Patterson Education Group

1. Patterson Education
Group
Luke Bakies, Noah Fruecht, Rich Michalik
William Blair Case Competition 2017

2. Industry Drivers 4
Company Overview 7
Valuation Analysis 11
Strategic Option 19
FinalThoughts 26
Appendix 28
Executive Summary 3

3. Compelling Story Potential Buyers
Growth Opportunities
3
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Valuation Overview
Executive Summary
v Patterson Education Group (PEG) offers a
unique personalized high school experience
v PEG is projecting a compound annual
growth rate of 18.3% for revenue and
88.4% for EBITDA through 2021
v Organic growth can be achieved
through their scalable IT and
technology services associated with
the school
v New markets are available for
expansion both in the US and abroad
as the demand for schools increases
$100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00
Precedents
Comparables
DCF - Perpetuity
DCF - Exit Multiple
LBO

4. Industry Overview

5. 5
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Industry Overview
Industry Growth
v Education has seen consistent growth just shy of 3%
v Due to inelastic demand, education is expected to remain
resistant to economic downturns
v To adapt for technological advances, spending has
increased in all schools
Source: IBIS World, EdNET Insights, Ed Surge
$0
$200
$400
$600
$800
$1,000
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
Billions(USD)
US K-12 Education Industry Revenue
Public Private Charter Trade
EducationTech is Growing
v Spending on online education platforms has been
rapidly increasing over the last several years
v Schools have increased their spending on school-
related software as much as 27% in the last 3 years
v PEG runs their own software program, which
eliminates subscription costs and adds value in an
acquisition
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
2011 2012 2013 2014 2015 2016 2017E
Billions(USD)
Venture Funding for EdTech

6. 6
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Growth Opportunities
US Market
v There are opportunities for high-priced schools
Massachusetts, California and North Carolina that have
seen significant increases in consumer income over the
last several years
v For-profit universities have garnered a positive response
in states such as California,Texas and Georgia so we
believe for-profit high schools have potential in these
markets too
International Market
v India has large prospective growth opportunities due to
the large number of youth and increasing economy
v Wealthy consumers are expected to spend more on
education in the next decade
v An entrance into the Chinese market may be difficult due
to content restrictions and policies reformingWestern
education
Source: EY Industry Report, World Bank, WSJ, The Economist, U.S. Dept. of Education
Key
Blue-Original
Grey-First 4 years
Light Blue-Last 5 years
Light Grey-Future Expansion
Government Policy
v Betsy DeVos is advocating for school choice by
allowing for funding to private, and for-profit schools
v For-profit schools are being held accountable for
student success after graduation
v Many states are moving towards requiring
accreditation in order for private schools to operate

7. Company Analysis

8. 8
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Company Profile
Revolutionary Experience
v PEG is the only school of its kind operating in the world
v They provide an individualized learning experience for 9th
through 12th graders who struggle in traditional
classrooms
v Charge a premium price of $25,000 per year
Nationally Accredited
v Accredited by 5 of the top 6 programs
v Creates larger barrier to entry ensuring at this time PEG
is the only program of its type
v Positive relationship with final accreditation agency
v Offers over 300 courses with over 150 approved as
College Prep or Honors by University of California
2.79
3.73
GPA Prior to PEG GPA at PEG
GPA Increase at PEG
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
10
20
30
40
50
60
70
2006 2008 2010 2012 2014 2016 2017
NumberofStudents
NumberofSchools
PEG Growth
Schools Students

9. 9
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Room to Expand
Current Market Penetration
v Large potential opportunities as PEG has only penetrated
10% of their possible US market
v Projected US market up to $2.0 billion
v Scalable central support allows for the expansion of
current schools on top of building new schools
Technological Advantages
v PEG has multiple technology systems already set up and
in use
v Those include a Learning Management System, Student
Information System and a Resource Library
v Opportunities to expand these programs organically
through IT development which is easily scalable
Promising Financials
v Strong projected EBITDA growth as PEG looks to expand
its domestic market density and international market
opportunity
v Increasing EBITDA margins show an efficient business
model led by an experienced management team
0%
5%
10%
15%
20%
25%
0
20
40
60
80
2016 2017E 2018P 2019P 2020P 2021P
EBITDAMargins
EBITDA(Millions)
EBITDA and EBITDA Margin Growth Projections
EBITDA EBITDA Margin

