Revenue rose to $400 million (around Rs 3,280 crore as per current exchange rates) in 2022-23 from $245 million the previous year, said Ashwin Damera. Eruditus follows a July-June fiscal year.
Damera did not disclose the operating profit — earnings before interest, tax, depreciation and amortisation (Ebitda) — the company posted for the April-June quarter, but said it is targeting Ebitda of $40 million before one-off items in fiscal 2024.
Cutting down on cost, customer acquisition cost as well as employee cost by moving several roles from the US to India, was the primary reason for turning operationally profitable in the past quarter, he said.
Eruditus’ latest financials come at a time when higher learning and upskilling segments of the edtech sector are faring better than their K-12 counterparts. Meanwhile, several other large startups are also aiming to reduce cost and are advancing their profitability targets and a fund crunch.
“Two levers have moved significantly for us … our customer acquisition cost (CAC) has been higher in the earlier years. Maybe we could have grown a little higher, but we’ve traded some amount of CAC to optimise acquisition costs. In FY22, our CAC was around 35-37% and in FY23, we were able to bring it down to below 30%,” Damera said.
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“The other thing is that we’ve done very little incremental hiring … so if the business has grown by 63% year on year and you don’t hire anybody on a like-to-like basis, your indirect costs will get a lot of operating leverage,” he said.The SoftBank and Accel-backed firm is looking to raise $125-150 million through a sale of primary and secondary shares, as reported last week. As part of this, it just began the process for a secondary share sale of $60-80 million by existing shares, a person aware of the discussions said.
Damera declined to comment when asked about the secondary share sale.
The company was last valued at $3.2 billion, after it closed a $650 million financing round that included a secondary share sale of about $220 million.
Eruditus has partnerships with top global universities such as Harvard, Columbia and Massachusetts Institute of Technology, as well as Indian management institutions including the Indian School of Business and Indian Institutes of Management.
Higher learning opportunities
Eruditus’ operations in India and Latin America grew faster in the past fiscal year compared with other markets such as the US and Europe, the CEO said.
The Indian market’s share in the company’s total enrolments rose to 25% in FY23 from 20% the year before. The US contributes 40% to the enrolments for the company and is the largest market for the firm.
“Almost 75% of our business comes from outside India … we benefit from that because we have dollar revenues but most of our people are from India, so a part of our costs is in Indian rupees. That is the operating leverage we have, which continues to improve,” he said.
Peer performance
For the fiscal year ended June 30, 2022, Eruditus’ revenue had increased 87% to $245 million. Its net loss for the year, adjusted for exceptional items such as provisions towards employee stock compensation, goodwill impairment and unrecognised revenue, was around $66 million.
In comparison, the company’s key competitor, Temasek-backed Upgrad, reported around $92 million in revenue for its fiscal year ended March 31, 2022, almost three times more than the previous year. Upgrad’s total expenses had more than doubled. It has yet to report its FY23 results.
Eruditus also competes with Byju’s-owned Great Learning and Blackstone-owned Simplilearn.
For Eruditus, the enterprise business grew faster than its consumer business, and Damera indicated that the company will focus more on enterprise going ahead, in line with its chase for profitability.
According to him, the company continues to evaluate acquisition opportunities, especially in the enterprise segment where companies sponsor courses.
“In the enterprise segment, you have the same 55-60% gross margin, but you don’t have the 28% CAC (customer acquisition cost) … our India and Asia-Pacific enterprise business is at 30% Ebitda already. To grow that segment in the US and Europe is a focus for us,” he said.
