Education Markets and Deals Roundup — 13th Edition
In July, we witnessed notable public market activities including 2U’s financial restructuring through Chapter 11 bankruptcy, Chegg’s major restructure amid its financial challenges, and Instructure Holdings’ agreement to a $4.8 billion acquisition by KKR and Dragoneer.
In the private sector, we saw continued investor interest in innovative edtech solutions, with Byte XL securing $5.9 million in Series A funding and EMoMee raising $1 million in a pre-seed round.
While Neuberger Berman is in talks to buy a minority stake in Nord Anglia valuing the company at $15 Billion, PhysicsWallah is set to raise $150 million from Lightspeed at $2 Billion valuation.
B2C Education Companies
Rapid Round Up:
2U: Company has initiated a financial restructuring to strengthen its balance sheet. The company has secured a Restructuring Support Agreement (RSA) with major lenders to obtain $110 million in new capital, reduce its debt by over 50% to $459 million, and extend loan maturities by more than two years. To execute this, 2U and its subsidiaries have filed for “prepackaged” Chapter 11 bankruptcy in New York, aiming to complete the process by September. During this period, 2U expects to secure $64 million in financing to maintain operations without disrupting services. Following the restructuring, 2U will emerge as a private company supported by existing lenders, including Mudrick Capital and Greenvale Capital. CEO Paul Lalljie and Strategic Advisor Brian Napack stressed that this move will allow 2U to continue its mission of providing high-quality education and will not affect current programs or services.Chegg: In Q2 2024, Chegg completed a major restructure and introduced new features aimed at enhancing student support, yet faced financial challenges. Total net revenues reached $163.1 million, marking an 11% decline year-over-year, with subscription services revenues also falling by 11% to $146.8 million. The company reported a gross margin of 72% (75% on a non-GAAP basis) and a substantial net loss of $616.9 million, though non-GAAP net income was $26.5 million. Adjusted EBITDA was $44.1 million, and the number of subscription services subscribers dropped 9% to 4.4 million. Looking ahead to Q3 2024, Chegg anticipates total net revenues between $133 million and $135 million, subscription services revenues between $116 million and $118 million, a gross margin of 67%-68%, and adjusted EBITDA ranging from $19 million to $21 million.New Oriental Education: Company has increased its share repurchase program from $400 million to $700 million. This program, initially set to run until May 31, 2023, has been extended through May 31, 2025. The company has already repurchased approximately $330.3 million worth of its shares. Repurchases will continue through various methods depending on market conditions and regulatory requirements.Coursera: For Q2 2024, Coursera reported total revenue of $170.3 million, an 11% increase from the previous year, and a gross profit of $90.2 million. Non-GAAP net income reached $13.8 million, improving from a loss the previous year. Key business segments saw growth, with Consumer revenue up 12%, Enterprise revenue up 8%, and Degrees revenue up 14%. They completed a $95 million share repurchase program and provided a financial outlook for Q3 and full year 2024, forecasting revenue of $171–175 million for Q3 and $695–705 million for the full year, with Adjusted EBITDA margins around 4%.Instructure Holdings: Company has agreed to be acquired by KKR and Dragoneer Investment Group for $23.60 per share in an all-cash deal valued at approximately $4.8 billion. This purchase price represents a 16% premium over the company’s share price. KKR will buy all outstanding shares, including those held by current majority owner Thoma Bravo, which took Instructure public in 2021.
Instructure’s management team, led by CEO Steve Daly, will continue in their roles, and KKR will support the company in enhancing its technology and innovation, particularly for its Canvas and Parchment products.
