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Education Markets and Deals Roundup — 10th Edition

Education Markets and Deals Roundup — 10th Edition

In April, the M&A activity in private education markets continue to remain robust, with headline transactions such as Navneet Learning selling its stake in K12 Techno Services valuing the company at 525Mn$ and Veranda Learning’s acquisition of Logic Management Training Institute getting announced while the news of Bain Capital looking to acquire PowerSchool for $6 billion also broke out.

With public education companies announcing their quarterly/ annual results we witnessed a volatile movement in their prices as stocks like Perdoceo surged around 35% while Chegg plummeted 34% in the last month. Further, both Chegg and Skillsoft underwent leadership changes, announcing the appointment of their new CEOs

Global

B2C Companies

Rapid Round Up

a. Perdoceo Education: The company in Q1FY24, saw a mixed performance with operating income increasing by 6.8% to $46.3 million while adjusted operating income decreased by 6.8% to $49.5 million. Earnings per diluted share rose to $0.59 compared to $0.50, and adjusted earnings per diluted share increased to $0.60 compared to $0.58. However, revenue experienced a significant decline of 14.0% to $168.3 million, with both academic institutions reporting notable decreases. Despite this, total student enrollments showed a positive trend, increasing by 9.0% to 41,300. The company ended the quarter with a strong cash position of $642.4 million. CEO attributed the better-than-expected results to improved student retention and engagement, signaling effective investments in student resources and technology.

b. Chegg: Company announced Nathan Schultz as the incoming President and CEO. Q1 2024 revenue declined by 7% year-over-year to $174 million, with 4.7 million subscribers. The company aims for Q2 2024 revenue between $159 million and $161 million, emphasizing AI-driven growth. Chegg reported $25.3 million in free cash flow and $612 million in cash and investments. They completed a $150 million share repurchase, reducing shares by 15% year-over-year. Despite challenges, the company remains bullish, focusing on AI-led growth and efficiency to meet evolving learner needs. Q1 total net revenues were $174.4 million, down 7% YoY, with subscription services revenues at $154.1 million, down 9% YoY. Gross margin was 73%, non-GAAP gross margin at 75%, and adjusted EBITDA at $46.7 million.

c. Adtalem Global Education: In the third quarter, the company showcased notable growth across various metrics. Revenue surged by 11.8% year-over-year to reach $412.7 million, accompanied by a 7.8% increase in total student enrollment, totaling 85,809 students. The company posted a GAAP net income of $36.8 million and an adjusted EBITDA of $107.1 million, marking a robust 24.6% increase year-over-year. As part of Capital allocation activity company announced a $91 million share repurchase. Company’s net leverage stood at 1.3x as of March 31, 2024. Looking ahead, fiscal year 2024 guidance indicates revenue expectations ranging from $1,560 million to $1,580 million, alongside adjusted earnings per share projections between $4.80 to $5.00. Adjusted EBITDA also showed significant growth, reaching $107.1 million with an adjusted EBITDA margin of 25.9%.

2. B2B Companies

Rapid Round Up

a. Powerschool: Bain Capital is currently in discussions to acquire PowerSchool, in a deal that could value the company at around $6 billion, including debt. This potential acquisition has caused PowerSchool’s shares to surge by as much as 27%. A deal for PowerSchool would come at a time when private equity-led buyouts are showing signs of a pickup, following a slowdown last year due to high interest rates that made debt financing for leveraged buyouts more expensive.

b. Skillsoft Corp: Company announced the appointment of Ronald Hovsepian as Executive Chair and principal executive officer, effective April 16, 2024, following Jeffrey R. Tarr’s retirement as CEO and Board member. Company posted its annual results as Content & Platform segment bookings grew 2% to $418 million, while total bookings declined 2% to $596 million, with a 10% decline in Instructor-Led Training segment bookings. Content & Platform segment GAAP revenue grew 5% to $405 million, offsetting a 13% decline in Instructor-Led Training segment GAAP revenue to $148 million. GAAP net loss improved to $349 million from $725 million in the prior year, with a favorable net loss per share. Pro forma Adjusted Net Loss decreased to $107 million from $118 million in the prior year, with a favorable pro forma Adjusted Net Loss per share. Pro forma Adjusted EBITDA from continuing operations rose to $105 million, reflecting a margin of 19% of pro forma revenue. Free Cash Flow improved to negative $15 million from negative $36 million in the prior year.