10. 10
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
SWOTAnalysis
S W
TO
v High barriers to entry
preventing competition
v Experienced executive team
v Cost per square foot to build a
school is half as much as the
average public school
v Difficult to expand while
keeping exclusivity
v Costly to build and maintain
schools
v Retention rates for 9th graders
are less than 2 years
v Bear market could cause a
loss in students due to
high price tag of PEG
v One revenue stream
v Teacher turnover is high in for-
profit schools
v Expansion opportunities in
the US and abroad
v Multiple information systems
with the possibility of expansion
on each
v Price can be increased as schools
become more established
Source: School Planning and Management

11. Valuation

12. 12
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Football Field
EBITDA Multiple 5.9x 11.7x 17.6x 23.4x 29.3x 35.2x 41x
Valuation Range: 250-300mm
$100 $200 $300 $400 $500 $600 $700
Precedents (11x - 14x)
Comparables (11x - 15x)
DCF - Perpetuity (16.6x - 18.2x)
DCF - Exit Multiple (32.8x - 35.3x)
LBO (13x - 17x)

13. 13
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Cost Per School
Analysis
v Revenue typically yields a
positive return for the first
time in the 4th year
v Our analysis has shown
that 5 school openings is
optimal to minimize loss
while maximizing returns
v By opening 5 schools per
year, PEG is using
approximately !
"⁄ of its
2017E cash between capex
and initial lost earnings
v This allows for increased
brand recognition which
allows for market
penetration, resulting in
more long-term revenue
(25.00)
(20.00)
(15.00)
(10.00)
(5.00)
0.00
5.00
10.00
15.00
20.00
1 School 2 Schools 3 Schools 4 Schools 5 Schools 6 Schools 7 Schools 8 Schools 9 Schools 10 Schools
EBITDA By Number of School Openings
Year 1 Year 2 Year 3 Year 4 Year 5

14. 14
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
*All Valuesin Millionsexcept price
Revenue EBITDA LTM Revenue LTM EBITDA 2017E EBITDA
Cambium Learning Group NASDAQ: ABCD $6.49 383.6 155.9 45.8 41.8 29.4% 2.5x 8.4x 9.2x
Capella Education Co NASDAQ: CPLA $67.90 615.9 438.6 88.4 88.1 20.2% 1.4x 7.0x 7.0x
IDP Educatiom LT: IEL $5.87 1,463.9 394.2 70.3 70.3 17.8% 3.7x 20.8x 20.8x
Rosetta Stone NYSE: RST $9.87 196.0 194.0 8.6 8.0 4.4% 1.0x 22.8x 24.5x
Strayer Education NASDAQ: STRA $88.52 840.7 449.1 80.4 80.5 17.9% 1.9x 10.5x 10.4x
RYB Education NYSE: RYB $30.92 732.0 123.7 12.4 18.0 11.4% 5.9x 59.0x 40.7x
Career Education Corp NASDAQ: CECO $10.40 554.8 631.2 67.2 61.0 10.7% 0.9x 8.3x 9.1x
Patterson Education Group 195.8 17.1 8.7%
Max 1,463.9 631.2 88.4 88.1 29.4% 5.9x 59.0x 40.7x
3rd Quartile 840.7 449.1 80.4 80.5 20.2% 3.7x 22.8x 24.5x
Mean 683.8 341.0 53.3 52.5 16.0% 2.5x 19.5x 17.4x
Median 615.9 394.2 67.2 61.0 17.8% 1.9x 10.5x 10.4x
1st Quartile 383.6 155.9 12.4 18 10.7% 1.0x 8.3x 9.1x
Min 196.0 123.7 8.6 8.0 4.4% 0.9x 7.0x 7.0x
2017E
EBITDA
LTM EBITDA Margin
Enterprise Value
Company Name Ticker & Exchange Price
Enterprise
Value
LTM
Comparable Companies
v Due to the unique business model of PEG, direct
comparables were very limited
v Comparables ranged from higher education and EdTech
to K-12 and tutoring
Analysis ImpliedValuation
2017E EBITDA
Comparables Multiple 11.0x 15.0x
Enterprise Value Range $187.66 $255.90
$17.06

