SoftBank-backed higher edtech startup Emeritus, formerly known as Eruditus, expects to turn profitable in FY24 (2023-24) on a bookings basis as the company sees strong growth in its revenue with working professionals increasingly opting for upskilling amid fears of recession.
The company, which last raised equity funding in August 2021 at a post-money valuation of $3.2 billion, will breakeven in the current quarter (January-March) and turn profitable on a bookings basis in the next quarter (April-June), co-founders Ashwin Damera and Chaitanya Kalipatnapu told Moneycontrol in an interview on the sidelines of the GSV Emeritus Summit. For the next full fiscal, Emeritus expects to be profitable on a booking basis, they added. Emeritus follows a July-June financial year.
Edtech companies like Emeritus, calculate revenue, typically in two ways--accrued and bookings. Bookings revenue or collection revenue is the total sales generated by the company during a fiscal year that also includes deferred revenue. Accrued revenue, on the other hand, excludes deferred revenue. Deferred revenue is the advance fees collected for services that will be delivered over a period of time.
“On an accrual basis, there’s typically a lag of one year between bookings and accrual revenue,” Damera said when asked when the company will be profitable on an accrual basis.
“Let’s say if the course is a six-month course, we count it as booking so we collect most of the fees upfront so that’s booking. But on an accrual basis, it's a six-month course and we are starting in June or the last month of our fiscal so we are going to take only one-sixth of the revenue, but costs are going to be 100 percent. 100 percent marketing, 100 percent course creation, and so that’s why there’s this lag,” he added.
Damera said that for Emeritus, accrued revenue has typically been 80-85 percent of the collection revenue. Damera and Kalipatnapu also expect their revenue to grow about 40 percent in 2022-23. Emeritus had a revenue of about $130 million in 2020-21, which grew almost 2.5x in 2021-22, the two co-founders said, adding that the company expects revenue to top $430 million in 2022-23.
Founded in 2010 by Kalipatnapu and Damera, Emeritus is a platform that provides executive-level programmes for working professionals. The company has raised a little more than $814 million in equity funding to date and counts SoftBank, Prosus, Sequoia, Chan Zuckerberg Initiative, GSV Ventures among others as its backers. In August 2021, the company raised its largest-ever round of $650 million at a valuation of more than $3.2 billion.
The majority of Emeritus' revenue comes from outside India, and the company has a legal entity registered in Singapore. India contributes about 20 percent to the company’s total revenue, Kalipatnapu said. Moreover, Kalipatnapu and Mohan Kannegal, CEO (chief executive officer) of India and APAC (Asia Pacific) Consumer business, said that India has been the company’s fastest-growing market in the recent past and it will continue to be for the next few quarters.
“In India over the next 24 months, I see a 4x growth. I say that because of the tailwinds and the demand in terms of the number of students who want to enroll. It is certainly the fastest-growing market for us within the company,” said Kannegal.
Kannegal’s comments on India being the fastest growing market for Emeritus come at a time when the higher edtech space in the country has witnessed continued momentum even after the pandemic has receded, unlike the K-12 (kindergarten to class 12) and test preparation platforms that saw Covid-induced pull back. Investors, too, have favoured the higher education space in the edtech segment. Naturally, competition in the higher edtech space has surged in the recent past.
“The higher secondary or professional learning market is about $2.7-2.9 trillion. Of that, the digital penetration is only five percent. Compared to other sectors, education is the most underpenetrated sector when it comes to technology and digital enablement.,” said Kalipatnapu.
“For us, the competition is someone who is a non-customer. Someone who has not experienced online. So it is not like a zero-sum game, where if I get five percent, others will lose five percent. For us, the goal is to reach one million learners. We already have served 300,000 learners. So while it is an audacious thing to say that we want to reach one million users, I think it's achievable,” he added.
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