IDP Education shares are currently trading at $8.86, reflecting a 53% decrease over the past year and a 78% decline since November 2021.
These declines come after a 1% increase in IELTS volumes in FY2023, a 18% drop in FY2024, and a 24% drop over the half-year reported on last month.
IELTS has always been very important to IDP’s bottom line. In 2019, it was responsible for more than 60% of the firm’s total revenues. Clearly then, IDP faces challenging times.
While IELTS volumes will certainly increase when regulatory and political conditions become rosier, declines in market share may be more difficult to make up. I’m not certain that future generations of test takers will rediscover the IELTS test and find a new appreciation of its virtues. Test takers aren’t like the kids today turning their backs on CDs and streaming in favor of vinyl records. Once test takers are gone, they may be gone for good.
Some may find this situation eerily familiar.
Consider the TOEFL test circa 1988. Taken about a half million times per year, it dominated its segment back then. At that time the Cambridge exams were taken about 130,000 times a year. The IELTS test was taken zero times a year because it didn’t yet exist. There were a few regional exams from Canada and Australia, but their test volumes were negligible. In 1989 things changed with the arrival of the IELTS. In the years that followed, that test grew and grew and grew, mostly at the expense of the TOEFL. Despite fairly hard resets in 1998, 2005 and 2019 the TOEFL has been unable to recapture much of that lost market share. TOEFL’s customers departed, and they never really came back. Test volumes today are about the same as they were 25 years ago even though the number of students studying abroad has increased dramatically since then. (source: “Cambridge English Exams: The First Hundred Years”)
So how might IDP salvage the situation?
New testing products are an option. I’m happy to see that the British Council has once again become a test developer. Revenues from new in-house products like the EnglishScore and Aptis tests may help them make up for lower revenues from the IELTS. Their pals at Cambridge now offer the Linguaskill test, which might do the same. Even ETS has diversified in recent years, acquiring existing (and profitable) products from Pipplet and PSI.
But IDP? I don’t see any new testing products on the horizon.
EDIT: A commenter mentions that IDP has a product called “Envoy.”
Are things totally hopeless? Of course not. Eventually IDP will be given the green light to resume language testing in China. That’ll help a lot. And the results of the HOELT tender are due any day now. Those could help as well (unless they make things worse).
Those last two points are worth a post of their own, so I’ll leave it at that. But I would love to hear an opposing point of view if you’ve got one.