15. 15
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Revenue EBIT EBITDA
AcadeMedia EQT Partners Financial 4/28/2010 2,667.2 26.9% 1.2x 12.8x 10.4x
Renaissance Learning Permira Financial 8/16/2011 294.9 17.5% 3.2x 11.6x 10.9x
McGraw-Hill Education Apollo Global Management Financial 11/26/2012 2,400.0 -- 1.1x 9.2x 4.6x
Somos Educacao Tarpon Investments Financial 2/9/2015 1,606.6 23.0% 3.3x 18.3x 13.2x
Nord Anglia Education Inc Canada Pension Plan Investment BoardFinancial 4/25/2017 1,122.9 20.9% 3.9x 23.1x 20.4x
Pearson Sistemas do Brasil SA Pearson PLC Strategic 7/22/2010 155.6 1916.0% 2.0x 18.0x 14.0x
Global Education and Technology Pearson Strategic 11/21/2011 153.3 211.4% 3.2x 24.4x --
High 3.9x 24.4x 20.4x
3rd Quartile 3.3x 23.1x 15.6x
Median 3.2x 18.0x 12.1x
Mean 2.6x 16.8x 12.3x
1st Quartile 1.2x 11.6x 9.0x
Low 1.1x 9.2x 4.6x
Transaction Value
Target Company Acquirer
Transaction
Type
Announcement Date
Transaction Value (In
Millions)
Premium
Analysis ImpliedValuation
PrecedentTransactions
v Precedents ranged due to a variety of education and
EdTech companies
v A majority of acquisitions were made by financial
sponsors due to synergies recognized from the
combination of different types of education companies
2017E EBITDA
Precedents Multiple Range 10.0x 14.0x
Enterprise Value Range $170.64 $238.89
$17.06

16. 16
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Discounted Cash Flow
Analysis
v Due to the bullish projections, cash flows are projected to
exceed other valuations
v Exit Multiple method produces much higher
valuations due to these high projections
v Projections extended through 2023 to tone down end
revenue and EBTIDA growth to a more consistent rate
v Beta found by unlevering, then relevering average
comparables
ImpliedValuation
Estimated
2017E 2018E 2019E 2020E 2021E 2022E 2023E
Adjusted EBITDA 17.1 22.8 33.7 56.8 72.9 80.3 86.8
Less: D&A 11.2 12.5 14.5 15.9 16.0 16.7 17.8
EBIT 5.9 10.3 19.2 40.9 56.9 63.6 69.0
Less: Tax 2.2 3.9 7.2 15.3 21.3 23.8 25.9
NOPAT 3.7 6.4 12.0 25.6 35.6 39.7 43.1
Plus: D&A 11.2 12.5 14.5 15.9 16.0 16.7 17.8
Less: CapEx (8.0) (9.9) (11.7) (14.1) (16.1) (17.6) (18.9)
Change in NWC 4.5 12.1 7.3 10.0 10.2 8.0 6.9
Unlevered Free CashFlow 21.1 22.2 37.3 45.7 46.9 48.9
Present Value 18.4 16.8 24.6 26.2 23.3 21.2
Projected
Book Value of Debt (mm) 86.8
Market Value of Equity (mm) 49.85
Total Capital 136.65
Beta 3.75
Market Risk Premium 7.72%
Risk Free Rate 2.41%
Size Premium 2.00%
Cost of Equity 33.4%
Pre-Tax Cost of Debt 7%
Tax Rate 37.5%
Cost of Debt 4.38%
WACC 14.95%
WACC Calculation
Pv of FCF's 130.4
Final EBITDA 86.8
Exit Multiple 12
Terminal Value of FCF's 1041.1
Years 6
Present Value of Terminal Value 451.3
Enterprise Value 581.7
Exit Multiple Method
Pv of FCF's 130.4
Perp Growth Rate 2%
Terminal Value of FCF's 385.16
Years 6.00
Present Value of Terminal Value 166.94
Enterprise Value 297.37
Perpituity Method

