Education Markets and Deals Roundup — 9th Edition
Momentum in private markets has started to build over the last few months, where can see a shift in trends as the funding in Series A and above rounds have started to pick up pace. In March, private markets saw a good traction with companies like Avanse securing $ 120 Mn in pre-IPO funding, Planet Spark closing its series B round for $17 Miilion while funds such as Alta Capital looking to invest more than $1 billion in education infrastructure.
Sale and Leaseback transactions have emerged as an alternative funding option as GEMS Modern Academy in Kerala closed an sale and leaseback transaction with a mega Middle East Fund.
Public markets trended downwards during the last month primarily due macroeconomic factors like high interest rates and as a output of push and pull forces of market as the companies were rallying upwards for the last few months. We also saw market indices such as Nasdaq, S&P 500 and Dow Jones were down as well for the last month”
Public markets experienced a downtrend in the last month with only 2 of the listed education companies having a positive return over the last month. Reasons for the downtrend could be primarily push and pull forces of market as the companies were rallying upwards for the last few months and macro-economic factors such as high interest rates as we saw market indices such as Nasdaq, S&P 500 and Dow Jones were down as well for the last month”
The EV/EBITDA ratio floating between 16.5 to 17.5 for Indian companies, 12–13 for global B2B companies and 9.5 to 10.5 for global B2C companies in the last few months
Global
B2C Companies
Rapid Round up
a. Strategic Education:
Company reported strong Q4 results with revenue up 12.5% to $304 million and operating income doubling to $57 million. Key highlights include 7% growth in U.S. Higher Education enrollment and a 26% revenue increase in Education Technology and Services. Despite a slight dip in international enrollment at Torrens University, bullish sentiments prevail due to strong market demand. The company plans significant investments in 2024 for growth, maintaining margins in the low to mid 20s. The outlook for 2024 is positive, with a focus on reducing debt and enhancing shareholder returns. Analysts are optimistic about future profitability, supported by upward revisions in earnings and a favorable P/E ratio.
b. Scholastic Education:
Company has announced its definitive agreement to invest in 9 Story Media Group, a leading independent creator, producer, and distributor of premium children’s content, for approximately USD $186 million. This strategic move expands Scholastic’s reach into the realm of children’s media, allowing it to leverage its trusted brand and popular franchises across various platforms. The investment solidifies a longstanding collaboration between Scholastic Entertainment and 9 Story, paving the way for deeper engagement with young audiences through storytelling. With 9 Story’s strong momentum and extensive content library, Scholastic expects significant growth opportunities and synergies, aiming to enhance its position as a top developer, producer, and distributor of kids and family content worldwide. The transaction, subject to customary closing conditions, is expected to close in Scholastic’s fiscal 2025 first quarter.
c. 2U:
Company is facing financial challenges, with its stock price plummeting and doubts raised about its ability to continue operations. Despite attempts to diversify and expand through acquisitions, such as the purchase of edX, the company’s model has not proven profitable. Losses have mounted, exacerbated by debt from acquisitions. Major setbacks include losing a flagship client, USC, and multiple rounds of layoffs. Former CEO Chip Paucek stepped down amid the crisis. With shares trading below $1 and potential delisting looming, 2U is focused on survival, implementing cost-cutting measures and renegotiating debt terms to secure its future.
d. Coursera:
Company, boasted over 129 million registered learners. CEO Jeff Maggioncalda aims to expand offerings and partnerships, focusing on accessibility and quality education. AI, including ChatGPT, is being utilized for translation and as a personalized learning companion named Coach. Coursera partners are using AI to create content and courses, enhancing learning experiences. Pathway degrees are offering flexible learning paths, addressing gaps in traditional education. Maggioncalda envisions Coursera as providing adaptive, personalized, and effective learning experiences, bridging the gap between online and traditional education.
2. B2B Companies
Rapid Round Up
a. Docebo
The company reported strong financials for FY23, with subscription revenue accounting for 94% of total revenue, a 29% increase from the previous year. Total revenue increased by 27%, reaching $180.8 million. Gross profit stood at $146.3 million, representing 81% of revenue. Net income was $2.8 million, or $0.09 per share, compared to $7.0 million, or $0.21 per share, in the prior year. Adjusted net income was $21.2 million, or adjusted earnings per share of $0.65, a significant increase from the previous year. The Net Dollar Retention Rate was 104% compared to 109% in the prior year. Adjusted EBITDA reached $16.3 million, or 9% of total revenue, compared to $1.3 million in the previous year. Operating activities generated $16.0 million in cash flow, while free cash flow amounted to $20.1 million. Cash and cash equivalents were $72.0 million as of December 31, 2023, compared to $216.3 million in the prior year.
b. Lincoln Educational Services
Company recently reported strong earnings, but the stock hasn’t reacted significantly, possibly due to concerns over underlying weaknesses. The company’s accrual ratio of 0.47 over the past year suggests future profitability may be poor, as it didn’t generate free cash flow despite a profit of US$26.0m. Unusual items worth US$27m boosted profit, but sustainability is questionable.
