company? Probably yes.
We offer high quality services including student support, admission support and we’ve even made 24,071 clinical placements in sites around the world. Are we a for–profit university?
Absolutely not. People don’t apply to Berkeley and Strayer at the same time and they certainly aren’t applying to 2U.
So why don’t our partners do it all themselves; because it’s hard. The pieces are complicated enough, but the glue that makes it all work, that's even tougher.
One of students deans told me way back that interviewed the competition before signing our deal and he found them to be confident. They told me they could bring the online and I believe them.
You told me you can make me great in the 21st Century and I believed you. What would you buy?
That's the special software to you. We do everything we can to make them great.
So all these one in done deals in fact no. We had already extended our UNC contract and I’m very proud today to announce that George Town University has agreed to extend its original contract with 2U by an additional five years creating a 17-year relationship with 2U.
Now three of our first five relationships have delivered larger extensions of our contracts. So while programs continue to sign up, I'll let Jim Shelton in for that one.
Jim Shelton
Thanks Chip. 2U has done an incredible job at data building, great partnership that serve students, faculty and university as well.
I feel fortunate because there are very few times to get more excited about something when you get close up than when you are father away. I’ve now taken responsibility to building on that track record and taking it to another level.
Pipeline announcements won’t always line up with quarterly calls, but I do have two new program announcements today. I am pleased to announce that 2U we're working with NYU on a fourth program, Master for Counseling for Mental Health.
This is our second program in this vertical while we do not have a launch day yet the contract is signed. NYU is a multi-program commitment and this is the next program in that excellent relationship.
I hope you'll also note that this is now the seventh vertical where we deploy at least two programs up from only one vertical at the time of our IPO. I’m also pleased to announce that 2U will be working with GW in a key new vertical, Health Informatics.
Health Informatics is a burgeoning new field driven by the unprecedented increase in new healthcare data, basically data science for healthcare. We have looked everything we've seen from the data science vertical today.
New program, Health Informatics at GW is a third GW degree program supported by 2U. As you can see demand from new and existing partners continues to accelerate.
We now have eight programs announced that will launch in the next couple of years. You can expect more announcements on new programs in the current multi-program verticals and new high potential verticals as we progress through the next quarter and into 2016.
Now one of the things that most attracted me to 2U is the quarterly success that the company is tied to outcomes. I put that commitment to quality and outcomes up against any program in the world, online or on campus, but we’re trying to take it further.
We believe our focus on outcomes is competitive advantage, a multi if you will. But what if in the process of building a great company and supporting great institutions, we can also improve higher education itself.
This may sound audacious, but we believe it is not only achievable, but strategic because when we're successful we’ll also have reaffirmed the value of the best higher education has to offer. We've built a framework that will guide our work going forward and that we believe may also serve as a guide for all of higher education, online and on campus.
We call it straight A’s and in future calls, you'll hear a lot more about it. It’s important to remember Chip's story is not unique.
Great universities transform people’s lives and they in turn love them and support them because of it. With that, I would like to pass the time to our fantastic CFO, Cathy Graham.
Cathy Graham
Thanks Jim. Well this quarter's financial results largely speak for themselves I would like to cover a few points before turning to more interesting topics.
Guidance for the rest of 2015 and early look at expectations for '16 and some additional detail on our business model. A $37.1 million, third quarter revenue exceeded the comparable 2014 period by 31%.
Revenue growth was once again driven primarily by an increase in full course equivalent. Compared to the prior year period, third quarter FCEs increased by 33% offset slightly by a 2% decline in average revenue per FCE.
In this quarter, both revenue growth and the decline in average revenue per FCE were impacted by an adjustment to a rebate reserve we carry for an old initiative that was discontinued several years ago, but it still applies to a limited number of students who enrolled in one program between 2009 and 2011. If these students graduate and meet specific work requirement after graduation, we rebate a portion of their tuition.
Each September these students have to certify that they remain eligible for future rebates. We've reduced our reserves for students who don’t recertify which has the effective increase in third quarter revenue.
This quarter the amount we took into revenue was significantly less than in the 2014 period, resulting in lower year-over-year growth and the decline in average revenue per FCE. If we remove the rebate reserve adjustment from revenue in each year, third quarter revenue growth would have been 34% and average revenue per FCE would have increased by 1% year-over-year.
The balance of this reserve has been significantly reduced in recent years. So we don’t expect future adjustments to have a meaningful impact on financial metric comparison.
FCE increases were generated across our program portfolio, further diversifying our revenue base. In the third quarter, 57% of FCE’s and 62% of revenue came from the four programs in our first launch cohort.
By comparison in the third quarter of 2014 the first launch cohort contributed 77% of FCE’s and 82% of revenue. 79% of our third quarter revenue was generated by our four largest clients.
With these clients, we operate eight programs under separate long term contracts that launch between 2009 and 2014. Further, we've also announced two additional programs with these clients for launch after 2015.
At $2.9 million third quarter adjusted EBITDA loss showed a 13% improvement over the prior year period and was $2.6 million better than the midpoint of our third quarter guidance. Of this over-performance however, approximately $1.5 million was related to a non-cash charge we have planned to recognize related to expanding and consolidating office space.
Because of a change in building ownership the transaction is taking longer than we expected but we now hope to execute it in the fourth quarter. We've shifted the expected $1.5 million non-cash expense into our fourth quarter guidance.
Not excluded from our adjusted earnings measures is $250,000 in other expense related to an investment we made in an early stage entity to pass in international marketing channel. We regularly test new marketing channels and it is not unusual for us to commit similar amounts to similar tasks.
Operationally, we consider this test expense to be no different than those for other marketing tests but because this was structured as an investment, we’re treating it differently for accounting purposes. Given the uncertainty around determining the marketing benefit and the lack of basis for inputting value to the investment we’re expensing the full amount immediately, but through other expense rather than program marketing and sales expense.
From a balance sheet perspective, we ended the third quarter with $175.3 million in cash, including the net proceeds of our recent follow-on offering. We made significant operating and capital investment in the early years of our program's life.
