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Education Markets and Deals Roundup — 4th Edition

Education Markets and Deals Roundup — 4th Edition

Over the past couple of months, we have seen promising signs of recovery in the public markets, as the majority of public education companies have shown upward trends. Furthermore, as earnings reports are released, performance of education companies are exceeding market expectations. Companies continue to strike strategic partnerships with prestigious institutions to introduce new offerings and expand their presence in various geographies. Notably, the sector is placing a strong emphasis on artificial intelligence to distinguish their products and acquire customers, having their focus on innovation and research.

However, the private market for education is still struggling to rebound, as funding remains scarce. Venture capitalists are cautiously testing the waters with small investments at the seed and pre-seed stages in promising education startups.

Public Markets

The global EV/EBITDA ratio for publicly traded companies has been on an upward trajectory in recent months increasing from 11.3 in July to 13.2 in October; likewise, Indian listed companies have seen a substantial increase, rising from 8.5 to 12.1 during the same period, highlighting the ongoing revival in the education sector.

B2C Companies

Rapid Round up

a) Chegg has approved a $200 million increase in its securities repurchase program, allowing it to buy back common stock and convertible notes. With approximately $89 million remaining from a previous $2 billion repurchase program, the timing and volume of repurchases will be determined by Chegg’s management. The program has no set expiration date and will be funded from existing cash and future cash flows.

b) Coursera reported standout Q3 results, surpassing market’s expectations. They reported strong revenue of $165.5 million, marking a 21.4% YoY growth and beating analyst estimates by 4.21%. Additionally, their earnings per share improved, with a loss of only $0.21 per share, better than the expected loss of $0.26 per share (a 19.6% beat).
Company is continuing to enhance its offerings through strategic partnerships with prestigious institutions like LBS, UNDP, Qatari University and Berkeley, to develop courses that provide customers with valuable skills and knowledge.

c) Stride is expanding its services to students in grades K-12, extending beyond its initial focus on middle and high school students. This allows Stride to address a more comprehensive spectrum of educational needs and potentially reach a larger user base.

d) New Oriental Education & Technology released its Q1 2024 financial report showing a healthy 47.7% increase in revenue, a substantial 163.0% growth in operating income compared to the previous year. Alongside the strong financial performance, the company is gradually expanding its footprint with the addition of new schools and learning centers. Furthermore, their share repurchase program is gaining traction among investors, which is contributing to the upward trend in their share price.

2. B2B Companies

Rapid Round up

a) PowerSchool acquired Neverskip, an ERP company in Chennai, to create a unified tech platform for Indian schools. This move expands company’s reach to over 900 schools, 1.2 million students, aiming to enhance operations and academic success. Company envisions impacting 250 million students with this move.
Powerschool made another acquisition of SchoolMessenger, a leading provider of K-12 communication solutions in North America. acquisition of SchoolMessenger represents PowerSchool’s commitment to empower educators, administrators, and families to ensure personalized education for every student journey. The acquisition supports the expansion of My PowerSchool, designed to be the most comprehensive education collaboration platform on the market.

b) Wiley’s CEO Brian Napack, resigned from his position with Matthew Kissner, former Group Executive and Board Chair, being appointed as the Interim CEO. The departure is part of a value creation plan, with Mr. Kissner set to lead Wiley through a transition year in Fiscal 2024, focusing on profitability and performance improvements expected in 2025 and 2026.

c) Skillsoft has launched Skillsoft CAISY™ (Conversation AI Simulator), an enterprise AI-powered skills trainer that uses AI to create a safe training environment for employees to practice workplace conversations and develop communication skills. This tool provides real-time feedback and recommends courses. Company also introduced offerings for building AI-related skills and ethical AI training, recognizing the importance of human skills in the age of generative AI. Aspire Journeys help learners understand generative AI principles, while Skill Benchmarks assess proficiency and provide personalized recommendations. Ethical AI courses address AI regulation and ethical considerations in the workplace.

3. Indian Education Companies

Rapid Round up

a) S Chand Publishing is launching educational initiatives to transform the learning experience for students in foundational and preparatory years. The programs are aligned with the objectives of the 2020 National Education Policy and the 2023 National Curriculum Framework. The first offering is the ‘Bob and Bini’ series, a set of textbooks designed for pre-primary learners, focusing on early education and development to build a strong academic foundation for children.

b) NIIT’s stock price, in September, surged by an impressive 56%. This remarkable recovery follows three consecutive months of losses, with a significant drop of nearly 79% in June, followed by modest declines in July and August. Although the stock showed a 44% gain over the past three months, it had experienced a stark decline of over 64% over a six-month period. The recent surge is attributed to the company’s demerger, expansion into new sectors, introduction of fresh business models, and optimistic growth prospects. The company’s focus on AI, revenue targets, and strategic investments in skills and services indicate its potential for future growth.

Private Markets

Recent Developments in Indian Education

India and the UAE have signed a MoU to strengthen cooperation in the field of education. This MoU aims to enhance student and faculty mobility, promote the mutual recognition of qualifications, and foster academic collaboration between educational institutions. Furthermore, it opens doors for companies and investors to explore strategic opportunities in the UAE.

The United States has initiated an educational program enabling Indian students to pursue a one-year professional master’s degree with a focus on industrial specialization at American universities. Around 20 American and over 15 Indian universities are already in discussion with each other about how to take advantage of the initiative, with the US State Department acting as a facilitator. This presents a significant opportunity, particularly for companies operating in the study abroad sector, as they can facilitate financing and admission consulting to students looking to pursue their Masters from the US.

Generative AI in Education —AI can now understand how each student learns best and tailor their learning experience accordingly. This means that AI can figure out what students are good at, where they might struggle, and how they prefer to learn. Additionally, traditional tests can sometimes be unfair or inconsistent. With AI, quizzes and assignments provide instant feedback, making it easier for students to see where they need help and improving their learning experience.

Equity Financing

The private education market continues to face challenges in its path to recovery, Venture capitalists are treading cautiously, with modest investments at the seed and pre-seed stages, particularly in education startups showing significant promise and potential.

Rapid Round up

a) Disprz’s series C round has been the highlight deal in the last couple of months, the funds raised in the round will be utilized for global market expansion and product development using new-age technologies like Generative AI in emerging markets such as India, & expanding to the US.

b) GradRight, specializing in education loans and financial planning for students pursuing higher education abroad, successfully raised Rs 50 crore in a Series A funding round led by IvyCap Ventures. This investment will support the expansion of GradRight’s team, technology platform, and product offerings, as well as broaden its outreach to more students and parents across India.

b) Unstop — A community engagement and hiring platform for students and graduates, has successfully secured a $5 million investment in a funding round featuring notable participants like Mynavi and Coursera. The startup plans to allocate the funding towards enhancing its technology, marketing, product, and sales functions to further support its growing community of approximately 6 million students.

Mergers and Acquisitions

With Majority of the past M&A activity being driven by the likes of BYJU’s, UpGrad, Unacademy who are facing funding crunch, M&A activity has slowed down. However, companies that are finding it difficult to scale but possess technological moats, present significant opportunities for synergistic partnerships, making them a compelling strategic investment.

Rapid Round up

Dataisgood — SkillArbitrage has acquired Dataisgood, a data science training company, in a $3 million partly stock, partly cash deal. With the acquisition of Dataisgood, SkillArbitrage will add courses on data science, data analysis and cybersecurity to its repository.