17. 17
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Base DCF
v The base DCF produces a higher valuation range than the
DCF with the added schools due to the negative initial
EBITDA and capital expenditures
v The base DCF does not take into account the future
growth of these schools, as more are created, and the
value lost by not implementing any new schools
2017 EBITDA
Perpituity Growth 1.5% 2.5%
Enterprise Value Range $356.84 $380.85
$17.06
2017 EBITDA
Exit Multiple 11.5x 12.5x
Enterprise Value Range $585.75 $617.56
$17.06
Estimated
2017E 2018E 2019E 2020E 2021E 2022E 2023E
EBITDA 17.07 23.46 36.74 60.22 75.40 79.86 83.01
Less: D&A (11.16) (12.11) (13.63) (14.45) (13.79) (13.79) (13.79)
EBIT 5.91 11.35 23.11 45.78 61.61 66.07 69.22
Taxes 2.36 4.18 8.57 17.13 23.03 24.47 25.43
NOPAT 3.55 7.17 14.53 28.65 38.58 41.60 43.79
Plus: D&A 11.16 12.11 13.63 14.45 13.79 13.79 13.79
Less: CapEx (8.03) (1.94) (2.23) (2.30) (2.90) (2.90) (2.90)
Less: Change in NWC 0.00 10.41 8.23 11.42 7.86 4.96 3.51
Unlevered Free Cash Flow 27.76 34.17 52.22 57.33 57.45 58.18
Present Value 24.1 25.9 34.4 32.8 28.6 25.2
Projected
Analysis ImpliedValuation

18. 18
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Leveraged Buyout
Analysis ImpliedValuation
Capital Structure
v While PEG has experienced leadership and high barriers
to entry, it lacks the established nature of a solid LBO
candidate, resulting in a higher IRR required by sponsors
v TransactionAssumptions:
v Required Sponsor IRR: 30%
v Assume an exit and entry multiple of 14x
v Investment Length: 6 years
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2018E 2019E 2020E 2021E 2022E 2023E
Equity Debt
Equity Value/Purchase Price $256
Plus: Debt ($131)
Less: Cash $34
Transaction Value $353
2017E EBITDA $17
Expected IRR 30.0%
EBITDA Multiple 15.0x
Transaction Value
2017E EBITDA
EBITDA Multiple 13.0x 17.0x
Enterprise Value Range $221.90 $290.17
$17.1

19. Strategic Options

20. 20
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Strategic Buyers
Buyer Rationale
v Leading education provider through textbooks/online
content
v Has all tools that could be integrated in a classroom setting
at PEG
v Education technology enterprise in China specializing in a
K-12 program
v Over 2.3 million students in China with possibility to
expand to US market through PEGSource: Bloomberg
v Technology based education company providing online
curriculums for K-12
v Expertise in blended schools could translate well to PEG
v Leader in global education with operations spanning
multiple countries
v Direct connections to for-profit education through the
University of Phoenix

21. 21
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Strategic Buyers
Buyer Rationale
v Specializes in education administration software
v Their previous acquisition of Smart in 2015 gives them an
insight to the K-12 landscape
v Smart operates as a subsidiary to Blackbaud
v One of the world’s largest manufacturers of computers and
smart phones along with their own well-integrated
operating system
v Recently paired with Ohio State to integrate technology as a
“digital flagship”, could utilize PEG as a similar program
Source: Bloomberg, Columbus Dispatch
v Private education provider in China with most revenue being
derived from K-12 tutoring
v They have been exploring possible expansion opportunities
v PEG provides an opportunity for direct access to high schools
already established to utilize their curriculum
v Manages multiple online and hybrid universities
v Acquisition of PEG could create a feeder high school program
v Their operations abroad can give PEG an introduction to a
new market

22. 22
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Financial Sponsors
Buyer Rationale
v Have advised and made multiple acquisitions in the
education and training fields
v Specializations in K-12 and education technology
v Targets technology based service companies in lower middle
market
v Acquired Blackboard in 2011, among several other education
companies over the past several years
v PEG falls between their expertise of services and technology
v Apax operates in multiple countries including India, which
allows for easier expansion opportunities
Source: Bloomberg
v Fits the criteria through their EBITDA and growth profile
v Has previous experience in education through several deals
v Retains management and operates in states that PEG should
consider expanding to.