Though we expect to reach adjusted EBITDA profitability in 2017, we will still need to deploy additional cash for technology, content and other infrastructure investments to support program and corporate growth. Given our current cash position, we believe we should be able to meaningfully increase our annual program launch schedule in 2017 and beyond, while maintaining progress towards steady state margins.
Continuing to look forward, as our business continues to perform we're raising our expectation for the rest of 2015. We now expect revenue to be between $41.7 million and $42.1 million for the fourth quarter and are increasing our full-year guidance to be between $148.6 million and $149 million.
At the midpoint of these ranges that’s year-over-year growth of 36% for the quarter and 35% for the year. We now believe that the fourth quarter will be the first adjusted EBITDA positive quarter in 2U's history.
We expect adjusted EBITDA to be between $700,000 and $1 million for the fourth quarter. Some of you may have higher numbers in your existing model.
So please remember that we've shifted an expected $1.5 million non-cash office space charge from third quarter to fourth. This is simply a timing shift and does not impact our full year guidance.
Fourth quarter guidance implies an adjusted EBITDA loss of between $7.8 million and $7.5 million for the year. At the midpoint of the range we are expecting 2015 to show an adjusted EBITDA loss improvement of 48% over 2014.
Just as a reminder we've reduced our marketing activities during the year-end holiday period. So our fourth quarter margins typically increase.
Fourth quarter margin should not be viewed as a run-rate going into the early quarters of 2016. As we approach year-end, we’d also like to give you a first look at 2016.
As we haven’t completed our budget cycle this is the preliminary view that we will update with more specific guidance at a later date. We currently expect year-over-year revenue growth for 2016 to be between 30% and 32%.
We also expect the pattern of revenue distribution across the 2016 quarters will be similar to what we saw in 2015. We also currently expect a 2016 adjusted EBITDA margin of 2% to EBITDA loss margin of 2% to 1%, an improvement from the approximately 5% we're guiding too for 2015.
This implies a somewhat more modest improvement that we're seeing in 2015 because of expanding our 2016 launch schedule to six programs and maybe more importantly because meaningfully stepping up our launch schedule in 2017 we'll push additional launch cost in 2016. While the additional launches will benefit revenue growth and profitability in future periods, in the first year accelerating our launch schedule increases our expense base while producing relatively little incremental revenue.
As usual, we expect that cost seasonality will impact the distribution of our earnings measures across the 2016 quarter. In the second quarter, we typically incur a disproportionate amount of annual costs that reduce our earnings measures, related to meetings, training, graduations and other periodic events.
Conversely, we typically reduce our marketing costs in the year-end holiday, which increases earnings measures in the fourth quarter. Finally, I think a quick refresher on the expected economic lifecycle of the typical program may be useful to eliminate any confusion.
I’ll also give you some metrics on our first and second launch program cohort to show how we're tracking against that life cycle. Let’s start by talking about first programs in a degree of vertical like first social work or first business.
On the top line, we earn revenue by taking a percentage of tuition and fees paid by students to the school, typically in the low to mid 60% range. We get paid as students take classes through the life of their programs and on average expect students to be in their programs for more than two years.
If a program starts classes on day one of year one, we start to incur costs six to nine months ahead of the first class start. So what do we spend our money on?
Well, we configure our SaaS technology for the program and integrate our technology with the schools. We also work with faculty to create content for the program.
Together these efforts typically cost about $2 million, much of which is capitalized and we incur these costs from our six to nine months prior to launch to about 18 months factor. Our other significant investment is in program, marketing and sales.
We also typically begin our marketing efforts six to nine months prior to program launch. It's a lengthy process.
Students make a long and expensive commitment to these programs. So they don't apply on a lot and we have to find not just any student, but the right student.
Across our program portfolio, it usually takes about seven months from the time we first connect with prospective students until they enroll in a program. Since we don't see revenue until they enroll and start taking classes, there is typically quite a lag between the time we start spending and the time we start generating revenue.
So for our first program, our cumulative net negative cash investment is typically in the range of $10 million before we get to adjusted EBITDA and cash flow breakeven. We expect to reach that point around the end of year three or beginning of year four after program launch.
We then expect to recover our investment as the program gets to steady state enrollment, which we expect should average in the range of 300 to 500 new students per year generally by year five or year six. Before launching a second, third or fourth program in the vertical however, our cumulative net negative cash investment usually falls by about half, more in the range of $5 million, why?
It doesn’t change our typical revenue share range. What or how we spend on technology and content development or what we expect for eventual steady state enrollment, but it does change the cost and timing of student acquisition.
Because offering additional choices increases the number of students from existing program marketing efforts that will enroll in one of the programs, our marketing becomes more efficient and cost effective. Further, because we can leverage an existing marketing funnel when we launch an additional program in a vertical, enrollment and therefore revenue tends to scale faster than in first program.
This combination of faster revenue scaling and lower student acquisition cost significantly lowers the cost of launching additional programs in a degree of vertical. It also helps these additional programs to reach breakeven and steady state faster than for first programs typically by about a year.
Let me make sure that a few points are clear. First the roughly $5 million to $10 million in cumulative net negative cash flow we refer to is not an upfront investment with additional negative cash flows expected.
It is the total cash investment we expect to make to get a program to breakeven. Second, these investments create significant revenue backlog for us before a program reaches breakeven.
For a cohort of students and there are typically four new student cohorts per year, attrition usually becomes quite low and predictable after they get to their second term. So at any point in time, there is significant future revenue that we expect to receive over the next couple of years related to existing students, not ones we have yet to find.
As of the end of the third quarter, we estimate our revenue backlog that is attrition adjusted revenue we expect to get from already enrolled students with $206 million. And third, our contracts typically have 10-year to 15-year initial terms.
So we have a very long time to monetize these programs. We believe our client relationships are good, but further the nature of our services create high switching costs and the majority of our contracts have non-renewal penalties or similar teach out provisions imply for significant low cost revenue at the end of the final contract term.
