A provider of digital education content to the education sector, Readcloud‘s (ASX:RCL) latest quarterly results have been well received by the market.
The business has reported continued strong growth in both customers and contracted revenues, with Q1 sales increasing to $0.44 million. Cash receipts from customers improved 38% from the previous corresponding period and, combined with proceeds from a recent capital raise, Readcloud now has around $3.4 million in cash on hand (and is expecting a $0.39 R&D tax refund in the current quarter)
With the business losing over $0.42 million in operating profit (EBITDA) last year, and burning through $1.1 million in operating cash in the latest quarter, it will need to sustain strong growth sustained in order to reach breakeven anytime soon. Investors should, however, be mindful that the first quarter is typically the slowest for Readcloud due to the spending cycles of schools. The 2nd and 3rd quarters tend to do most of the heavy lifting.
The company said it had secured new customers across all four of its sales channels and it also announced a strategic distribution agreement with an established vocational education & training provider, Training Resource Solutions. Meanwhile, the team has recently finished development of a new media overlay feature, which is hoped to further boost the attractiveness of the offering.
Readcloud didn’t provide specific guidance, saying only that it was well positioned “for strong growth going into the 2020 school year”. Based on last year’s financials, shares are trading at roughly 7 times sales, but nevertheless remain below the Strawman community consensus valuation.
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