c. Lincoln Educational Services: Company has extended its share repurchase program until May 24, 2025, with an increased authorization of $40 million from the initial $30 million. So far, approximately 1.7 million shares have been repurchased, leaving $29.7 million available for future buybacks. The company plans to finance these repurchases using available cash and operational funds, maintaining flexibility in program adjustments. CEO emphasized the commitment to balance sheet optimization and shareholder value enhancement.

3. Indian Companies

Rapid Round Up

a. Navneet Education Limited: Company has finalized a deal with Venturi Partners, selling a 5.12% stake in K12 Techno Services Private Ltd for ₹225.18 crore. This agreement was reached on May 8, 2024, as stated in a stock exchange filing. Despite the partial divestment, Navneet Learning LLP will retain a significant 14.35% stake in K12 Techno Services. Navneet Education maintains a 93.0% stake in Navneet Learning LLP. Managing Director Gnanesh (Sunil) D. Gala highlighted the strategic value creation aspect of the divestment, aligning with the original investment thesis in K12 Techno. Navneet Education’s stock rose by 1.62% following the announcement.

b. Veranda Learning: Company has announced its subsidiary’s acquisition of Logic Management Training Institute’s business operations, effective April 1, 2024. The consideration for the transfer will be structured in tranches, comprising cash and shares, at the discretion of Veranda. Payments will occur annually from FY25 to FY29, based on 50% of the operational EBITDA of the transferor company. The final tranche in FY30 will be equivalent to 5 times the operational EBITDA of FY29. The total payout, subject to adjustments, ranges from a floor of ₹46 crore to a maximum of ₹75 crore, contingent upon conditions outlined in the business transfer agreement.

Rapid Round Up

a. TWOSS: Company has secured its first seed funding round, valuing the company at ₹20 million. TWOSS serves as a channel sales partner for various EdTech platforms, earning commissions by facilitating product sales. The funding round highlights confidence in TWOSS’s mission to address high client acquisition costs in the EdTech industry and rebuild trust among Indian consumers. TWOSS aims to provide personalized guidance to 1 billion students over the next five years. With a current team of 50, the funding will fuel growth, focusing on team expansion, tool development, and partnership enhancement to deepen TWOSS’s impact in India’s dynamic education technology landscape.

b. Gyan Live: Classplus has strategically invested in Gyan Live, a platform focused on State-level government exam preparation in Gujarat. The undisclosed investment aims to expand Gyan Live’s offerings to central government and school exams in regional languages, leveraging Classplus’ technology to enhance the learning experience and reach. Gyan Live, founded in 2019, provides education through its app and YouTube channels, offering live classes, recorded lectures, study materials, and test series for exam preparation. Both companies express enthusiasm for the partnership, aiming to broaden educational impact and accessibility across India.

Rapid Round Up

a. ProGrad: GenSpark has acquired ProGrad, a Bangalore-based tech talent solutions firm, as part of its strategic expansion in India and the APAC markets. ProGrad will now operate as GenSpark India, with Ram Prakash G leading the business, and co-founders Siddharth P and Akarsh Agrawal joining GenSpark. Vishak Mallya, Head of GenSpark, expressed excitement about integrating ProGrad’s innovative tech education approach to develop a skilled workforce. The acquisition strengthens GenSpark’s presence in India and capitalizes on the booming tech talent market, estimated to reach over $200 billion by 2025 by NASSCOM. Ram Prakash G highlighted the opportunity to scale operations, expand programs, and make a significant impact on the Indian tech talent ecosystem.

b. Macmillan Learning India: Happiest Minds Technologies has executed a share purchase agreement to acquire 100% equity interest in Macmillan Learning India for a consideration of Rs 4.5 crore, subject to the terms and conditions outlined in the agreement. Upon closing the transaction, Macmillan Learning India will become a wholly owned subsidiary of Happiest Minds Technologies. The acquisition is anticipated to be finalized by April 30, 2024.

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