We believe that the large majority of our clients will continue with us for multiple contract terms. Remember that three of our early contracts have already extended their initial terms before reaching renewal, but if a client decides not to renew, we would quickly eliminate our marketing cost and we expect our margins to increase significantly in the last years of the service period.
So how are our programs performing against the lifecycle we expect? Turns out they're mostly doing well.
Our first launch cohort is made up of four programs that have been operating for between four and six and half years. They're at or getting close to the age where we would expect them to reach maturity and their most recent academic term, this launch cohort averages approximately a 1,000 total enrolled students per program and for full year 2015, we expect this first launch cohort to have a high 20% adjusted EBITDA margin on a fully allocated basis.
We've said that our target for long term corporate steady state adjusted EBITDA margin is in the mid 30%, but with first programs in a degree of vertical somewhat lower and subsequent program somewhat higher. As the first launch cohort is all first programs, it is approaching the steady state margins we expect.
So with our experience with the first launch cohort indicative of the future, the date is starting to say the portfolio wide it is. Our 2013 launch cohort is made up of five programs that have now been operating in the two to three year range and you'll remember that pre IPO, we rode off our investment in one of these because we concluded it was unlikely to scale.
So it happens faster than our models would have predicted for a typical launch cohort, we now expect the 2013 launch cohort to be fully allocated adjusted EBITDA positive in the mid single digits for full year 2015. This is being achieved with total student population through the cohort scaling within the range we would expect.
Two years after each program is launched and including the program we've already identified as small, this cohort averaged approximately 375 total enrolled students per program. And while it's too soon to discuss specifics for our 2014 launch cohort, an early look indicates that it's scaling enrollments and moving through the program economic lifecycle as we typically expect given it's number and mix of programs.
Also remember that the 2013 and 2014 programs were all selected before we developed our program selection algorhythm. While the 2015 and future programs will inevitably have a mix of tuition levels enrollment potential for another characteristic, we believe that by applying the algorhythm insights, we're increasing the odds of success for the current and future launch cohorts.
So with that additional color on our model, I would like to turn things back to Chip for his closing remarks.
Chip Paucek
Thanks Cathy. You all know I like to end my clause with a story about impact, which is really what matters.
I've never shared a story about our university impact. I told Marilyn Flynn of the fantastic USC School of Social Work about some of the challenges of explaining to you to our various constituencies.
She really wanted to talk to you. So I ask her to record a message.
I would really like you to listen to this. The recording is unscripted and unedited.
These are Marilyn's words and she is uniquely qualified to speak on the subject matter. “Chip asked me if I would be interested in speaking with all of you in this investor community about 2U and my experience with 2U and I immediately said that I would happy to do so.
I think I understand this firm as well as anybody possibly could. I was almost the first academic program to sign up with this company and we worked together for five years.
During this period interact within the first year and half or so, I literally doubled the enrollment in our Masters of Social Work Program and at the present time, that enrollment is about it exceeds 2,000. We started from an enrollment of about 600.
So the rapid scaling that we went through was something that was completely unique in the history of social work education. It was further completely unique in the sense of the type of partnership that we had with 2U.
This was not a typical vendor relationship in which the University is simply right to the contract with someone. It was a -- it was at a joint venture in the sense that you would technically think of recovering in the investor community, but it was certainly a joint venture in the shared risk that we both had in our shared state if it failed, but in another very fundamental sense in our shared interest in maintaining excellence.
My school has always been a model that operates in all schools of social work and I belong to a top ranked global search institution and for both of those reasons, I have never undertaken any kind of distance education or online education ever, simply because all of the other available options that were presented to me were from the companies whose products were so much more inferior, whose capacity for imagination was so much less, whose genuine interest in promoting the best kind of education was some much lower, in some cases not evident. So from the beginning of course for 2U, I understood perfectly this was a profit making venture.
For us it was a venture in transforming the nature of education at the highest possible level and after five years, I absolutely can say with confidence that we have the gold standard in online education in my field in the United States in fact anywhere in the world. We've been able to accomplish that standard I think not because we haven’t had any problems and not because some of the courses that we've offered have been difficult to manage, but because we've had this shared view of what needed to be accomplished.
So, I am tremendously impressed with the value that 2U has brought to my program to the field of social work education and to the concept of online education in itself. I am extremely proud to be associated with them and if there is ever anything that’s proposed by the company that I feel in anyway undermines the quality of what we represent as an institution and as a school or in the field of professional social work we always discussed how everything that we can do will contribute to quality, to the highest classical quality.
And I would say I feel consistently supported in that objective and extremely proud to recommend the company to you, but also to my colleague. The experience for me of course has generated a positive revenue flow.
We've had consistent high demand for our program even throughout a recession, one of the deepest recessions in the history of the company -- country. We've had consistently high demand even though the number of competitors in my field have grown steadily.
We had consistently high demand even though we have the second highest tuition in the United States for online program and the only way that I can account for that is that we have the best online program that anybody has to offer. I really don’t have any other explanation for it.
We've been extremely cautious in encouraging people to enroll. The company has worked with me very carefully so that we can be sure that people who participate can do so in a way that is manageable for them financially, so that we have one of the best if not the best retention rates in our program.
So in short it’s been responsible and socially responsible program it's been an institutionally responsive program and for our students it's been for some of them the best educational experience that they've ever had. We have letters, I had one just yesterday, not just from the students that talk about the quality of their education and their pleasure, their satisfaction, but from employers, which is equally impressive.
So I really don’t know any other aspect to discuss in trying to explain the strengths of this company, but I think as I said before, I am the best person in the United States to talk about this company and what you heard from me is something that you can rely on.” Well you can see Marilyn Flynn, is not living in the back row.
We’re extremely proud to work with her and the USC School of Social Work. And with that, we are open to receive your questions.
Operator
[Operator Instructions] Our first question comes from line of Michael Nemeroff with Credit Suisse. Your line is open.
Michael Nemeroff
Oh! Hi, thanks for taking my questions and nice job on the quarter.