Indian Companies
Rapid Round Up
a. Veranda Learning:
Veranda Learning has secured Rs 425 crore in debt funding through non-convertible debentures (NCDs) from BPEA Credit. This funding is a key step for Veranda in advancing its expansion plans within the education sector. The NCD issuance is part of a larger fundraise to be completed in the next three to six months, with the company planning to balance its risk profile by raising equity-like instruments in the future. BPEA Credit Group expressed confidence in Veranda’s growth prospects, aligning with its fund’s objective of investing in growth-oriented businesses. Veranda intends to utilize the funding for acquisitions, loan refinancing, and strengthening working capital. With this substantial debt funding, Veranda Learning is poised to expand its presence and offerings in the education market further.
b. NIIT Limited
NIIT Ltd has appointed Pankaj Prabhakar Jathar as its new Chief Executive Officer, effective from July 1, 2024. This announcement was made in a regulatory filing. Jathar will replace Sapnesh Lalla, who will transition to a non-executive director role at NIIT Limited while continuing as CEO of NIIT Learning Systems.
Rapid Round Up
a. Planet Spark:
Edtech platform PlanetSpark raised $17 million in an extended Series B round led by Prime Venture Partners. The funding, including Rs 30 crore in debt, marks a significant step for the Gurugram-based company after a 26-month gap. The round also saw participation from InnoVen Capital, Alteria Capital, myPat, GGT3 Ventures, Ashish Gupta, IAN Investors, and co-founders Maneesh Dhooper and Kunal Malik. PlanetSpark issued CCPS and equity shares totaling Rs 91.8 crore or $11 million and 5,000 NCDs to raise Rs 50 crore or $6 million in debt. Prime Venture Partners led the equity round with Rs 49.7 crore, followed by InnoVen Capital and Alteria Capital.
b. Avanse:
Avanse has secured INR 1,000 Cr ($120 Mn) in primary capital led by Mubadala Investment Company, with participation from Avendus PE Investment Advisors Private Limited. The funding will bolster Avanse’s position in education financing, enhancing customer experiences and driving profitable growth. Founded in 2012, Avanse offers education financing for students and institutions in India, covering higher education abroad and in India, as well as skill enhancement loans. As of December 2023, its asset under management (AUM) stood at approximately INR 12,147 Cr.
c. Aviotron Aerospace:
Noida-based edtech startup Aviotron Aerospace has raised $600K in a Pre-Series A round from Enrission India Capital, valuing the startup at INR 70 Cr post-money. Founded in 2019, Aviotron focuses on experiential learning for students up to class 12 and plans to use the funds to expand its presence across India. The B2B startup has already partnered with 65 schools in 15 states, serving around 20,000 students, with a goal to reach schools in 28 states by year-end. Previously, Aviotron raised INR 2 Cr in seed funding from undisclosed angel investors in 2022 at a valuation of INR 12 Cr.
d. Coach Up IAS:
Edtech startup Toprankers has acquired the judiciary arm of Lucknow-based Coach Up IAS to enhance its offerings for judiciary aspirants. The financial terms were not disclosed. Coach Up IAS is now renamed Judiciary Gold by Toprankers. The acquisition aligns with Toprankers’ vision of providing quality education to judiciary aspirants nationwide. With enhanced resources and faculty expertise, the institute aims to empower students in the judiciary sector. The newly acquired centre in UP’s Aliganj can accommodate over 100 students. This acquisition adds to Toprankers’ recent acquisitions, including Chinar Law Institute, The Lex Guru, and Pro Bano.
Gems Modern Academy, Kerala completed infrastructure sale and leaseback transaction of around $21 Mn with a Mega fund in Middle East. The funds will be utilised by the school to build additional infrastructure to meet the growing enrollments, add new curriculum and further growth.Wonderschool, a childcare startup, has acquired EarlyDay, an early childhood educator marketplace. The terms of the deal were undisclosed, but EarlyDay’s CEOs described it as “opportunistic.” Wondershool’s CEO declined to share details of the deal’s structure, but implied that it was executed for a non-trivial sum.Modal, a leading skills development platform for data and analytics professionals, today announced a $25 million Series A. The round is led by Left Lane Capital and Ensemble VC with participation from leading investment firms Signalfire and Learn Capital.Abre, closed Series A investment round led by PeakSpan Capital, with follow-on participation from JumpStart Ventures, JobsOhio Growth Capital Fund, and Golden Angels Investors. The $24 million in funding will support Abre in its mission to open learning communities by connecting what matters. Abre improves student outcomes by transforming the way all stakeholders in and out of schools make comprehensive data-informed decisions.
