Market Metrics · ESL training is important to both international students and landed immigrants in accelerating their settlement in Canada, and/or their career progression
· Canada is one of the top 5 most popular host countries for international students, and Ontario and British Columbia are the most chosen destinations.
· Languages Canada reported that ~150K students attended its member institutions in 2012, generating ~$592M in tuition revenue and ~$1.9B in annual revenue for the country.
An overwhelming majority of students are from a country where English is not the first language, which creates a large marketplace for Loyalist to pursue:
An attractive characteristic of the ESL market is its recession-proof nature. While data specifically regarding foreign students studying under short-term language programs is limited, according to Citizenship and Immigration Canada, the total number of long-term international students in Canada(across all levels of education) has consistently trended upwards, growing by a 10-year CAGR of 6.7%
A recent report by the Advisory Panel on Canada's International Strategy recommended that Canada should aim to have more than 450,000 full-time international students enrolled by 2022. Here's an interesting fact, education services is Canada's 11th largest export globally, and its single-largest export to China. A 2011 report commissioned by Foreign Affairs and International Canada indicated that in 2010 international students in Canada spent in excess of $7.7B on tuition, accommodation, and discretionary spending. This translates roughly into 86,570 jobs and $455M in government tax revenue. Part of Canada's brand is based on a relatively higher-quality education system and a reputation for excellence across the education spectrum. As such, Canada's government has undertaken efforts to increase Canada's positioning as one of the top-ranked ESL student destinations, which currently include the U.S., the U.K., Australia, and New Zealand. With applicants facing an increased amount of difficulty pursuing studies within the U.S., and the U.K., Canada is expected to be the net beneficiary. These factors all bode very well for Loyalist to continue to grow and attract new students, as well as the Canadian industry in general.
The Canadian ESL market is extremely fragmented with no large incumbent provider, characterized by a large number of schools in B.C. and Ontario, generating a relatively small amount of revenue and likely constrained by capital with no clear exit strategy. According to Languages Canada, there are ~185 accredited member programs across the country, with ~35% of these programs in the public sector (ex., universities and colleges) and ~65% in the private sector (ex. Private and not-for-profit schools).
The majority of private sector programs are represented by 'mom-and-pop' owner/operators.The lack of another aggressive consolidator and the upcoming retirement of the baby boomer generation that have created well-run but small scale ESL businesses, has created the perfect storm for the Company to gain significant market share through highly accretive acquisitions.Since going public, Loyalist has acquired 8 ESL schools and 6 career colleges, representing an expected annual revenue run rate of ~32M In 2013. This figure represents less than 10% of the total market share. The Company's acquisitions have largely been concentrated in British Columbia and Ontario (~42% and ~37%, respectively) where the majority of international students reside.