Just following up on my own remarks, clearly the one satisfied customer, the events over the last couple of weeks have -- has that been uniformly what you're hearing from existing partner schools? And then alternatively, are the conversations changing with potential partner schools as a result of some of the things that have been written about you lately?
Chip Paucek
No, honestly, I think we were really proud of the portfolio right now in terms of how they feel about us. You obviously can see that we just extended the George Town relationship by five years, that doesn’t happen as -- that’s not a surprise, that’s a long process of talking to them and they’re a great partners as well.
We chose Marilyn simply because many of the folks on that call know that that is a very large program and people ask a lot of questions about it and we spark her words were particularly insightful, but she has worked with us five years. What I would say is in terms of the pipeline, really it’s stronger.
Part of the reason that we went out and raised more capital as the opportunity has expanded in front of the company to grow more programs both within the existing partner suite as well as new -- planning new flags in great regions where we want to expand. So the reality is the notion of what others are saying out there in the market place is just really not that important given that the partners know what we're delivering for them every day and Michael we don’t talk about the financial impact a lot, but the reality is $1 billion in attrition adjusted tuition is a non-trivial number.
We're generating great missions for these schools and a great business. So…
Michael Nemeroff
So, Chip following up on that one, some of the questions that I received from investors is around how you determine what the economics of these agreements are. Just from my desk, how open are you with your schools about how much you're going to make, how much they're going to make and how you determine which programs to go into best and which ones you think are going to scale and why?
Chip Paucek
Well, in the early days we were just real blessed to get what we got, because these are all pretty incredible institutions at the level that we were playing in. Today we are very data driven about the process and we were able to be very strategic in our selections and the idea is to plant flags in great regions and really grow in each region and therefore grow on a U.S.
wide basis and really worldwide 50 countries. The sales process itself is very open kimono.
We show them our side. We show them their side.
You don’t sign a 10-year agreement or plus on a larch. It’s a long thoughtful process.
There is a lot of people involved. So everybody around the table knows what they're getting into.
And we're not shy about it. We show them everything.
We think it’s really important that long term their satisfaction, their happiness in these arrangements matters more than anything else. We can sit here and talk about switching cost and talk about all the various reasons why it would be hard for somebody to end a two-year arrangements.
But the most important thing is why they're entering them in the first place. We're going to build something that helps them create the future of the institutions and I got to tell you right now regardless of what those out there are saying we're definitively doing that and if you talk to people across our portfolio they're really very happy.
We just did an event last week at the economist in New York City where Jim Shelton was on our panel with two of our partners [Indiscernible] from Berkeley and Lucas Swineford from Yale. And it was a public setting and to hear them talk so strongly about 2U is really pretty often, but it's not something we're surprised by.
So it's a notion of reporting what's happening in a partner program without ever having spoken to us or the partner program is a little silly.
Michael Nemeroff
So one last question on the programs that have been announced, but haven't launched. There aren’t any launch dates associated I think there is eight of them at this point in time.
Previously I think you were pretty explicit about when you thought these programs would launch in terms of the timing. Is there any -- what should we read into that?
Chip Paucek
Yes, it's a very good question. So last year at this time we had four announced programs and now at this time this year we have eight.
They're clearly not all for 2016 and the reason that we haven't put launch dates behind them is candidly it's important investors know that we're expecting several other announcements here in the very near future that allow us to sort of once we have them altogether figure out the best slotting for a variety of reason. There is -- each of these is complicated.
There are a variety of approvals and then there is also just some business goals for the company that allow us to sort of think about when we're slotting them. So I think those new announcements will become clear over the very near future.
We were excited to be able to announce two today. Really frankly one of those two literally was just signed today interestingly this morning.
So we were to get that one in, but timing of our contracts don't wing up the earnings calls because that's not what they're about. They're not about the investors.
They're about driving these partners for the programs. So important to note that we'll give clarity as we have at about when we're expecting which programs to launch.
Michael Nemeroff
I lied. This is the last one.
The L programs announcement, how has that -- I know the financial impact is expected to be pretty low because it's relative small program, but what has that done for the company in terms of your ability to talk to other school or real top Tier, top five, top ten schools? Has it changed at all since that announcement?
Chip Paucek
Yes, so I would say just first important to note that 2U doesn’t really launch anything that over time we believe is going to small. We're trying to find great programs that we can scale over time and we think both medicine and low, while there is a series of real legitimate complication with accreditation on both of those disciplines.
They're both disciplines that we think that use case over time or when out and as ultimately you prove that you can be great in those disciplines we think long term that there is a ton of potential. You take physician assistance just that in general is a massive job shortage right now.
So there are serious needs of that discipline. Yale has had a positive impact in terms of what people view of online simply because it's really you can't argue that there is some higher level of higher ads.
It's really obviously the highest level, but I'll tell you, it's not like more Western in Berkeley and Washington in Chapel Hill and George Town or [Library] [ph]. So we had already been playing in a very, very strong sort of arena and while we're extremely proud of Yale, we're also thrilled that we have one of the best schools of social work in the country and one of the best schools in nursing in the country and so on and so forth.
So it has had a net positive effect, but I think if you look at the math it had overall and while you just signed for the largest program announcement in our history and today Jim was able to announce the fourth program there. So we think pipeline is really not an issue for the company, which is part of the reason for the follow-on offering.
Michael Nemeroff
Thanks very much for taking my questions.
Chip Paucek
Okay. Thanks Michael.
Operator
Thank you. Our next question comes from the line of Andre Benjamin with Goldman Sachs.
Your line is open.
Andre Benjamin
Thank you. Good evening.
Chip Paucek
Hey Andre.
Andre Benjamin
My first question I was wondering if you can confirm the terms of the extension with George Town was the same as your current contract and then is there any reason why all your initial partners are re-upping now so early and now you're looking to do the same with others.
Chip Paucek
Yes, so the important -- number one, I can't discuss any individual contract specifically because it would be it would be not only violation of my agreement, will be bad for my partners. It's very important that you know that that's real.
