News Update

Edtech Firm Eruditus Reports 87% YoY Growth in Revenue, But Sees Net Loss of $66 Million in 2022

• ByStartupStory     |    April 3, 2023

Eruditus, a higher-education edtech firm with backing from SoftBank, CPPIB, and Accel, experienced a significant 87% increase in consolidated revenue, reaching $245.26 million in the 12-month period ending in June 2022. However, its net loss, adjusted for exceptional items like Esop provisions, goodwill impairment, and unrecognized revenue, also grew to approximately $66 million during the same timeframe.

According to filings reviewed by ET, Eruditus, a Mumbai-based edtech unicorn, recorded a cash loss of $31 million in FY21. The company’s total net loss, including exceptional items, increased by 46% to $386.82 million in the same period. The filings also revealed that Eruditus’ net cash used in operating activities surged by over three times to $110.99 million in the year under review, compared to $30.11 million in the previous year.

Eruditus, an edtech company that collaborates with prominent universities such as Harvard, Columbia, and MIT, as well as Indian management institutions such as the Indian School of Business (ISB) and various Indian Institutes of Management (IIMs) for its higher learning courses, experienced almost a 2.5x revenue growth in its US business, driving overall revenue growth.

In FY22, Eruditus generated a total revenue of $245.26 million, with its US operations contributing nearly half of the amount at $119.61 million, followed by the Asia and Asia Pacific region with $54.18 million. The company provides services in several countries, including the US, UK, India, UAE, China, Mexico, and Singapore. Additionally, Eruditus paid $108.02 million as program fees to schools out of its total revenue during the same period.

Eruditus saw a significant increase in cash burn on marketing, technology, and consultancy expenses during the year 2021-22, spending $141.61 million as opposed to $67.09 million in the previous year. The company’s salary bill also surged over three-fold to $107.07 million in the same period, up from $32.42 million in the year-ended June 2021. However, Eruditus’ total employee benefit expense grew by only about 5% on a year-on-year basis, reaching $262.15 million.

A significant portion of Eruditus’ employee benefit expense in 2021-22 was attributed to stock appreciation rights (SARs), which decreased by 30% on a year-on-year basis but still accounted for almost 57% of the total employee benefit expense, amounting to $149.24 million. SARs, similar to employee stock options (ESOPs), are tied to the company’s valuation. However, unlike ESOPs, employees do not need to pay the exercise price with SARs. Instead, they receive the increase in stock or cash.

Eruditus’ total expenses from operating activities, excluding program fees paid to schools, reached $378.43 million in FY22, an increase from $264.49 million in FY21. In August 2021, the company entered the unicorn club after raising $650 million in a funding round led by SoftBank and Accel, which also included a secondary component. The equity fundraise valued the company at $3.2 billion.

Edtech companies heavily invested in marketing in 2021 and early 2022 to pursue growth. However, venture funding became scarce for late-stage startups, leading to a change in strategy. Eruditus also had to lay off approximately 40 people from its talent acquisition team within three months of closing its debt financing round. The edtech industry’s funding winter has resulted in valuation resets.

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