Visionary Education Technology Seeks U.S. IPO For Growth Plans

Summary

  • Visionary Education Technology Holdings Group has filed to raise capital in a U.S. IPO.
  • The Canadian firm provides online and in-person education to a range of student types, sourced from domestic and international sources.
  • VEDU is a tiny firm and was negatively impacted by the pandemic.
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Teenage girl attending online class from home.

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A Quick Take On Visionary Education Technology Holdings Group

Visionary Education Technology Holdings Group Inc. (NASDAQ:VEDU) has filed to raise an undisclosed amount in an IPO of its common shares, according to an F-1 registration statement.

The firm provides a range of online and in-person educational services in Canada.

VEDU is a tiny company in a market with uncertain future characteristics due to the ongoing pandemic.

I’ll provide a final opinion when we learn more information about the IPO.

Company

Markham, Canada-based Visionary was founded to provide educational services to domestic and international students studying in Canada.

Management is headed by Chairman and CEO Dr. Thomas Traves, who has been with the firm since 2021 and was previously president of Brock University and Dalhousie University.

The company’s primary offerings include:

  • 9-12 grades

  • College

  • Vocational programs

  • Master's degree programs

  • Visa and immigration services

Visionary has booked fair market value investment of 666,000 as of September 30, 2021 from investors including founder Fan Zhou, Ying Wang, Yamin Han and Qiaosha He.

Visionary - Customer Acquisition

The firm has pursued partnerships with other educational networks connected to domestic and international students.

Management plans to grow through more partnerships, enhancing student learning success through advanced student management techniques and further develop its international marketing capacities.

General & Administrative expenses as a percentage of total revenue have trended lower as revenues have increased, as the figures below indicate:

General & Administrative

Expenses vs. Revenue

Period

Percentage

Six Mos. Ended Sept. 30, 2021

4.4%

FYE March 31, 2021

1.7%

FYE March 31, 2020

8.2%

(Source)

The General & Administrative efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of General & Administrative spend, fell to a still impressive number in the most recent reporting period, as shown in the table below:

General & Administrative

Efficiency Rate

Period

Multiple

Six Mos. Ended Sept. 30, 2021

8.6

FYE March 31, 2021

51.4

(Source)

Visionary’s Market & Competition

According to a 2021 market research report by IBISWorld, the Canadian educational services sector has grown by an average annual rate of 5.2% from 2015 to 2020.

Employment has grown by 7.1% per year during the period and the number of businesses has grown by 4.8%, to 35,419 businesses in 2020.

Also, wages in 2020 totaled $6.6 billion versus $4.2 billion in 2015, making a very large sector in the Canadian economy.

Major competitive or other industry participants include:

  • Private schools

  • Public schools

  • Online education

Visionary Education Technology Holdings Group Inc. Financial Performance

The company’s recent financial results can be summarized as follows:

  • Growing topline revenue

  • Increasing gross profit but lower gross margin

  • Reduced operating profit

  • Uneven cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

Six Mos. Ended Sept. 30, 2021

$ 3,238,624

60.1%

FYE March 31, 2021

$ 7,725,221

728.3%

FYE March 31, 2020

$ 932,707

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

Six Mos. Ended Sept. 30, 2021

$ 1,753,060

60.6%

FYE March 31, 2021

$ 4,265,774

640.1%

FYE March 31, 2020

$ 576,384

Gross Margin

Period

Gross Margin

Six Mos. Ended Sept. 30, 2021

54.13%

FYE March 31, 2021

55.22%

FYE March 31, 2020

61.80%

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

Six Mos. Ended Sept. 30, 2021

$ 875,024

27.0%

FYE March 31, 2021

$ 3,728,786

48.3%

FYE March 31, 2020

$ 381,207

40.9%

Net Income (Loss)

Period

Net Income (Loss)

Net Margin

Six Mos. Ended Sept. 30, 2021

$ 638,348

19.7%

FYE March 31, 2021

$ 2,913,646

90.0%

FYE March 31, 2020

$ 241,738

7.5%

Cash Flow From Operations

Period

Cash Flow From Operations

Six Mos. Ended Sept. 30, 2021

$ 1,784,309

FYE March 31, 2021

$ 4,439,717

FYE March 31, 2020

$ 273,631

(Glossary Of Terms)

(Source)

As of September 30, 2021, Visionary had $255,083 in cash and $24.6 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2021, was negative ($13 million).

Visionary Education’s IPO Details

Visionary intends to raise an undisclosed amount in gross proceeds from an IPO of its common shares.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

on PPP projects.

on MTM course development and program partnerships with other universities

at the vocational education level, including training equipment purchases, renovations of facilities, and promotions and professional trainer recruitments.

on global market development and distribution channel establishments.

for staff development.

for working capital.

(Source)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not currently a party to any legal proceedings that would have a material adverse effect on its financial condition or operations.

The sole listed bookrunner of the IPO is Joseph Stone Capital.

Commentary About Visionary’s IPO

VEDU is seeking U.S. capital market investment to continue its expansion plans, including internationally.

The company’s financials have generated increasing topline revenue from a small base, growing gross profit but lower gross margin, less operating profit and variable cash flow from operations.

Free cash flow for the twelve months ended September 30, 2021, was negative ($13 million).

General & Administrative expenses as a percentage of total revenue have trended lower as revenue has increased; its General & Administrative efficiency rate fell to 8.6x in the most recent reporting period.

The firm currently plans to pay no dividend on its shares and anticipates that it will use any future earnings to reinvest back into the company’s growth initiatives.

The market opportunity for education in Canada is large and expected to grow at a moderate rate of growth in the coming years.

Joseph Stone Capital is the only underwriter and the firm’s sole IPO led by the firm over the last 12-month period has generated a return of negative (81.4%) since its IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the continued negative impact of the COVID-19 pandemic on its in-person operations.

When we learn more IPO details, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

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This article was written by

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