What I would say is that the revenue share under that arrangement has stayed the same. We clearly did give them some consideration.
The reason we're going back to our original partners is those that have been around the company for a long time know that we originally had a business model where we did not believe we were going to launching multiple programs in each vertical. So even at the time of our IPO, we only had one vertical with two programs in it.
Everything else was one vertical. So if you go back to the earliest program and you looked at a timeline of our program, it’s not just the continuum of time, it's the continuum of exclusivity.
So the earliest arrangements were most exclusive and you can think of the ones today as almost nonexclusive. So we've had to go back to work with those original partners to deal with that and in that process we've been able to come to a conclusion that extensions of these agreements were possible because frankly they're really happy with the company.
So given that we were going back and reopening it and given that this was something that was important to the company, we were able to get these included and now at our first five contracts we now have three of those five where we've extended them. In doing so, we've been able to unlock exclusivity, which allows us to pursue the MPV strategy, which as you know has been critical to the long term value of the company and we expect that to continue.
Andre Benjamin
Thanks. And similar to how you report the pre 2013 FTEs and revenue, I didn't know if you’d be able to start giving some color on the 2013 cohort and specifically what do you think is pushing you to get the profitability fashion than expected.
Is it more the scaling larger and their enrollments tolls are higher or is that you've actually been able to negate better expanding levels and leverage out of where you're spending?
Chip Paucek
So what I would say first is we feel like by the way, one logistical note for everyone on the call as we said in early part of the call, we are going to extend this call through to the 6:30 time just to make sure we've got enough time for you Q&A. So, Andre the reality is we thought we gave quite a bit more info and color about cohorts on this call than we had previously.
So Cathy just gave you quite a bit of financial data thinking about what the average enrollment of these programs looks like, but I'll give you in terms of why that 13 cohort is profitable today. There is no question that we now have MPV and it significantly improves the efficiency of the company on our single largest expense, which is marketing to students.
So we do think that all aspects of MPV, the program scale faster. So instead of a second program scale much more quickly than our first program and frankly just it’s a lot less expensive to launch it.
So the net negative cash impact of a second program goes from $10 million for our first program over the first four years to $5 million, it's a big difference on average. Anything you want to add Cathy?
Cathy Graham
Yes. Let me just follow that Andre and say I totally agree with Chip.
It is about program mix that was the 2013 launch cohort. It was the first cohort in which we had an MPV program and it was an MP, it is an MPV program that was very successful and scaled very quickly.
So the combination of putting that in, getting scale on the company in general, which helps in allocated cost to cross all of our cohorts is really driving that for 2013.
Andre Benjamin
Thank you. I'll get back in queue.
Chip Paucek
Thanks Andrew.
Operator
Thank you. Our next question comes from the line of Michael Tarkan with Compass Point.
Your line is open.
Michael Tarkan
Thanks for taking my questions. Just regarding 2016 Cathy, I think you mentioned that the recent raise now gives you the ability to accelerate launches in 2017 and beyond and that some of those expenses are going to hit in 2016.
Any way you can quantify what that delta is or just anything around that?
Chip Paucek
This is Chip, Michael. We haven’t yet -- we're not yet at a point where we're willing to guide to a particular number for '17.
It is pretty clear that we're talking about an order of magnitude increase. We're not talking about six going to seven.
Cathy Graham
So when I think about this Michael I agree with Chip it is kind of hard for us to give orders of magnitude this early, considering we aren’t even through our '16 budget cycle. But affectively we looked at a step up to six programs in '16 and absorbing costs of '17 programs that will fall into '16 pre launch and even in doing so, we were kind of able to keep our expectations for where adjusted EBITDA is going to be for 2016 in the same place even while absorbing those additional cost.
Chip Paucek
It's a high class problem at the company, but we're in quite a bit of demand from the existing partner base and there is a lot of new partners now that we're in process with. So it's a good thing obviously.
Michael Tarkan
Understood and just so I am clear I think should we just mention that -- so you're at least six right now, when you talk about meaningfully accelerating in 2017 and beyond we're not just talking about one additional program per year, this is a step function up again most likely.
Chip Paucek
That’s correct, and that is part of the reason that as Cathy mentioned the '16 guide is where it is.
Michael Tarkan
Understood, I guess switching gears on the competitive front, I know one of your competitors is in the process of losing a big contract with University of Florida and I know that’s under grad and fairly different, but just curious if you're hearing or seeing any changes competitively, whether it’s new entrants or existing players just any kind of thought there.
Chip Paucek
Yes, I would say we feel very strongly that our overall solution is combination of technology and service is very strong and we continue to make it better. So we talked a little bit about it on previous calls with adding new technology to the overall bundle, adding new services to the overall bundle like our campus scaffold.
And frankly in terms of the others, how they do or don’t do, what I can tell you is you got to live up to your promises and when you bring in new schools, you got to make sure that you're being thoughtful and careful about what your expectations are and making sure everybody agrees with it. You got to set the overall plans for the business in a place that accomplishes the mission of the University and is very achievable and I feel like we've done a really good job doing that.
Part of the reason we wanted Marilyn, we wanted Judy here Marilyn is it's easy to have me talk about it. And you think well of course you are CEO, you're saying this stuff, but my client will say it and they say it pretty loudly.
So with regard to the competition I got to tell you we feel like we're further ahead than we were two quarters ago or three quarters ago. We like where the company is and I continue to push everybody here to not -- we're certainly not rest on our word that much as companies are moving.
Michael Tarkan
All right, and then last for me on the addressable market question so, you guys have historically talked about $3 billion topline number was I think 180 programs. Does that include anything internationally and then just if not just any thoughts about how that opportunity could look and when we could see an international relationship for you guys?
Thanks.
Chip Paucek
So it's important to remind you that we do have one. We have a dual degree with Monterrey Tech and [Indiscernible] which is really one of -- Monterrey Tech is one of the best schools in all Latin America.
But in terms of a full degree program we definitely believe that’s in our future internationally. Part of the reason for the small investment that saw us make this quarter that Cathy commented on is international marketing.