The deal, approved by Instructure’s Board of Directors, is expected to close later this year pending regulatory approvals. After the transaction, Instructure will become privately held and its stock will be delisted from the New York Stock Exchange.Powerschool: Company is expanding into the Middle East and Africa (MEA) with new partnerships in the UAE, Egypt, and Lebanon. The company is deploying its AI assistant, PowerBuddy, and unified communications platform, MyPowerHub, to enhance educational systems in the region. In the UAE, GEMS Al Khaleej International School and Maplewood Canadian International School have adopted PowerSchool’s Student Information System (SIS), with Maplewood also implementing PowerBuddy and Schoology Learning. Salahaldin International School in Egypt and Al Bayan School in Lebanon are also adopting PowerSchool’s solutions to modernize their systems. PowerSchool’s shares have increased 14.8% over the past three months, driven by strong demand and advancements in its AI technology.
Rapid Round Up:
Navneet Education: Navneet Education’s stock rose 3.15% to ₹167 following the board’s approval of a ₹100 crore buyback plan at ₹200 per share, a 23.53% premium over the previous closing price of ₹161.90. The buyback will include up to 50 lakh shares, representing 7.82% and 7.68% of the company’s paid-up equity and free reserves, respectively, as of March 31, 2024. The record date for eligibility is August 13, 2024. Despite a 14.1% increase in net sales to ₹791.45 crore in Q1 FY24, Navneet Education’s consolidated net profit declined 5.8% to ₹144.16 crore.Veranda Learning: In Q1FY25,Company’s EBITDA jumped to ₹27.61 crores from ₹5.64 crores, with an adjusted EBITDA of ₹28.83 crores after accounting for a ₹1.22 crores ESOP expense. Deferred revenue stood at ₹98.70 crores, and cash collections exceeded ₹150 crores. The company trained 113,262 students during the quarter. Finance costs totaled ₹29.92 crores, including ₹9.01 crores in cash interest, and depreciation included ₹13.45 crores for amortizing intangible assets.
Deals Round Up:
Byte XL, an edtech platform specializing in engineering education, has secured $5.9 million in Series A funding led by Kalaari Capital and the Michael and Susan Dell Foundation. The funds will support team expansion, product development, new digital tools, and broader college outreach. Founded by Karun Tadepalli, byteXL integrates curriculum and practical learning with industry needs. The platform recently teamed up with Microsoft to launch a B.Tech CSE course in AI and Machine Learning.EMoMee, an edutainment startup focused on emotional intelligence, has closed its pre-seed round with $1 million from Whiteboard Capital, Gruhas Consumer Collective Fund, and DeVC. Founded by Pooja Jauhari, Varun Duggirala, and Suraksha Subramaniam, the platform aims to enhance emotional intelligence in children aged 2 to 7 through a blend of skill-based play, stories, and educational content.
Significant Deals in the works-
Neuberger Berman is nearing an agreement to buy a minority stake in Nord Anglia Education, in a deal that values the international-school operator at $15bn, including debt. Neuberger is in talks to buy the position from Nord Anglia’s existing shareholders including EQT Group, a big European buyout firm — which will retain control of the business — and CPP Investments | Investissements RPC. The deal, if completed, could be announced in the coming weeks. The Neuberger deal allows EQT and other Nord Anglia investors to realize a portion of their investment while betting on the business’s growth by retaining control. This type of deal structure is often used by buyout firms for their most favored investments.PhysicsWallah (PW) is poised to raise $150 million in a new funding round, with both new and existing investors participating. The funding will boost the company’s valuation to approximately $2.8 billion, a significant increase from $1.1 billion in its last round in 2022. Despite a general downturn in edtech funding, PW’s strong market position and loyalty have attracted substantial investment. The company, led by Alakh Pandey, has expanded from online coaching to a full-fledged education firm. Recent financials show a tripling of revenue to Rs 779 crore in FY23, although profits have declined sharply. The new funds will support further growth and scaling amid a challenging edtech landscape.KKR has decided to drop plans to sell its school chain, Lighthouse Learning (formerly Eurokids International), due to promising prospects in the education sector despite challenges faced by many ed-tech unicorns. Initially, KKR had sought buyers from West Asia and Europe aiming for a valuation of $1–1.2 billion. However, KKR has now opted to remain invested and is considering a future public listing.
