Consensus community valuation
$0.340
Average Intrinsic Value
19.3%
Undervalued by
Active Member Straws
#Q2 2020 Results
Last edited 5 months ago

A good jump in cash receipts for what is typically a slow quarter (given timing of school year). In FY19, ~93% of cash receipts came in the second half.

Management appear confident in a strong second half with strong sales conversion across its four channels.

Key points:

  • Number of schools using the platform increased 75% to 350 over the past year
  • Focused on larger schools as reference customers. Recently signed 3 of the largest state schools in Brisbane
  • Customer cash receipts up 155%
  • Cash balance of $2.8m
  • Operational cash burn averaging -$800k per qurater

ASX announcement here

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#Q2 2020 update
Added 5 months ago

Redcloud has released their Q2 update, and it is quite positive.

Key takeaways:

1) 103k users signed up,  an additional 7k signups since the November update, with more to be onboarded in the next month.  

2) Q2 receipts up 285% in this seasonally low quarter.  

3) No. schools is little changed from novermber at +350 schools. Reported encouraging pipeline generation from signing up 3 large Qld high schools. 

4) VET school signups will not be resolved until the end of Febuary, however, RCl reported VET schools more than doubled to +200 in teh Nov. sale update.   

5) Importantly, staff costs have remained relatively flat for the quarter.   

6)ARPU was reported to be $54 in FY19, with CAGR of ARPU at 39%.  Assuming ARPU of $64 per user, revenue for FY20 looks like being $7.5-$8.5M, depending on final results of the onboarding season.   

Overall, strong revenue and good cost control should see RCL reach beyond breakeven in H2 2020.  

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#Business Model/Strategy
Last edited a month ago

ReadCloud should announce a roughly breakeven result this year. New customer’s have already signed on for next year accelerating FY21’s sales curve.  As they start to generate cashflow this can be re-invested in the business to both expand their market share though promotion of the platform but more interestingly be employed to expand their eLearning solutions.

 

As schools tackle the need to provide a modern tech-enabled curriculum they will be looking to the companies they know and already do business with to potentially solve these problems. This is where it could truly get interesting for ReadCloud if they are able to leverage their technology and existing relationships to become an elearning platform with multiple tools such as discussion boards, homework delivery, video conferencing and assignment submission etc.  This will increase uptake as other schools look for the same solutions and allow cross sell opportunites within Readcloud's existing network.

 

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#Investor Presentation
Added 3 weeks ago

Whilst not providing a heap of new information given it has only been a month or so since the last market update I think that this presentation summed up the thesis nicely so I have summerised it here.

 

On the business...

Secondary schools

TAM: 1.6mil secondary students

-       75% in “book hire” schools (core market) – Schools rent books and levy parents

       o   47,000 users (~4% penetration) – Grew 81% over last year

       o   Typically enter into 2-3 year contracts and contracts typically cover 2-4 year-levels in the first year with roll-out to additional year levels in subsequent years

       o   ReadCloud has averaged 23% organic revenue growth from existing school customers

-       25% book list schools – parents buy books usually from reseller

       o   56,000 users (~14% penetration) – Grew 17% over last year

       o   With only two national booksellers (one of which is a ReadCloud reseller), ReadCloud has successfully partnered with seven resellers in four states and is actively pursuing further partnerships

       o   Partnering with a local school bookseller who doesn’t have access to an eReading platform enables ReadCloud to sell its products to schools who already have a trusted relationship with a local supplier of stationery and textbooks

 

VET in school - AIET division

-       242,000 secondary students doing VET per year

-       9000 users (~4% penetration) – Grew 50% over last year

-       Annual Auspicing fee per VET qualification ($2,500) delivered by that school plus an annual student fee per enrolled student ($195)

       o   9000 users implies 1.75mil in annual enrolment fees alone

 

Broader VET

-       Early stages of digitising other Registered Training Organisations material

-       4.2 million students enrol in VET courses with 4,193 training providers

 

 

On profitability...

-       ReadCloud’s cost base is largely fixed (85% of non publisher / bookseller costs are fixed). As such, profitability is highly leveraged to growth in user numbers

-       YTD (to May 2020) revenue is now at $7.3 million (52% growth over FY19)

-       Direct schools revenue growing 84%, VET in Schools growing 65% and revenue from Resellers growing 14%

-       YTD (to May 2020) revenue is now at $7.3 million

-       Positive EBITDA expected in H2 FY20 with a significant reduction in full year EBITDA loss despite substantial investment in platform

 

On insider ownership...

