K-12 Services, test prep help power double-digit revenue growth at Kaplan and Princeton Review.

K-12 Services, test prep help power double-digit revenue growth at Kaplan and Princeton Review.

Midway through 2004, the Princeton Review (New York) and Kaplan (New York) each are experiencing double-digit revenue growth from their test prep and K-12 services businesses. Revenue from Kaplan’s supplemental education business grew 30.5% to $279 million, and Princeton Review’s Test Prep and K-12 Services business combined to generate $51 million, up 25.6%, in the first six months of the year.

Supplemental Education at Kaplan, a subsidiary of the Washington Post Co. (Washington, D.C.), includes its traditional test prep business, K-12 state test preparation, school-based K-12 Learning Services and Score! center-based tutoring, as well as professional training.

Much of the revenue growth in this unit was driven by its Financial Training Co. (London), which was acquired in March 2003.

Kaplan, like Princeton Review, also got a boost in test prep because of the new SAT exam.

Kaplan’s career-oriented, post-secondary-school Higher Education business generated a 60.5% increase in revenue to $256 million in the six-month period, largely due to an increase in student enrollment and to several acquisitions.

Kaplan’s overall revenue grew 41.5% to $276.7 million in the second quarter and was up 43.3% to $535 million in the first six months of the year.

Test Prep, K-12 Drive Princeton Growth Princeton Review’s Test Prep division increased revenue 10.4% to $18.2 million in the second quarter and was up 13.9% to $37 million in the six-month period, driven largely by growth in the company’s new tutoring course for the new SAT exam.

But tutoring services for K-12, designed to address opportunities from No Child Left Behind under the supplemental educational services provision, also helped power growth. Tutoring revenue was up 36% in the six-month period, according to company management. The company’s supplemental education services business generates most of its revenue in the first and fourth quarters.

K-12 Services, Princeton Review’s in-school program, was the growth powerhouse in the first half of this year. Revenue in the second quarter was up 50.2% to $7.7 million and up 72.3% to $14 million in the six-month period.

While K-12 Services is a smaller unit than Test Prep, Princeton Review CEO John Katzman said he sees opportunities for it to become “a very large K-12 business” with the potential for $100 million in annual revenue.

In addition to organic growth, the company is in the market for acquisitions. While Katzman wants to build scale in Princeton Review, any acquisitions in the immediate future would fit into the existing businesses rather that branching out into a fourth arena.

Princeton Review’s third division, Admissions Services, remains problematic for the company, growing below company expectations.

Overall, Princeton review generated $28.4 million, up 20.1%, in the second quarter and $56.4 million, up 24.3% in the first half of the year.

Princeton Review and Kaplan

Q2 and 6-Month Financial Performance, 2004 vs. 2003, Ended June 30

($ in thousands; ranked by 6-month revenue)


Q2 6 Months

Publishers 2004 % Chg. 2004 % Chg.

Kaplan $276,696 41.5% $534,967 43.3%

Supplemental Education $143,410 23.9% $279,010 30.5%

Higher Education $133,286 66.9% $255,957 60.5%

Princeton Review $28,447 20.1% $56,394 24.3%

Test Prep Services $18,163 10.4% $36,993 13.9%

K-12 Services $7,697 50.2% $13,980 72.3%

Admissions Services $2,587 21.9% $5,421 13.0%

Op. Inc./Loss

6 Months

Publishers 2004 % Chg.

Kaplan $50,000 157.0%

Supplemental Education $45,694 13.7%

Higher Education $43,515 81.2%

Princeton Review -$164 NA

Test Prep Services NA NA

K-12 Services NA NA

Admissions Services NA NA

Note: Kaplan’s total operating results reflects losses in its share

of corporate overhead and charges for stock-based Incentive

compensation and amortization of certain intangibles.

Source: Company financial results.

Kaplan: 212 492-5800; www.kaplan.com Princeton Review: 212 874-8282; www.princetonreview.com

COPYRIGHT 2004 RR Bowker

COPYRIGHT 2004 Gale Group