While the pandemic presented challenges in face-to-face education, it also spurred the adoption of online learning as the new norm. Universities and education providers embraced digital learning as a profitable long-term solution, benefiting companies like edtech provider Keypath Education (ASX: KED). In FY23, the Company recorded a revenue of US$124.2 million, 4.9% higher than FY22 and aligned with its FY23 full-year guidance (US$125 million to US$130 million). 

Its Healthcare sector, which encompasses 118 programs across areas like nursing, social work, mental health, psychology, public health and more, recorded a 21.6% revenue increase to US$68m year-on-year (YoY). 

Adjusted EBITDA loss for FY23 was US$9.4m, inclusive of one off restructuring cost for its Canadian, UK and some US operations, as well as Securities and Exchange Commission (SEC) registration cost. This was an improvement from the EBITDA loss of US$10.5m incurred in FY22, achieved through matured newer educational offerings despite investments in new initiatives and Southeast Asia operations. 

While older offerings experience enrollment declines, Keypath’s focus on the Healthcare sector is countering this impact, positively affecting contribution margin and adjusted EBITDA performance. The Company eyes on achieving breakeven adjusted EBITDA from H2 FY24. 

Keypath’s Founder and CEO, Steve Fireng, said “We continued to move our investment from our mature vintages¹ to newer vintages and programs where we see the strongest demand.

“We are pleased with the progress and outcomes within our Healthcare and Social Services programs as we continue to build out a global Healthcare platform. These investments, along with the continued expansion in APAC, will provide long-term sustainable growth for Keypath.” 

In FY23, Keypath secured seven new partners and introduced 34 programs, primarily in Healthcare (23 programs). Thirteen programs were launched in sync with expansion with Asia Pacific enterprise partners to build market leadership and innovation in the region, with Southeast Asia posing an unmissable potential as the world’s largest edtech growth region. 

Fireng further revealed that Keypath already has 48 new programs on the horizon, 39 from the FY24 vintage, seven from the FY25 vintage and two from the FY26 vintage. Out of these, 37 programs are in the Healthcare domain. Keypath also plans to further expand programs across partners and global regions.

Making gradual strides toward profitability, Keypath reported a net loss of US$19.7m, showing improvement from last year’s US$26.7m loss. The company is progressing towards its pre-pandemic FY20 level of US$11.4m loss. Its largest loss of US$78.7m occurred in FY21 when it first floated on the ASX in the midst of the pandemic, but still was below the projected prospectus loss of US$88m. 

As of 30 June 2023, the Company had total cash on hand of US$46.8m, reflecting flat YoY cash burn of US$8.1m as well as US$4.2m cash outflow from one-time non-operating costs. The Company remains debt-free and confident in organic growth fully funded to cash flow breakeven.

Founded in 2014, Keypath operates in the online program management (OPM) market, collaborating with global university partners in delivering online higher education courses using its technology and data platform KeypathEDGE. Keypath provides university partners with designing, developing, launching, marketing, and managing online programs, as well as undertaking market research, student recruitment, support and placement services.

Keypath has operations in Australia, the United States, Canada, the UK, Malaysia and Singapore. Its latest notable projects include partnership with the University of Melbourne’s Melbourne Business School (MBS) in launching online MBA plus short courses and career accelerators.

Upon entering FY24, Keypath launched revenue guidance of US$130m – US$135m and adjusted EBITDA guidance of US$1m – US$3m loss on constant currency basis assuming USD:AUD rate of 0.67.

Originally forecasted at US$74 billion in 2025 with a 13% CAGR (2019-2025) during the pre-COVID, global online education market valuation rose to US$97 billion in midst of the pandemic, showing an 18% CAGR during the same period.

(1) Vintage refers to the fiscal year in which a new program has its first student intake. Revenue from the first year of a vintage reflects a combination of the timing of when a program has its first student intake (Keypath does not earn revenue until the first student intake on a program) and the number of programs in the respective vintage.