-       Board and management shareholding 23.5% of company

-       Top 20 shareholders 77.6%

 

On Corona Virus...

The pandemic is not likely to have a significant impact on ReadCloud FY20 results as schools had already purchased their books for this year, however, it provides another element of momentum into the selling season for 2021 as all schools have a heightened awareness of the need to have an effective Home Schooling capability.

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#opportunity
Added 3 months ago

Was looking at this company last night with the annoucment of schools shutting down in some states. Thought it would very benifical to this company considering their buisness model. Not only did they lock in contracts before the pandamic, but now are reaching out too schools and isnitiutes that need online learning quickly. I think other people noticed too with it currently surging 32 percent, not sure if this will last, but it definitly will come out of this stronger then it went in. Though in this current climate buying somehting that is now more pricy then it was coming in could be a big mistake. This however i think shows the strenght in the future of this company.

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#HY2020 Report
Added 4 months ago

Key higlhights:

1) Revenue tracking at $5.5 M, as at end of February, 83% above pcp. 

2) Revenue will be heavily skewing to the second half.  e-book sales for Jan/Feb were $1.55 M, up from $0.48 M in pcp.  

3) VET auspicing fees exceeding $0.77M in Jan / Feb, with more invoicing outstanding.  Also VET student fees are yet to be invoiced.   

4) Looks to be on track to exceed $8M in revenue for FY2020.

 

Outlook:

1) reported competitors struggling with implementation issues. 

2) Antipate growth through existing customer schools, through expansion into additional school years, and cross selling VET and readcloud platforms.

3) Anticipating increasing momentum in acquiring new schools, with a focus on larger schools delivering cost efficiencies.      

4) Digital transformation of schools anticipated to provide tailwinds for RCL into the future.  

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#Podcast
Last edited 6 months ago

I run through some thoughts on Readcloud in this podcast.

Have time stamped the link so you should jump straight to the relevant segment by clicking here

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#RCL March 2020 4C
Added 2 months ago

Basically, in line with my expectations outlined in a previous straw.

Highlights

-       Cashflow positive (expected given the commentary around the last quarterly balance being the low for the FY.

-       $7mil (51% growth on pcp) unaudited revenue with some still to come (looking promising for my full year guess of ~$7.5mil)

-       Some commentary around an accelerated start to the 2021 selling season due to interest in online learning tools accelerated by Covid.

Last year majority of payment to publishers occurred in this quarter $1.18mil Vs $303K if a similar pattern holds next quarter will bring the full year close to breakeven.

Full report can be found here

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#HY20 Results
Added 4 months ago

 

-       Revenue of 3.15m (35% up from HY19) management are flagging a larger second half skew than previous years. Unlike some companies this can be believed due to the seasonal nature of the school year

-       Unaudited revenue for year to date of 5.51m (up 83% compared to same period last year)

-       Ongoing orders of ebooks / onboarding schools

-       Majority of VET revenue to fall in second half

-       3 largest Brisbane state schools now customers / large NSW Anglican school / resellers won two large prestigious grammar schools in Melbourne as customers

-       Peak selling for VET in-school over Feb/March (so selling season not completed)

-       There is some commentary over the timing of invoicing suggesting that the revenue will be more weighted to the second half assuming 40% / 60% (last year it was 48% / 52%) FY revenue will around 7.8m representing around 60% growth in the top line

-       Gross margin was noted to decline by 1.8% in report due to lower margin eBooks representing a larger proportion of orders – will be important to monitor this number as margin has been variable.

-       Cash on hand of 2.84m with commentary that this likely represents the low point in cash reserves for the year

 

I’m optimistic that we will see a breakeven/maiden profit at the FY. Commentary remains positive and thus far management have delivered on expectations.

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##Escrow Period Ends
Last edited 5 months ago

Approximately 40% of RCL capital (including options), will be released from escrow on February 7.    

depending on the holders intentions, this may present an opportunity to buy RCL at a reasonable price......

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#3Q20 4C Report
Added 2 months ago

Increase in all key metrics.

Direct full-curriculum schools 46k

Reseller schools 56k

VET-in-schools 8k+

Total Users: 110k

Receipts 2,924

CFO 378

Cash 3,176

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