Feeling underwhelmed by the JAN Strategy update.
SUMMARY OF THOUGHTS
On the one hand, it was probably not realistic to expect too much - the platform is world class, but JAN seems to have been sitting on its reputation and current cohort of customers, has been all over the show, lost focus etc.
So, the New CEO is going back to basics, leveraging on the core strength, and actually SELLING JAN to the broader market. Not sure there is anything wrong with this approach - not sure what else she could do really.
There was a lot of use of big buzz phrases, particularly "AI", but there were no specifics as to what this actually meant from a new capability, area to focus efforts on, cost estimates etc.
What was needed, and was conspicuously missing, were clear measurable numbers/targets as to what good looks. That is troubling. I get that Sujata is 4M in the role, but she would have known that shareholders would be clamouring for something tangible to re-focus their investments on. While she has lived and breathed Assessments in her career, I am concerned that this was in a private company setting (OET is what her Linked-In profile says, 11 years+, decent length).
That she did not pro-actively address shareholder anxieties with more specifics could be telling of her lack of experience in a public company environment and the additional expectations management requirements that go with it.
BUT
The platform is still world class, is robust and there are some big contracts already in play and coming into play - there is a decent base to work from.
The actions, while lacking specifics, all make sense - going back to basics, repositioning the company, selling the company and its capabilities etc. All are needed, regardless of who ran JAN and what other things it does/does not do.
WHAT TO DO
Unlike my other turnaround holdings (EML, EOS, CAT etc), other than the CEO coming onboard, I can't quite see all the ingredients to make JAN successful being in place today.
But to be fair to JAN, I ignored those turnaround holdings while the new CEO got its ducks in a row and only revisited after they were in place for some time. So perhaps I should give Sujata the time to really get going rather than exit now - it could well be too early.
JAN is only 0.6% of my portfolio and I have too much cash as it is today, so crystallising the loss to raise more cash, does not help things.
The JAN price is already rock bottom - the only way from here is up really. But it will be an uncertain 12M or so until Suhata puts out clearer markers AND show tangible progress that we can see in the financials.
Going to sit on this for a few days before working out what to do.
Discl: Held IRL
STRATEGY SUMMARY
We've got a great assessments technology platform, not many know what we do, we have undersold ourselves - we need to double down on our core strength, let the market know who we are, what value we can deliver
We want to "AI" the platform - lots of "AI" thrown around, no specifics in terms of scope, timing, cost
Market is growing to USD21b by 2030, 10-12% CAGR projected, AI is driving assessment innovation/disrupting the assessment industry, the competitive landscape is evolving
Blueprint for Growth, the 3 Horizons
YEAR 1 FY2025, PRIORITIES AND OUTLOOK
Had a closer look at my JAN position these past few days.
Discl: Held IRL
SUMMARY
- Thesis appears intact but short-term headwinds to growth aspirations have appeared and are still being battled
- New CEO Sujata Stead is well regarded in the Assessments world, likely to be the catalyst to restart the growth engine - much will depend on how she views the business and her strategy going forward
- The Janison Insights platform is still a formidable moat and allows JAN to rapidly scale new contracts, but contracts need to be won
ACTION PLAN
- Stay invested as a turnaround from a decent base of average growth appears on the cards
- Opportunistically top up position from current 0.90% to max 1.25% if price falls below $0.25, ahead of results, on the expectation that 2HFY24 meets expectations and slightly improves on 1HFY24 and pcp, indicating that gains thus far in terms of platform enhancements, customer stickiness, cost containment can be sustained
- This sets up the platform for the new CEO to present the new strategy for the business
- Takes advantage of current prices at historical lows to average down cost
- This approach may well be too early to take, particularly as the new strategy is unknown - this is the risk, but the reward is higher upside for a thesis that appears very much intact, subject to understanding the new strategy.
- Risk mitigation is that the price is at all-time low levels, so downside and losses is expected to be limited from here
- Progressively top up to 2.0% max if the new strategy makes sense
- Review position after the FY24 results are announced and again when the new strategy is announced
EXIT PLAN
- The new CEO’s strategy does not make sense and/or lacks ambition or aggression to return JAN to a growth profile
- Loss or non-renewal of big contracts
ORIGINAL THESIS IN MID-2022
JAN’s Moat
- Janison Insights is JAN’s Digital Online Assessment platform - proven ability to deliver online assessments globally, at scale, (eg. National NAPLAN assessments)
- End-to-End capability in design, implementation and delivery of assessments for school-based clients
Competitors
Digital Assessment Platforms:
- Inspera Assessment
- Local Government- City of Lund, EICOM Institute, Norwegian Directorate for Education & Training, AQA Global Assessment Services
- Higher Education - Oxford University, UNSW, University of London, University of Cambridge, University of Queensland among others
- No national government clients highlighted
- JAN delivered 5x more assessments, 33m, this is significantly bigger delivery scale
- Caveon Scorpion - mostly corporate clients
- Rest appear to be much smaller assessments software
Others - much smaller competitors competing against individual product offerings
Review of Thesis
WHAT HAS HAPPENED SINCE
- Price fell to all-time low since listing of $0.24, still languishing ~$0.275
- Evolving into (1) an end-to-end Assessments provider with Assessment-related services to Janison Insights Assessment Platform and (2) a stronger JAN-parent relationship in its direct assessment product offerings - International Competitions and Assessment for Schools (ICAS), Academic Assessment Services (AAS), RISE+ etc
- CEO change - Sujata Stead replaced David Caspari in May 2024
- Revenue is a mixture of organic and acquisition-driven growth, margins around 63%
Negatives
- Still growing but growth slower than projected - growth aspirations/aggression seems to have eased off, could be one of the reasons for David Caspari’s departure
- Headwinds from (1) ICAS revenue flatlined in 1HFY24 (2) OECD/Pisa Based Test for Schools did not quite take off
- Acquisitions have made sense, but have mostly been smallish and lack the step-change ambition required to resume growth trajectory
- Going forward strategy is in limbo until Sujata develops the new strategy, expected in 1QFY25
Positives
- Reached cash flow positive goal in FY23, sustained into 1HFY24 - cash on hand $9m, no debt, significant improvement in free cash flow vs 1HFY24 Capex coming under $1.5m
- No immediate concern of capital raising, particularly as share price is not raising-conducive - no capital raising since Jul 2021, which raised $3m @ $0.82
- Further extension of NAPLAN contract to 2030, $24m across 6 year contract
- Big $45m over 5-Year win with NSW Dept of Education for 5 Year Selective Education Placement assessments, on track to a May 2025 startup
- Cost cuts have occurred in FY23/FY24 - $2m annualised cost taken out
- The products that JAN has acquired and launched have made sense and been well integrated - ICAS, AAS, QAT, RISE+ - product offerings appear clearer
Financials
