Keypath Education is down ~80% since its IPO but is hopeful it can get out of the doldrums

Keypath Education (ASX:KED) is down over 70% since its IPO in May 2021 but it is still selling hope. The company released its 1HY23 results this morning, telling shareholders that it would eventually reach cash flow breakeven and could do so without raising fresh capital. 

 

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Keypath Education grows revenue but also its losses

Keypath Education is a company that runs online university courses (predominantly post-graduate) through its technology and data platform KeypathEDGE, making money through taking a share of course fees. 

Although its 1HY23 revenue was US$58.7m, up 3.1%, the company’s net loss increased 31% to US$13.5m. Its EBITDA loss ballooned too, by 79% to US$6.7m. 

Keypath Education closed the period with US$51.5m in cash, a figure the company claimed was enough to take it to cashflow breakeven, along with 45,707 students enrolled across its courses (up 2.3%). 

  

 

Its a long way back to the top

Noting that 1H is typically a lower half in terms of revenue given holidays at tertiary institutions, Keypath Education issued guidance of US$125-$130m revenue and an EBITDA loss of US$7-$9m.

The company also expressed hope that it could capitalise on the growing online healthcare education market. It said this was a US$12bn market opportunity and that its revenues from this vertical grew by 20% and thay it was now responsible for more than half of its revenues. 

However, Keypath Education listed at $3.09 and is down over 80% since then. The listing was spearheaded by Macquarie, just 6 months after Nuix (ASX:NXL) which has proven to be another dud float. 

 

 

The harsh reality is that, similar to food delivery stocks, the company listed at a time demand was temporarily skyrocketing and hoped to capitalise.

However, the rapid growth was not going to last forever. And as a consequence, the short-term investor money has shifted to other opportunities and IPO investors are left owning a company with a long way to get back to the top. 

Collins Foods (ASX:CKF) depicts that it is not impossible for failed IPOs to recover, but that it is very difficult and takes time.

 

 

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