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CEOCFO Monthly Analyst |
Renaissance Learning, Inc., - helping educators improve schools through technology and research.
Technology Renaissance Learning, Inc. PO Box 8036 CEOCFOinterviews,com BIO OF CEOMichael H. Baum, Chief Executive Officer
Mike joined Renaissance Learning, Inc. in 1994 as Managing Director of Renaissance Learning’s professional development division in Madison, Wis. From 1995-1996 he served as President of Renaissance Learning, Inc. Prior to joining Renaissance Learning, Inc., Mike was Executive Vice President and General Manager of Francorp, Inc., an international management-consulting firm based in Chicago. Before his ten-year association with Francorp, Baum spent a number of years in direct mail merchandising management. Baum holds B.A. and Master of Arts in Teaching degrees from Yale University and has taught in the New Haven, Conn., public schools. He received an MBA from Northwestern University in 1993. About Formerly
known as Advantage Learning Systems, Renaissance Learning is a leading provider of school
improvement for Pre-K to 12 schools. Its software products, called learning information
systems, help educators improve academic performance by increasing the quality, quantity,
and timeliness of information in the classroom. Its
Renaissance™ teacher training programs have helped over 300,000 educators use this
information more effectively to accelerate learning.
Founded in 1986, Renaissance Learning
has key product offerings in reading, math, writing, and early literacy
assessment. Mr. Baum: Renaissance Learning started as many companies do, at a
kitchen table . Our founder Judi Paul, who
lived at the time in Port Edwards, Wisconsin, had four kids who were not reading as much
good literature as Judi felt they should. She’d
been trained as an elementary educator, so she devised a plan for having them select books
off lists of books appropriate for each child’s reading level. Then she had them take a short quiz after they
read each book to make sure that they had read and understood what they read. The kids
started reading so many books, that with the help of her husband Terry she put it on a
computer. Neighborhood kids started using
the program too, then a neighboring school picked it up. In
1986 they went into the mail order business selling the product, which they called
Accelerated Reader, to schools. From that beginning in the basement of their home, the
company has grown one school at a time and even one teacher at a time, to where we are now
in over 55,000 schools, with well over 500,000 educators using both our software and our
training approaches. We, believe we reach 10 to 15 million children every day. We are now
in not only reading, but also in math, getting into writing and other areas of language
arts, with other areas of the curriculum on the way. CEOCFOinterviews – What is your most recent and exciting news? Mr. Baum: To begin with, we are always improving schools, and
that’s always exciting. We’ve just
released research from the first year of district-wide implementation of Renaissance in
two pioneering districts, in Texas and California, where their students grew six to 12
percentile points in reading ability across the board in less than a year. This is terrific for whole-school, whole-district
implementation of any academic program. Just
recently, we’ve just started shipping the latest version of that product that Judy
invented at her kitchen table in 1984. It’s
called AR Universal, and it adds two new features that have the teachers very excited. One
of those new features is that it now manages and motivates the reading of assignments in
reading textbooks as well as self-selected literature books. The other feature is that now for the first
time, for very low-level books, which are often read to the children, the quiz will be
read to the children by a recorded voice on the computer. Initially we expect to bring out
voice quizzes on about 1,500 low-level books, with more to come. CEOCFOinterviews – What affect will STAR Early Literacy.™
have on your company and its future? Mr. Baum: We are expecting it to be one element that will continue
to contribute to our growth. We have publicly said that we expect to be able to maintain
our growth this year at least at the same level as last year, and last year we grew about
28%. We are aiming at the same level this year and STAR Early Literacy will be part of the
way that we expect to get to that number. CEOCFOinterviews – Do you build your product pipeline through
research and development, acquisitions, or both? Mr. Baum: It’s both, but primarily it is through our own
efforts and our own way of thinking. It all starts with the mission of the company, which
is to accelerate learning for all. We are very picky about what products or services we
will introduce. We have to have quantitative evidence that the approach is going to accelerate learning, get
children’s test scores to improve, and also make life better for the teacher in the
class room. The teacher is key to improving education, so everything we do is supporting
the teacher by providing more information on learning that is going on in the classroom. CEOCFOinterviews – What percentage of your revenue goes into
R&D? Mr. Baum: The product development area last quarter was about 14½
% of our revenue. CEOCFOinterviews – Do you see that percentage changing over
time? Mr. Baum: As a percentage we would expect that it probably will stay about the
same. We are currently in about 55,000 schools, close to 50% of the schools in country,
and many of the schools use our product very heavily. They depend on them to accelerate
learning, and satisfied customers breed the potential for repeat sales. In any given
quarter, over 75% of our sales are add on sales to our repeat customers. Therefore, our
growth strategy has always been three parts. First, add more schools. Second, build up build up utilization within the
schools, by communications and training. Third, create new products for those satisfied
customers to buy. So investing in new
products is vital. CEOCFOinterviews – Which product is your greatest revenue
producer? Mr. Baum: The only one that we break out publicly is Accelerated
Reader®, and in 2000 that product accounted for about 34% of our revenue. That’s less as a percentage than it used to
be because other products are increasing faster. CEOCFOinterviews – Currently, which is your fastest growing
product? Mr. Baum: Our fastest growing product is Accelerated Math®. Partly because we are selling it into schools that
already have our reading products. The other