We are continuing to put chips down there. We do believe that’s very much part of our future and if you look at our client base, you start getting to the student base, you can see that the student base is global.
Now we're going to be conservative. You're not going to see us launching nearly as many internationally as you will see us launch here.
Why, the used case here is unbelievably obvious. If you're a great school and you think that they're going online you can make your degree more flexible for people that don't want to quit their jobs to achieve their goals.
It’s a big deal. So we got a lot of runway in the U.S.
So it’s taking some reasonable but conservative steps on a go-forward basis to expand internationally we think it’s the call.
Michael Tarkan
Thank you.
Operator
Thank you. Our next question comes from the line of Corey Greendale of First Analysis.
Your line is open.
Corey Greendale
Hey. Good afternoon.
Thanks for sticking around longer. Few questions, so first of all, could you, Cathy can you give us the latest of TR to TCA ratio you're seeing?
Cathy Graham
Sure, it actually is staying about the three mark and is continuing to trend, kind of in the direction of that 3.2. So we are very pleased
Corey Greendale
Okay.
Chip Paucek
I would say Corey, that’s a big part of what's driving the efficiency of something like 2013 cohort.
Corey Greendale
Yes, understood, second question I had is I realize you just gave 2016, but in thinking about 2017, should we be thinking that given the maturation of 2015, 2016 cohorts and the accelerated introduction in '17 that you're aiming to maintain 30% plus revenue growth in 2017.
Chip Paucek
Yes, we didn’t say that, but we probably should have. We firmly believe we can maintain 30% plus revenue growth for the foreseeable future.
We feel very strongly about that. If anything more strongly about it then we did at the time of IPO and we felt pretty strongly at the time of IPO.
The primary reason for that is the MPV strategy allows us to launch more programs in vertical. So as you think about the opportunity going from at the time of IPO, 30 verticals with two programs and we've said recently 60 verticals with three.
The reality is that three is probably a conservative number. There is a lot of opportunity on a reasonable basis for these great programs.
It’s a big opportunity. And I would also note, I know some of have asked some questions about whether we just done the good ones already and it's a little crazy because the number of programs out there that we haven’t touched yet that are really big we haven’t done engineering at all.
Just that as a discipline is massive. Computer science, there is a whole bunch of them that haven’t done.
So we think it’s a great opportunity for long term. If you are log on 2U this is a long journey and we're still in the second innings folks.
Corey Greendale
I appreciate that, and actually Chip since you bought that up, if don’t mind, can I ask you a couple of the questions that I've been getting most frequently recently. One of them is to that point, a couple of people have said if you look at part of education data at the number of vertical it looks like you start getting down to some relatively small population before you get 60 verticals.
I suspect you're looking at it a little differently than that data, but can you just address that point?
Chip Paucek
Yes. I would say what's interesting about the 13 and 14 cohorts is that there are programs in those cohorts that by no means is we didn’t have the algorhythm to select and the reality is we like what we see.
So we're working on MPV of those program and those were not programs that we specifically targeted using the algorhythm. So as I mentioned, there is a lot of verticals left that we haven’t touched.
Some of the biggest are still there. So we do think that beyond -- before you get the Greenfields and what we love like Health Informatics is an example of a Greenfield that we think has really strong demand long term.
So the notion of existing verticals where you can clearly look at it and identify that's it's a good size, MPV in current verticals where we're just getting to scratch the surface if you look at it. The first public health second program is in our Simmons enterprise model.
There is a very -- that is a good example of a discipline that will get very large and we firmly believe we will do many of them because our first one is doing extremely well. So do you want to add some Cathy?
Cathy Graham
Yes, specifically Corey when you look at the number of verticals that we could address, when you use the program selection algorithm and when you've gotten the experience that we've gotten over the last 18 months, not about how multiple program verticals work and if you get the marketing efficiency you get even in tangential vertical. It actually allows us to group up things that in the data might look small, but we now believe can be run as a sizable verticals in their own right.
Corey Greendale
Yes that was my understanding or my assumption. Another one I've been getting a fair amount is questions about acceptance rate at your University partners given that they are leading universities and whether that narrows the funnel.
Can you just address, I think I've read that the MBA, UNC has like a 39% acceptance rate. Some point to the Yale acceptance rate of 3%.
Can you just address kind of what the typical acceptance rates in your program?
Chip Paucek
Well I’ll tell you strongly no matter how much investors want to talk about it we'll never talk specifically about our partners acceptance rates because it’s not our place. What I will tell you is it is a little insane to broadly infer something from a campus program to an online program because by definition there is only a certain number of seats on a campus program.
So there is an unlimited number of seats in the online program as long as you don’t dump down the brand by admitting students that wouldn’t be in the campus program and inherently my marketing teams job is to find great students worldwide that indeed are interested in attending and can get in and want to experience it that way and frankly can afford it. So that’s our job is to grow the partner programs without hurting the brand.
So I think the notion of analyzing something about what’s happening on campus the person doing that would have no idea what the requirements are of that program. So what I always say is we will not dump down the school's brand in any way by changing you admission’s requirement but you admission process of course we're going to have to change because the program is going to get a lot bigger when you go online.
Is that helpful.
Corey Greendale
It's very helpful. I appreciate.
And just one last one for me if I could because this question may come, just try to address it proactively, looking at the individual client data in the Q, it looks like one of your clients, the revenue declined from the year ago period. I don't know if you want to talk about individual clients, but anything you can say to address that if the question comes up?
Chip Paucek
Yes, so one of our clients went through a period where it actually put a halt on certain programs and has since re-launched those programs and allowed them to move forward for a variety of reasons that had really nothing to do with us. So we do expect that to sort of revert the other direction.
Corey Greendale
Okay. Appreciate it.
Thank you.
Chip Paucek
No problem.
Operator
Thank you. Our next question comes from the line of Geoff Miller with Baird.
Your line is open.
Geoff Miller
Yes. Thank you.
You talked quite a bit about program life cycle and program scaling. I guess and you also talked about pre IPO writing off the investment in one of the programs.
