Archipelago Learning - Not All For-Profit Education Is The Same

These are grim days for the for-profit education sector. The government has painted a bullseye on the hind ends of companies like Apollo Group (Nasdaq: APOL), DeVry (NYSE: DV) and Career Education (Nasdaq: CECO), ostensibly for poor student loan repayment rates and generally over-promising the benefits of post-secondary education (though many public/private universities have similar problems...).

Investors may want to broaden their horizons and take a look at Archipelago Learning (Nasdaq: ARCL). Although sometimes grouped in with those for-profit educators, Archipelago's business model is completely different, and comparing this company to that industry just makes no sense. Archipelago is in the business of selling online subscription-based educational content to K-12 schools, helping those schools educate their students better and achieve higher test scores.  

A Quarter Worth Studying
For the third quarter, Archipelago reported a 46% jump in revenue to just over $15 million, so this is very clearly still a very small company. Scrubbing out the boost provided by the mid-summer acquisition of Education City, growth was more on the order of 27%. Going a step further, the company also reports invoiced sales; this is not at all uncommon with subscription-based models where there is a time gap between recognizing a "sale" and getting the money. By this metric, sales were up 37% for the quarter and 19% ex-Education City. (For more, see Pay Back Time In For-Profit Education.) 

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