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Lingo Media Corporation: THE INVESTMENT CASE

Lingo Media looking to be top of the class in 2017

The English language learning specialist is confident it can kick on in the coming year
learning symbol on a keyboard
INVESTMENT OVERVIEW: LM The Big Picture
It's not just kids who benefit from Lingo's suite of products

“English represents hope for a better future, a future where the world has a common language to solve its common problems.”

This quote from a recent TED Talk Lesson goes some way to explaining why Lingo Media Corporation (CVE:LM) is so invested in finding new ways to teach the English language to people around the globe.

English is spoken by more than 1.5bn people around the world, with an estimated 500mln speaking it as their first language. On top of that, there are a further 2bn who are brushing up on their English skills to try and add to that total.

The appetite from non-English speaking countries to take up the language is obviously there, and Lingo is developing innovative teaching methods to help feed this.

What does it do?

To put it in its most simple form: Lingo is an education through technology (edtec) firm which develops products that help people of any age learn the English language.

Edtec is a hot topic on Wall Street at the moment with US companies in that space raising more than US$1bn in funding from investors last year.

Lingo has two divisions: a publishing arm and an online arm.

The publishing business, Lingo Learning, produces more traditional, print-based textbooks and other materials, primarily for the Chinese state ministry of education.

The connections in China leave the group well-placed to benefit from the surge in interest from the country which, according to analysts, is set to become the largest English-speaking country in the world by the end of this year.

Lingo has even opened an office in Beijing to help the firm meet demand from Chinese customers.

The online arm, ELL Technologies, is more like what you’d expect from a 21st century edtec group and offers online training and assessment programmes.

ELL also has a virtual conversation tool, which means users can hone their speaking skills with a virtual avatar before starting to practice in real life.

Lingo’s products have had a pretty decent effect as well. An estimated 20mln learners in more than ten countries have “significantly improved” their English language skills thanks to Lingo’s tech.

Classroom and boardroom

When you hear education, it’s easy to think of those old school days sat in a classroom.  But while K-12 (kindergarten through to 12th grade) is one of Lingo’s key markets without a doubt, it’s not the only one.

The number of adults who want to improve their English to help them find jobs or conduct business with foreign companies where English could be a mutual language is on the rise.

Lingo can adapt its suite of products to suit anyone from a five-year-old to a 60-year-old chief executive.

Third quarter results

Lingo’s third quarter results released at the beginning of December didn’t quite hit the high standards it has set itself in recent years.

The company reported a loss of US$0.016 per share for the three months to end September, compared to the US$0.023 profit it posted for the same period in 2015.

“The decline in our third quarter results was directly attributable to ELL Technologies’ revenues that were a short-term timing issue rather than a long-term business-related issue,” said President and chief executive Michael Kraft.

Lingo had posted seven consecutive profitable quarters in the run-up to these results, and Kraft said he was confident that the underlying business was still in excellent shape.

“While our third quarter sales results didn’t meet our expectations, we believe as strongly in our business today and the opportunity as we ever have before, because we are speaking with the customers on the ground, we understand their needs, and we see the long-term market opportunity for English language learning.”

Putting their money where their mouth is

While it might be easy for Kraft to tell investors that he’s confident in the company’s outlook for 2017 and beyond, it’s another thing to actually show it.

But that’s exactly what he and other directors have done in recent weeks.

Between them, they bought over 300,000 Lingo shares in the days following the earnings release, ploughing more than US$60,000 of their own cash into the business in the process.

The share price

The past year has been a rocky one for Lingo’s share price. It came into 2016 valued at around C$0.90 a pop, and peaked in the spring at a shade over C$1.

It’s been on the wane since then though and now stands at C$0.22, giving the company a market capitalisation of roughly C$7.5mln.

It’s worth bearing in mind that even with the fall during 2016, the stock is still worth twice as much as it was this time two years ago.

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