Executive education startup Eruditus became the 23rd startup of 2021 to attain the coveted unicorn milestone after scoring a mammoth $650 million round led by SoftBank and Accel partners at a valuation of $3.2 billion in August last year.
Eruditus is the third-largest edtech company after Byju’s and Unacademy in terms of value and its valuation has come on the back of over 70% increase in its operating income in the fiscal ending June 2021.
The company has filed its annual statements for FY21 (July 2020- June 2021) in Singapore and Fintrackr has analysed the numbers to understand the financial performance of the company during the fiscal preceding its unicorn round.
The edtech company controls eight subsidiaries across six countries and booked a consolidated operating revenue of $131.2 million [Rs 960.38 crore], registering a 71% jump over FY20 revenue of $76.8 million.
Eruditus offers executive management programs, both classrooms and online in partnership with over 50 universities worldwide. The company also offers workforce development programs via its online platform Emeritus and claims to have educated more than 250,000 individuals across 80 countries.
The Mumbai-based startup entered the K-12 STEM education segment after acquiring Silicon valley-based InternalDrive Inc (iD Tech) toward the end of FY21 (May 2021). The total consideration was set at $244.12 million divided into $110 million upfront cash, $91.7 million deferred consideration and $42.42 million earnout based contingent consideration.
For reference, iD Tech generated revenue of $18.02 million at a loss of $11.11 million during FY21.
The United States is the company’s largest geographical market in terms of revenues, accounting for around 38% of its annual revenues. Its US collections grew by 77.6% to $49.73 million during FY21 as compared to $28 million in FY20.
Asia and Asia pacific are Eruditus’s second-largest market, making up for 29.5% of revenue during the last fiscal. The company’s revenue from this market has registered the highest growth during FY21 with Asian collections surging over 4.2X to $38.8 million during FY21 from only $9.22 million collected in FY20.
The edtech company’s revenues from Europe have also increased by 96.2% YoY to $20.8 million while Latin America brought in $19.84 million – registering 94.5% growth during FY21.
The Eruditus group employs more than 1,400 employees globally and employee benefits payment is the single largest cost borne by the company, accounting for 62.5% of its annual expenditure. These staff costs ballooned 9.4X to $248.51 million during FY21 from only $26.3 million paid out in FY20.
The primary reason for this mammoth increase is due to the accrual of Stock Appreciation Rights(SARs) Payments to its employees after the company was valued at over $3 billion in its unicorn round. SAR accruals of nearly $214 million made up around 86.1% of total staff costs during FY21 and were yet to be paid out as on the balance sheet date.
Expectedly, advertisement and marketing are Eruditus’s second-largest cost centre, accounting for around 17% of its annual costs. Such expenses surged by over 81.4% to $67.1 million during FY21 from $37 million spent in FY20.
The Accel-backed company works with its more than 50 university partners including MIT, Columbia, Harvard, Cambridge, INSEAD among others to facilitate its executive training courses. It pays program fees to its partner universities which account for 13.8% of its annual costs.
Such payments grew by over 44% to nearly $55 million during FY21 from $38.1 million paid out in FY20.
Further, Eruditus’s technology expenses surged 72% YoY to $5.5 million and consultancy fees payments also grew by around 71.4% YoY to $6 million during FY21.
Bank charges of $4.6 million pushed the company’s total expenditure to $397.4 million during FY21, growing 3.4X from $117.1 million spent in total in FY20. On a unit level, Eruditus spent $3.03 to earn a single dollar of revenue during FY21 as compared to $1.52 spent to earn the same in FY20.
On account of SAR expenses of nearly $214 million, Eruditus’s annual losses have ballooned 5.7X to $264.2 million [Rs 1933.94 crore] during FY21 from $39.2 million lost during FY20. If we leave out the extraordinary SAR expenses, losses would stand around $50.2 million for FY21.
EBITDA margins have worsened to -196.68% during FY21 and the company’s balance sheet sported accumulated losses of $351.7 million as of 30 June 2021.
For Eruditus, it must be gratifying to have the US lead all markets in terms of contribution, making the case both for the quality and breadth of courses it offers. Even as Asia and the Asia Pacific region has strong momentum to overtake the US soon.
The share of payments for the partner institutions at under 14% also points to the value add it does, instead of the perception sometimes that the courses are just a quick fix to buttress CV’s with Ivy League names. The firm serves a real need for early and mid-career professionals with its courses and clearly seems to have cracked the global market here. The next three years should be defined from a growth perspective, as there seem to be few limits in terms of market size and the dry powder the firm holds in terms of funds.