23. 23
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Financial Sponsors
Buyer Rationale
Source: Bloomberg
v Fits the criteria through their revenue and growth profile
v Has previous experience in education and, specifically,
private education in for-profit schools with Capella
Education Company, which makes PEG a solid way to
branch out further into the education industry
v Fits the criteria through their EBITDA
v Has previous experience in education with both Coursera,
and Course Hero. GSV also believes in retaining
management.
v Fits the criteria through their EBITDA
v Exclusively focused on the knowledge education sector so
purchase would provide synergies across their other holdings
v Believes in retaining management
v Look for market leading companies such as PEG
v Acquired Renaissance Learning and received 2.5x initial value
after just 3 years

24. 24
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
M&A Landscape
Source: Bloomberg, Berkery Noyes
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016
TransactionVolume
Education EdTech
v Learning management
systems innovation is
expected to drive M&A
activity in the PreK-12
and technology sectors
v Median EBITDA multiple
increased from FY2016
lows of 8.7x to 10.3x in
3Q2017
v In an increasingly
challenging education
environment, blended
learning companies are
more valuable to both
students and potential
buyers
8.7x
9.2x
8.7x
10.3x
7.5x
8.0x
8.5x
9.0x
9.5x
10.0x
10.5x
2014 2015 2016 Q32017
Median EV/EBITDA Multiples
Analysis

25. 25
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
SaleTiming
2017 2020
v If sold in 2017: PEG would assume less risk for the future
and be able to capitalize on their significant growth in the
past without having to worry about uncertain growth in
the future.
v Estimated EV in 2017: 250-300mm
v Pros:
v Able to sell PEG while the market is strong
v No risk in terms of meeting future growth projections
v Cons:
v Significant lost value if PEG hits projections
v PEG is still in a high growth pattern and there is no reason
to believe that it will halt abruptly
v If sold in 2020: Assuming PEG is able to meet its high growth
projections, then PEG will be worth approximately twice the
value of the projected 2017 EV. EV derived from 2020 exit
multiple
v Estimated EV in 2020: 450-500mm
v Pros:
v Company will be worth significantly more
v Company will be allowed to realize the significant growth
projected before sale
v Cons:
v Significantly more risk as the growth projections were way above
the industry average growth per year of ~3%
v The market is healthy in its current position and that could change
and negatively impact the value of PEG in 2020
$100.00 $150.00 $200.00 $250.00 $300.00 $350.00 $400.00
Comparables
Precedents
DCF Growth Perpetuity
LBO
$350.00 $400.00 $450.00 $500.00 $550.00 $600.00
Comparables
Precedents
DCF-Growth Exit Multiple

26. FinalThoughts

27. 27
Valuation
Analysis
Strategic
Options
Final
Thoughts
Executive
Summary
Industry
Overview
Company
Position
Strategic Buyers Financial Sponsors
SaleTiming Valuation Overview
Final Recommendation
v Apollo Education Group is a leader
in the education field and has
specific experience in the for-profit
schools industry with University of
Phoenix
v Leeds Equity has
completed four
transactions in 2017
showing its expertise in the
education realm
v In addition to retaining
management,
Clearview Capital
operates in target
states for PEG
v We recommend a transaction in 2020, as
projected growth will not be recognized as
attainable by potential buyers until then
v Political uncertainty after the current
administration’s term, as well as an aggressive
growth strategy will require the firm to perform
exceptionally over the next three years in order to
persuade buyers that the business model produces
growth
$100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00
Precedents
Comparables
DCF - Perpetuity
DCF - Exit Multiple
LBO