Is there a typical inflection point or at what point would you guys concede that a program is not going to scale?
Cathy Graham
So I am not sure that we can give you a typical since we've basically seen one and we were probably able to determine that relatively early like within the first year of the programs like here or so of the program's life. But I am not sure that that would be typical for everything because just haven't seen any other examples of that.
I will note that if there is good things that come out of everything because seeing that program not scale was the impetus for us developing the program selection algorhythm, which we think is going to make it much, much better for us to select programs going forward. And then the second thing out of that was we learned how to run programs on a small program operating model so that we can minimize the cost in those programs, run them at the size that we think is optimal for them and have them not lose us money.
Geoff Miller
Okay.
Cathy Graham
…probably quality of the program.
Geoff Miller
Got it. It's obviously a portfolio approach and I would expect some programs depending upon what verticals are into scale or what partners are with the scale more slowly, but it sounds like the programs that are maybe in and you guys remain confident in scaling towards the 300 to 500 new enrollments per year plus.
Cathy Graham
Yes, so if you're looking at the -- we talked about an average sort of total enrolment was about 375, not new enrollment, but total enrollment in the 2013 at the end of their second year. So that's a pretty good idea of where the trajectory is for those programs when you're talking about probably a three to five year maturing cycle on those.
When you look at the ones that we've done now in the 2015 timeframe as Chip said, our early indications on those is that they're going to be very strong programs.
Geoff Miller
Okay. And then can you just confirm the follow-on second, third, fourth programs that you've been signing with some of the university partners that on average the revenue share is materially similar to the first programs that you guys are signing with the university partners.
Chip Paucek
Yes.
Geoff Miller
Okay. Thank you.
Chip Paucek
No problem.
Operator
Thank you. Our next question comes from the line of Jeff Silber with BMO Capital Markets.
Your line is open.
Jeff Silber
Thank you so much. Had a couple of questions about the first five programs that you've mentioned a few times.
I think you've renewed three of the five, of the two that have not been renewed yet, can you just remind us when they expire and are those both exclusive contracts as you've described them beforehand and are there any other contracts with exclusivity besides those two? Thanks.
Chip Paucek
So I would tell you the first two are two -- sorry the two you're referring to are two programs at USC believe the social work program five years less, is that right and then education, little less than four.
Cathy Graham
No, education is 2018 and social work is 2019.
Chip Paucek
So and of those two, it's important to know that USC has recently signed with us for a new 10-year term for the nursing program, which will be run out of the same school as it's just literally run out of the school of social work. So that is a 10-year deal exactly like the first year or the first deal with that school.
So I think that says quite a bit about what USC is thinking given that the social work school will run the nursing program. So we think that says quite a bit.
We're obviously in a continual dialogue with our clients and that's no different here in terms of the first school, the education school and we really don't have anything to say about that at this point.
Cathy Graham
And Jeff forgive me, I misspoke, it's 20-20 of the social work school.
Jeff Silber
I appreciate that. And I am sorry, on the exclusivity, are there any other exclusive contracts still out there besides these two with USC?
Chip Paucek
Not fully exclusive, no. As I said, there is no such thing having exclusivity I know we like to think of it as black and white and there is a lot of shades of gray, but our first contracts were you can think of as much more exclusive than our later contracts.
Our most recent contracts obviously the least exclusive, there may be something regionally that we've given somebody because we really believe in the region anyway. The early ones are the ones you can think of as more exclusive.
Jeff Silber
Okay. Great.
And then just…
Chip Paucek
It's important to note that even on our USC arrangements, while we've not extended the social work contract we have launched a second social work program with Simmons. So it's important to note that even in that case, we now have only one school where we do not have the ability to launch a second program and that is our first contract, the education contract.
Jeff Silber
Got it. Thank you.
That's helpful and just a quick question on the table that I think Corey referred to, client A, it looks like in doing the math, the revenues have been relatively stable, is there a little bit of color that you can give us on that, thanks?
Cathy Graham
Yes, so if you remember in my comments, I referred to a rebate reserve that we make an adjustment to in the third quarter of every year that is actually within client A. And so last year in making that adjustment, we brought a significant amount of revenue back into revenue for that client, while this year it was significantly less.
So if you were to strip those out, you would actually see revenue growth in that client.
Jeff Silber
Okay. That's very helpful.
Thanks so much.
Operator
Thank you. Our next question comes from the line of Ben McFadden with Pacific Crest Securities.
Your line is open.
Ben McFadden
Hey guys. Thanks for taking my call.
I wanted to ask the first question around seasonality, you talked about how with your programs diversifying that the model will start to get less and less seasonal relative to how you had it in the past, but I kind of wanted to drill down a little bit on new customer, excuse me, new acquisition. Kind of where you're seeing new students most likely to enroll?
Are they still around that bottom period Q1 or have they shifted with the diversifying of your start date as well.
Cathy Graham
So we still will typically see most of or our largest enrollment periods being in January and in the September, October timeframe. Some of that has to do with student -- traditional student preference, but some of them also has to do with when schools offer the cohorts.
So you'll have your largest grouping of cohort launches in those timeframes. Otherwise they wind up a little bit spaced out depending on the different school's academic calendars, but for example, January is the only month where every program has a lunch date.
Then the next would be sort of that September, October timeframe.
Ben McFadden
Great. And I wanted to return to sort of this competitive conversation around the University of Florida, that contract being cancelled.
I think one of the primary reasons given was around the marketing component. And can you talk to us about why the marketing component might be so difficult to pull off and exactly where do you might have competitive advantages around that specific segment of your solution.
Chip Paucek
Oh, Ben that's a eight year story. So marketing these university brands at the high level was a bit like it's sort of the elite schools to finding a needle in a haystack and you've to find the right student, not just any student.
And so we've gotten really good at it and we've over time deployed -- it's not just about talent, which our marketing team here I think is the best hire at marketing job in the country, but it's also about understanding how to leverage the spend to drive the right outcome and drive it on the marginal efficiency to 2U and our partners just making sure that you're spending the money wisely. If you don't predict enrollment early in the process when somebody comes with prospect, you'll spend a ton of money on things that don't work.
