PiperJaffray Reports on Archipelago Learning

PiperJaffray commented on Archipelago Learning ARCL in a report released today. In the report, PiperJaffray was mixed in its assessment of the company. PiperJaffray writes, "Archipelago hosted an upbeat investor day in NYC yesterday, highlighting its appealing business model, differentiated product offering, and attractive long-term growth opportunity. We like what we heard, although we remain on the sidelines given educational funding pressures that limit near-term revenue and earnings visibility. Archipelago reiterated its 2011 guidance calling for revenues of $68M-$72M (our estimate is $71.2M), cash EBITDA of $30M-$34M (vs. our $31.9M), and free cash flow of $19M-$23M (vs. our $22.5M). While the current funding environment has translated into longer sales cycles, increased discounting and modestly lower renewal rates, we were impressed by the comments from a number of current customers. The underlying appeal of ARCL's products in terms of cost efficiency and impact on students was the recurring theme from a number of current users. While customer testimonials at investor presentations must frequently be taken with a "grain-of-salt," what we heard was very consistent with our own due diligence. The ARCL product is effective and "value" priced ($9 student/year from the full curriculum at the K-5 level) relative to competitive alternatives." PiperJaffray currently has a Neutral rating on Archipelago. Shares of ARCL closed at $9.94 on Thursday, up from $9.32 at the opening bell.