28. Appendix

29. Pro Forma Income Statement
Estimated
2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Revenue $118.50 $156.36 $195.76 $247.16 $291.74 $353.07 $401.55 $439.82 $472.70
Revenue Old Schools 118.50 156.36 195.76 242.16 278.24 328.32 362.80 384.57 399.95
Revenue New Schools 5.00 13.50 24.75 38.75 55.25 72.75
Direct Expenses 39.80 53.60 64.60 90.10 103.70 121.50 133.00 140.98 146.62
DE New Schools 1.88 5.13 8.88 13.88 19.38 25.43
Indirect Expenses 58.30 77.90 96.30 99.20 101.40 105.30 110.10 116.71 121.37
IE New Schools 6.13 11.63 17.38 23.38 29.38 35.38
Overhead Expenses 18.10 21.80 25.20 32.30 37.50 42.40 45.40 48.12 50.05
Overhead Expense New Schools 2.10 4.20 6.30 8.40 10.50 12.60
Reported EBITDA $2.30 $3.06 $9.66 $15.46 $28.19 $51.32 $67.40 $74.76 $81.26
New School Dev Addback 3.80 5.00 4.40 4.40 4.40 4.40 4.40 4.40 4.40
Other Addbacks 4.10 3.10 3.00 2.90 1.10 1.10 1.10 1.10 1.10
Adjusted EBITDA $10.20 $11.16 $17.06 $22.76 $33.69 $56.82 $72.90 $80.26 $86.76
Less: D&A 6.40 8.91 11.16 12.48 14.46 15.90 15.99 16.66 17.80
Adjusted EBIT 3.80 2.25 5.91 10.28 19.23 40.93 56.91 63.60 68.96
Less: Tax 1.55 0.92 2.21 3.85 7.21 15.35 21.34 23.85 25.86
NOPAT 2.25 1.33 3.69 6.42 12.02 25.58 35.57 39.75 43.10
Less: Interest 3.24 3.24 5.38 3.07 2.75 2.44 2.14 1.84 1.64
Adjusted Net Income ($0.99) ($1.91) ($1.68) $3.35 $9.27 $23.14 $33.44 $37.91 $41.46
*All values in millions unless noted Historical Projected

30. Pro Forma Balance Sheet
Period Ending December 31st Estimated
*All values in millions unless noted 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Current Assets
Cash 35.3 45.9 58.1 85.9 122.4 160.6 205.9
Restricted Cash 4.4 4.4 4.4 4.4 4.4 4.4 4.4
Accounts Receivable, Net 11.9 13.5 16.0 19.3 22.0 24.1 25.9
Short-term Investments 1.3 1.7 2.0 2.5 2.8 3.1 3.3
Other Receivables 8.6 10.9 12.8 15.5 17.7 19.4 20.8
Prepaids 4.3 5.4 6.4 7.8 8.8 9.7 10.4
Total Current Assest 65.8 81.9 99.7 135.4 178.2 221.3 270.7
Other Assest
Fixed Assets 61.8 60.5 59.7 59.4 59.5 61.2 63.4
Goodwill 6.3 6.3 6.3 6.3 6.3 6.3 6.3
Intangible Asssets, Net 12.2 12.2 12.2 12.2 12.2 12.2 12.2
Other Long Term Assets 5.6 5.6 5.6 5.6 5.6 5.6 5.6
Total Other Assets 85.9 84.6 83.8 83.5 83.6 85.3 87.5
Total Assets 151.7 166.5 183.6 218.9 261.8 306.5 358.2
Liabilities & Equity
Liabilities
Accounts Payable 1.5 2.0 2.3 2.8 3.2 3.5 3.8
Other Accrued Expenses 14.5 17.3 17.5 17.7 20.1 22.0 23.6
Other Current Liabilities 6.1 7.7 9.0 10.9 12.4 13.6 14.7
Customer Deposits 2.4 3.0 3.5 4.2 4.8 5.3 5.7
Current Lease Allowance 2.3 3.0 3.5 4.2 4.8 5.3 5.7
Deferred Revenue 44.1 55.6 65.6 79.4 90.3 99.0 106.4
Total Current Liabilites 70.9 88.5 101.5 119.3 135.7 148.7 159.8
Bank Revolver 25.3 20.3 15.3 10.3 5.3 0.3 0.0
Deferred Tax Liabillity 3.4 3.4 3.4 3.4 3.4 3.4 3.4
Capital Leases and Other 31.3 39.5 46.7 56.5 64.2 70.4 75.6
Total Liabilities 130.9 151.7 166.9 189.5 208.7 222.7 238.8
Total Member's Equity 20.8 14.8 16.7 29.3 53.1 83.8 119.4
Total Liabilities & Members Equity 151.7 166.5 183.6 218.9 261.8 306.5 358.2
Projected

