Princeton Review Inc. raised $59 million in an initial public offering last week in which 5.4 million shares of the company were sold at $11 per share; the $11 price was at the low end of the company's range and the stock closed at $9.50 after its first day of trading June 19.
Princeton Review, which announced its plans to go public late last summer (News, Sept. 4, 2000), went forward with the offering despite a weak market and a general aversion among investors to companies that have anything to do with the Internet. Although only 5% ($2.2 million) of its $43.9 million in total sales was generated by the company's Internet projects in 2000, Princeton Review said that it expects its three Internet initiatives—Princeton Review Online, Review.com and Homeroom.com—to drive sales growth.
Another part of Princeton Review's strategy is to acquire most, if not all, of its domestic franchises. It recently paid a total of $13.8 million to buy Princeton Review of Boston and Princeton Review of New Jersey, and paid another $2.7 million to acquire Princeton Review Peninsula. Princeton Review of Hawaii and Princeton Review of Quebec were acquired for a total of $320,000. The company estimates that it will cost $25 million—$35 million to acquire the remaining franchises and it plans to use up to $9 million of the offering's proceeds to help finance the acquisitions. Approximately $22 million of the proceeds will be used to repay debt, with the remainder targeted for capital expenditures, working capital and other general purposes, including financing its Internet expansion.
Despite Princeton Review's 8.9% increase in sales last year, its net losses rose to $8.2 million from $2.0 million in 1999. The higher losses were attributed mainly to investment in Internet operations, and the company stated that it expected to incur substantial losses for the foreseeable future. As of March 31, 2001, Princeton Review had an accumulated deficit of $24.1 million, a figure that includes a loss of $2.9 million for the first quarter on sales of $13.1 million.
During 2000, Princeton Review's k—12 services division had revenues of $5.3 million, all of which were generated by workbooks and other Princeton Review—branded content that was published by McGraw-Hill. Revenues in its admission services division were $4.5 million last year with nearly half, $2.2 million, generated by royalties and other fees from books written by Princeton Review and published and distributed by Random House. The deal with Random yielded revenues of $2.8 million in 1999. The test preparation services division, with 2000 revenues of $34 million, is the company's largest unit.