So it's very difficult to do. And I got to tell you we weren’t very good at it in 2009.
Whereas we launched the programs and the degrees, the actual experience that students had was great pretty early on. It's got a lot better, but it was pretty good out of the gate.
It took us a long time to get the marketing right and a lot of key personnel. My CMO came from Capital One where he had $0.5 billion marketing budget, doing intense data-driven marketing of credit cards and the reality is it's all about really, really smart use of data.
And I think our competitors aren't really there, and that's obviously it’s good for us. On the other hand, we do think that right now it would be better for everybody if everybody was doing well because preconceived notions of online education are company's problem.
So we'd rather have everybody in the space do well. It's very, very large market.
So we want more positivity around our online program. But I could tell you, the marketing, if you go to look teach.com or any of our sites there are very smartly designed and our team spends dollars to get the right outcome for our partners.
I obviously can't comment on what the other guys do, but I know they are not us.
Ben McFadden
Great. And then lastly, I just wanted to ask a housekeeping question around the 2016 guide Cathy.
You gave the range of 30% to 32% growth. But can you help us understand how you're thinking about price per full course equivalent?
Cathy Graham
Yes, we generally expect price for SCE to be relatively flat, from period to period. Then it may move a little bit depending on what programs we launch in what timeframe.
But we don't expect to see any sort of material movement at all.
Ben McFadden
Great. Thanks a lot.
Operator
Thank you. Our next question comes from the line of Michael Huang with Needham & Company.
Your line is open.
Michael Huang
Thanks very much. And sorry for making this all go even longer.
But just a couple of questions here. So…
Chip Paucek
Don’t worry.
Michael Huang
I certainly appreciate the comments around the satisfaction of your partners and just some thought check. And clearly there is a potential I view, I think in your script you mentioned multiple renewals with many of your programs.
Are there any programs that you're working on today where you can foresee that they may not renew given how their trending? I'm just trying to get a sense right now on whether or not there are any who might not be going the way that you'd want?
Chip Paucek
You know, not today. Certainly it’s always possible, I mean, I can't predict the future.
But no, we feel strongly about the overall portfolio. We feel like we've got a group of real happy customers.
So let me give you a short answer.
Michael Huang
Perfect. Okay.
And then just my final question here is, could you talk about the progress that you're making around kind of blurring the line between online and on-campus students? Obviously there is been some investor questions around whether or not on-campus students and their perceptions of online degrees, might be forcing some schools to perhaps scale down their enrollment targets?
I mean, is that credible headwind to the enrollment story here and are there other things that you're doing here to address that? Thanks very much.
Chip Paucek
Yes, I'd say it has been a credible headwind from the moment we started the company until today. It is blowing lower, using the headwind.
It is less of a headwind today than it was in 2008. The program that you just heard from Maryland on the students effectively had a fit in when we launched it way back in the day because they were so upset about it and obviously at this point it's become an extremely positive story.
But it doesn't start that way. And the reason for that is people worry that you are going to hurt this thing they've blessed for and that they care about deeply, why, because most of online education isn’t very good.
So until you experience that with the combination of live, with in real network of people, with physical placements in the field. And so I'd say you look at the advancements of some of the partners like – just pretty awesome what's happening across the portfolio.
So GW School of Public Health allowing its campus students to use the platform to take on online classes. You've got the Chapel Hill program, MBA@UNC offering what they call MBA for life, where a student that it’s taken the program can come back at any point and take a campus class or take an on line class for literally the rest of their lives.
So you've got all of this really wonderful blurring of lines and we think long-term that’s a big deal for the company. But I would never make light of the headwind.
I think one of the reasons you probably getting the question is some of the stories around when we launched the Yale program. Honestly that really was no different than what we've experienced everywhere else, it just that it was Yale, so it got immediately attention.
And I would also say because it was position assistants where those are disciplines like Wal [ph] where there's more sensitivity. But we do see that when we launch a program.
We're getting much better addressing it and typically involve sharing, as much information as possible with the student body and the loans and the faculty just to make everybody more comfortable that this form of online education is great.
Michael Huang
Thanks so much.
Operator
Thank you. Our next question comes from the line of Brian Schwartz with Oppenheimer.
Your line is open.
Brian Schwartz
Yes. Hi, thank you.
I just have one question here this afternoon. Cathy, I just want to ask you a question on the sensitivity of your adjusted EBITDA margin guidance for 2016 that you put out here today.
I guess, I'm just trying to understand when you base that initial target, because you're talking about a significant step up here in programs in 2017. Are you basing that target where you are assuming that the high end of your range of your step up, I'm just trying to understand the sensitivity.
I mean, could there be a high-class problem here where we come back in 90 days and you've seen all this acceleration and demand in program starts and then you need to revise your guidance that you put out here for '16, again three months from now? So just trying to get a little more granular color into how you're thinking about setting that initial target that you did on the adjusted EBITDA margin guidance for next year?
Thanks.
Cathy Graham
So Brian, I think you should assume that we've been pretty thoughtful about trying to make sure that we don't come back to you and tell you that we're going to do more in '17 and therefore were going to pull back on that guidance. We are - by nature of the fact that we aren't even to '16 and we haven't even announced our launched calendar for '16 being a little bit vague, but we have certainly thought through what happens if we have certain acceleration scenarios in '17 and we've build that into what we're telling you.
Brian Schwartz
Thank you.
Operator
And I'm showing no further questions. At this time, I'd like to turn the call back to Management for closing remarks.
Chip Paucek
Okay. Thank you, everyone.
Thanks for joining us for this call. We continue to be very proud of delivering the kind outcomes across this portfolio that make our clients proud and deliver, some sort of change life for students in the program.
So you all know the back row and I'm glad that we're all here stepping out. You guys have a great afternoon or evening and we'll talk soon.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program.
And you may all disconnect. Everyone have a great day.