reason is that math is getting increasing attention as a major priority in improving
schools. Reading and math together constitute the top priority for improving schools. Mr. Baum: We really have very little direct competition. We are not
in the content business, so we’re not competitors with textbook companies or the
supplemental education companies. In fact, many of them, along with the trade publishers,
are allies of ours. We support all of the major reading textbooks, we support a growing
number of the major math textbooks, and we have quizzes on books from over 500 trade
publishers, because when our software is used in schools it creates more demand for their
product. We
take a unique approach to using computers to improve learning. We are not interested in
getting the kids on computers for an extended period of time; we don’t want to try to
teach on the computer. In fact, our products usually are used for only for five, ten or
fifteen minutes at a time. With Accelerated Math®, the child is never on the computer at
all; they work on printed, personalized assignments generated by the computer. The
computer is then doing what computers do best, which is managing data, and we leave it to
the teacher to teach, and free up more time to do so. CEOCFOinterviews – Is there any other software company
producing a product similar to yours? Mr. Baum: One publisher has a software product, with which they
have been trying to compete with us, but we believe they’ve largely been
unsuccessful. CEOCFOinterviews – What do you need to do to increase your
percentage of the market? Mr. Baum: We believe we essentially dominate the market of software
for learning information systems, but what we need to do to enlarge this market is to get
used more by the teachers, and help more kids. To
do that, we really keep our focus on our mission of accelerated learning. Another way to
state that is helping educators improve schools through technology and research. We are
very careful not to be caught up in educational fads. We will not bring out a product
simply because we think that it will sell. If it isn’t going to measurably accelerate
learning, we will not advance it, and I think that’s one of the reasons that we have
been successful, because the teachers realize that. CEOCFOinterviews – How do you market your products? Mr. Baum: We are primarily a direct marketer, and have been since
1986. We generate leads directly with
teachers, librarians, media specialists, and principals, through a variety of direct mail,
trade shows, and educational media. We have about 150 people on the phones continually
following up on inquiries, working with teachers and schools to develop orders. We have a
few book distributors who can also take orders for our products, but those are also
funneled through our direct marketing group. CEOCFOinterviews – Do you also provide support for your
program and products? Mr. Baum: The software is very much self-explanatory, easy to learn
and work with. In addition, we also have about 100 people on the phones giving technical
support who are always accessible to the teachers. The training staff that we have out in
the field consists of about 150 educators and ex-educators who do seminars, not on how to
use the software, but on how to use the information that the software generates, to
accelerate learning in the class room. Last
year we did about 3,000 seminars, mostly in schools and district training facilities
around the country CEOCFOinterviews – How does that add to your revenue flow? Mr. Baum: Directly, it flows into the service portion of our
revenue on our income statement, and represents about 15% of corporate revenues. Indirectly, it helps drive the growth of our
product revenue by improving teacher utilization. CEOCFOinterviews – Do you market your products globally? Mr. Baum: There is still a tremendous amount of potential here in
the United States, and we expect that most of our growth will be in the U.S., over the
next few years. However, we are mobile, and we do have three international offices, in
Canada, U.K. and Australia. In all three countries, they are selling localized versions of
Accelerated Reader, and Accelerated Math, and we plan that in the future they will be
selling localized versions of other software, and the training. All three are just getting
started, so it will be awhile before they make any significant contribution, simply
because the U.S. is growing so fast, but the emphasis on improving reading and mathematics
skills is just as high in those countries as it is in the U.S. CEOCFOinterviews – Is your software available in languages
other than English? Mr. Baum: We have several thousand quizzes on Spanish books, and
there are some reports available in Accelerated Reading in Spanish. We expect it will be easy to put it into other
languages some time down the road as we get into other countries. CEOCFOinterviews – What must you do to continue to be
successful? Mr. Baum: To be successful down the road, we must continue to be
focused. We do understand teachers, and we understand classrooms, because we talk to
teachers in classrooms literally every day, which is one of the advantages of being a
direct marketer. We have several hundred teachers and ex-teachers on our staff as
presenters and elsewhere. Teachers are the vital link in improving education. The key
isn’t changing curriculum, and it isn’t any magic of technology or the Internet.
Simply put, it is in getting to the classroom teacher and helping the classroom teacher. CEOCFOinterviews – What is your current cash and credit
position? Mr. Baum: At the end of last quarter we had about 77 million
dollars in cash, with no long-term debt. Our collections are generally good, currently
about 40 days’ sales outstanding. Schools
are very credit-worthy. CEOCFOinterviews – Do you do any governmental lobbying? Mr. Baum: We really don’t do governmental lobbying at any
level. We are focused on a communicating with and helping the teachers. Actually,
President Bush’s home state of Texas is one of our strongest states, and has bee for
a long time. More than 70% of the schools in Texas use our products. Therefore, I think
that we probably share a little bit of the credit for the educational improvement down
there. Mr. Baum: We are going to keep focused on the vision that has made
us a fast growing and highly profitable company over the last 15 years. We will bring out
products that enable us to accelerate learning in a wider range of subjects, and for more
children and teachers. As long as we keep focused on that, we will continue to be
successful. |
