Technology

Visionary Education Technology seeks U.S. IPO for growth plans

Teenage girl attending online class from home.

Imgorthand/E+ via Getty Images

A Quick Overview of Visionary Education Technology Holdings Group

Visionary Education Technology Holdings Group Inc. (VEDU) has applied for funding in an undisclosed amount in an IPO of its common stock, according to an F-1 registration statement.

The company offers a range of online and in-person educational services in Canada.

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

I will give a final opinion when we have more information on the IPO.

Company

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

Management is led by President and CEO Dr. Thomas Traves, who has been with the company since 2021 and previously served as President of Brock University and Dalhousie University.

The company’s main offerings include:

Visionary has recorded an investment at fair market value 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 company has pursued partnerships with other educational networks related to national and international students.

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

General and administrative expenses as a percentage of total revenue have tended to decline as revenue has increased, as shown in the figures below:

General Administration

Expenses vs income

Period

Percentage

Six months. Completed September 30, 2021

4.4%

FY March 31, 2021

1.7%

FY March 31, 2020

8.2%

(Source)

The general and administrative efficiency rate, defined as the number of dollars of additional new revenue generated by each dollar of general and administrative expenses, fell to a still impressive number during the last reporting period, as shown in the table below :

General Administration

Efficiency rate

Period

Several

Six months. Completed September 30, 2021

8.6

FY March 31, 2021

51.4

(Source)

Market and competition for visionaries

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

Employment increased by 7.1% per year during the period and the number of companies increased by 4.8%, reaching 35,419 companies in 2020.

Additionally, salaries in 2020 totaled $6.6 billion compared to $4.2 billion in 2015, making it a very important sector of the Canadian economy.

Major competitors 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:

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

Total revenue

Period

Total revenue

% deviation from before

Six months. Completed September 30, 2021

$3,238,624

60.1%

FY March 31, 2021

$7,725,221

728.3%

FY March 31, 2020

$932,707

Gross profit (loss)

Period

Gross profit (loss)

% deviation from before

Six months. Completed September 30, 2021

$1,753,060

60.6%

FY March 31, 2021

$4,265,774

640.1%

FY March 31, 2020

$576,384

Gross margin

Period

Gross margin

Six months. Completed September 30, 2021

54.13%

FY March 31, 2021

55.22%

FY March 31, 2020

61.80%

Operating profit (loss)

Period

Operating profit (loss)

Operating margin

Six months. Completed September 30, 2021

$875,024

27.0%

FY March 31, 2021

$3,728,786

48.3%

FY March 31, 2020

$381,207

40.9%

Net profit (net loss)

Period

Net profit (net loss)

The net margin

Six months. Completed September 30, 2021

$638,348

19.7%

FY March 31, 2021

$2,913,646

90.0%

FY March 31, 2020

$241,738

7.5%

Operating cash flow

Period

Operating cash flow

Six months. Completed September 30, 2021

$1,784,309

FY March 31, 2021

$4,439,717

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

Visionary Education IPO Details

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

No existing shareholders have expressed interest in purchasing 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 training level, including purchases of training equipment, renovations of facilities, promotions and recruitment of professional trainers.

on global market development and distribution channel establishments.

for staff development.

for working capital.

(Source)

The presentation by management of the company’s roadshow is not available.

With respect to ongoing legal proceedings, management indicates that the Company is not currently party to any legal proceedings that would have a material adverse effect on its financial condition or business.

The IPO’s sole listed bookrunner is Joseph Stone Capital.

Commentary on Visionary’s IPO

VEDU is seeking investment in the US capital market to further its expansion plans, including internationally.

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

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

General and administrative expenses as a percentage of total revenue have tended to decline as revenue has increased; its general and administrative efficiency rate fell to 8.6x during the last reporting period.

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

The education market in Canada is large and is expected to grow at a moderate pace over the next few years.

Joseph Stone Capital is the sole underwriter and the sole IPO of the company conducted by the company in the last 12 months has generated a negative return (81.4%) since its IPO. This is an underperformance for all major underwriters over the period.

The main 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 details about the IPO, I will give a final opinion.

Expected IPO pricing date: to be announced.