Princeton Review Plans $65-Million IPO
Jim Milliot -- 9/4/00

Princeton Review Inc. filed a registration statement with the Securities & Exchange Commission last month as part of its effort to raise $65 million through a public offering to help fund its Internet initiatives. Over the last two years, the company has significantly increased its investment in Internet programs, including the 1998 launch of, the debut of Princeton Review Online in July 2000 and increased spending on The higher investment is reflected in Princeton Review's six-month results for 2000, which showed the company had an operating loss from continuing operations of $16 million, compared to operating income of $486,000, in the first six months of 1999. Revenues rose 16.2%, to $20.1 million. Due to its increased expenditures, Princeton Review expects to incur losses for the foreseeable future.

The company's core business operation, Instruction and Guidance, generated 84% of total revenues in 1998 and 74% in 1999, but Princeton Review hopes to generate an increasing portion of revenues from its Internet-based operations in future years. The Instruction and Guidance group, which had sales of $29.9 million last year, focuses on conducting preparation courses and other services for such tests as the SAT and GMAT, and also offers tutoring and admissions counseling.

The group's primary business is the authoring of more than 150 test preparation and college selection titles that are published by third parties. The unit also operates an educational Web site aimed at facilitating the college application process. had revenues of $5.3 million in 1999, with $2.7 million coming from royalties, advances and other fees from books written by the company and published by Random House. Revenues generated through its agreement with Random, which serves as the publisher and distributor of Princeton Review's test prep guides and trade books, was $2.9 million in 1998. The publisher owns a 15% stake in Princeton Review and Random's Richard Sarnoff is currently on the company's board of directors. creates Princeton Review branded content for use in texts published by the McGraw-Hill Cos. Through 1999, all of the revenue generated by this division ($5.1 million last year) came from its contract with MHC. The division also recently launched an online subscription service for schools and families that provides academic assessment, remediation and enrichment services to children in grades three through eight. A pilot program was completed in Texas, and Princeton Review expects to offer the service in 24 more states by the end of 2000.

Approximately 8% of Princeton Review's revenue in 1999 came from fees paid by its franchisees. In North America, 15 franchises operated about 90 offices. The company has moved to directly own more of its outlets, agreeing to pay $12.5 million to acquire the operations of Princeton Review of Boston and Princeton Review of New Jersey. The company has also agreed to buy operations in Hawaii and Quebec for $320,000.