31. Pro Forma Statement of Cash Flow
*All values in millions unless noted Estimated
2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Net Earnings (1.68) 3.35 9.27 23.14 33.44 37.91 41.46
Depreceiation 11.16 12.48 14.46 15.90 15.99 16.66 17.80
Change in Working Capital 0.00 (12.10) (7.35) (9.98) (10.19) (8.04) (6.91)
Cash from Operating Activities 9.47 27.93 31.08 49.01 59.61 62.61 66.17
Capital Expenditures (8.03) (9.89) (11.67) (14.12) (16.06) (17.59) (18.91)
Cash from Investing Activities (8.03) (9.89) (11.67) (14.12) (16.06) (17.59) (18.91)
Revolver Paydown (5.00) (5.00) (5.00) (5.00) (5.00) (0.30)
Cash Spent on Long-Term Debt (2.43) (2.26) (2.10) (1.95) (1.82) (1.69)
Cash from Financing Activities (7.43) (7.26) (7.10) (6.95) (6.82) (1.99)
Change in Cash 1.45 10.61 12.15 27.79 36.60 38.20 45.28
Beginning Cash 33.85 35.30 45.91 58.06 85.85 122.45 160.65
Ending Cash 35.3 45.91 58.06 85.85 122.45 160.65 205.92
Historical Projected

32. DCF andWACCAssumptions(Change)
Company Ticker & Exchange Beta Market Value/Book Value Current Market Cap Book Value Liab Eq D/E Unlevered Beta
Bridgepoint Education NYSE: BPI 2.19 2.88 285.6 99.17 182.67 280.71 0.651 1.575034588
K12 Inc NYSE: LRN -0.23 1.27 712.7 561.18 160.94 574.35 0.280 -0.196896324
Rosetta Stone NYSE: RST 0.79 -4164 224 -0.05 3232.2 4179.1 0.773 0.539598295
Career Education Corp NASDAQ: CECO 2.71 1.98 752.2 379.9 238.1 321.5 0.741 1.876270566
Strayer Education NASDAQ: STRA 0.95 4.98 999 200.6 110.32 188.37 0.586 0.702978056
Avg Unevered Beta 0.899397036
PEG 3.75 86.8 20.80 4.173076923 0.899397036
297.37 1.0% 1.5% 2.0% 2.5% 3.0%
14.0% 307.5 315.3 323.8 333.0 343.0
14.5% 294.7 301.7 309.4 317.7 326.7
15.0% 282.7 289.2 296.1 303.6 311.7
15.5% 271.7 277.5 283.8 290.6 297.9
16.0% 261.3 266.7 272.4 278.6 285.2
WACC
Perpituity Growth
506.47 11.0x 11.5x 12.0x 12.5x 13.0x
14.0% 569.2 589.0 608.7 628.5 648.3
14.5% 555.8 575.1 594.3 613.6 632.8
15.0% 542.8 561.6 580.3 599.1 617.8
15.5% 530.2 548.4 566.7 585.0 603.3
16.0% 517.9 535.7 553.5 571.3 589.1
WACC
Exit Multiple

33. LBOAssumptions
xEBITDA Amort % Total Amount
Senior Debt 4.50x 15.0 17.5% $77
Sponsor's Equity 82.5% 362
Total Sources 100.0% $439
Transaction Value 91.7% $403
Beginning Cash Balance 8.0% 35
Transaction Expenses 0.2% 1
Total Uses 100.0% $439
Debt / EBITDA 4.5x
Sources and Uses
2018E 2019E 2020E 2021E 2022E 2023E
Years of Investment 1.0 2.0 3.0 4.0 5.0 6.0
EBITDA $22.76 $33.69 $56.82 $72.90 $80.26 $86.76
x EBITDA Multiple 15.0x 15.0x 15.0x 15.0x 15.0x 15.0x
Enterprise Value $341 $505 $852 $1,093 $1,204 $1,301
Debt $208 $203 $197 $192 $187 $182
Cash (18) (14) (30) (38) (40) (42)
Net Debt $190 $188 $168 $154 $147 $140
Equity Value $152 $317 $685 $940 $1,057 $1,161
Internal Rate of Return (51.5%) 0.7% 29.9% 31.7% 27.6% 24.5%
Cash-on-Cash Return 0.5x 1.0x 2.2x 3.0x 3.4x 3.7x
Investor Returns