https://youtu.be/4Lxx8anqy5I?si=T4PauIkjI0QRNGN9

New CEO has been on the job for about a year. Provided some commentary about where the business is at.

Well we have an inflection point over the rolling 12 months. Proof RCL can be a profitable business.

I guess the real question is is there much operating leverage?

Now I guess if they can maintain growth (positive commentary suggests in the near term this is likely) and grow expenses a bit slower than that things will start to get very interesting.

Some non company non operating related progress on the share register front

At least three Fundies involved now

- Cyan investment Management ?%

- Thorney Group 11.4%

- Microequities Asset Management 9.1%

Really aggressive buying suggest someone / multiple entities building a decent position.

Seems to be in the process of price discovery currently.

Could be highly volatile around this next quarterly...

Not much new information other than hinting that the business is still on track and may even accelerate the rate of growth moving forwards but nothing concrete.

They did state that they think that the contingent liability for the southern solutions acquisition will not have to be paid and subsequently impaired the goodwill for the asset meaning no net movement in the bottom line. This is extremely good for shareholders essentially news that they found 1.4 - 1.7mil down the back of the couch.

With 3 million in the bank and forecasting positive operating cashflow this actually leaves them well funded.

So market cap $9.5mil growing 10-20% inflecting to cashflow positive with a suggested stable cost base and $3mil in cash. Things actually looking very positive at readcloud currently. I would like to see a good next quarter as I think that will help confirm the cashflow timing wasn't key in the last quarterly result and it was true improvement in the business performance.

True cashflow inflection point?

Next quarter will confirm or refute as can be seen several times before costs and income can group together to create some false signals.

Perhaps 3rd times the charm?

Uh oh progress to break even seems to have stalled. Some commentary around timing of receipts revenue apparently up 19%.

Due to reduced headcount and some organic growth I've looked forwards six months with what I think are realistic but optimistic numbers and here is what that looks like.

Add in the R &D income and pretty close to breakeven over 4 quarters.

Something to keep in mind is a largish liability for the acquisition of southern solutions which will likely be somewhere around 1.5 mil cash which will probably need a capital raise.

Still "remains committed" to underlying EBITDA result in FY24 along with a positive operating cash flow outcome.

$1.63 million cash receipts from customers for the September quarter, up $1.06 million (84%) on the prior comparable quarter. Southern Solutions accounted for $0.6 million of this growth, with the balance coming from eBook Solutions and VET in schools;

Should be an interesting 12 months, new management, almost out of money, promises of an inflection point. Do or die for this company.

Cash receipts and revenue growing ~25%

Stable cost gap with run rate of around -$2million / year

Reasonable sounding strategy in place. Forecasting positive operating cashflow for next year. Hopefully the new CEO can bring some religion / VET in schools consolidated offering can find some traction and therefore operating leverage.

Fully-underwritten Entitlement Offer to raise $1.46 million 

The capital raising will support ReadCloud on its pathway to positive EBITDA and positive operating cashflow expected in FY24

Fully underwritten

Sub underwritten by management to the tune of 500k

It seems the price per share was omitted (very confidence inspiring).

The Rights Issue offer price represents a discount of:

19.0% to the 10-day Volume-Weighted Average Price (“VWAP”) of the Company’s shares; and

8.6% to the 20-day VWAP of the Company’s shares. 

1 share for every five currently held and a "free" option for every 2 new shares subscribed for exercisable at $0.10 with an expiry in 18 months.

Thoughts:

Hmmmm, so I knew they need to raise, if they were going to raise my preference is a rights offer as its equitable to smaller existing shareholders. I get the impression management will subscribe. Overall could be worse, who knows might even get them through to cashflow positive (I won't be holding my breath though).

This non-price sensitive update kind of snuck by me.

Not much new information but interestingly are forecasting positive operating cashflow for 2024. They also suggest margins (at least in VET-in-schools should start to expand.

New CEO in place. Note Skelton left A2B under controversial circumstances still looking at linked in he's been on a holiday and had some time to reflect and I suspect he has significant ambitions for RCL.

Market seems to like it with sellers having all but disappeared.

I'm cognisant of the likelihood of a capital raise requirement in the near future, new CEO would probably appreciate the headroom as well.

They probably don't need that much (maybe 2-3 million) and I hope there is the patience / market opportunity to do it at higher than todays prices.

Verified bag holder here.

As you can see from the grey line over the last 3 and a half years they have made exactly zero progress in closing the revenue and expenses gap. However, my baggy brain is suggesting to me that:

- Covid was a big disruption in schools meaning new programs were unlikely to be implemented

- VET in schools has a wide consolidated offering now and should be ready to ramp up sales

- Role up in the wider VET to consolidate small players makes sense to me

- Inflection point or at least the suggestion of it should be this year.

CEO was transitioned to a different managerial role in Dec which is ok he is an M and A banker, large shareholder and cofounder and has been on record that he would be happy to be replaced by someone better being a big shareholder himself.

Cash balance down to 1.32 mil – This will be an issue as you can see they are at a negative 2 mil run rate and doesn’t leave much of a buffer.

So we need

- A new CEO

- A capital raise ~Q1 next year at current rate

- Some indication that orange line can climb faster than the blue one

ReadCloud has acquired 100% of Southern Solutions – Training Services Pty Ltd (“Southern Solutions”) which is a leading national provider of training for certificates in Early Childhood Education & Care 

This is consistent with the companies strategy of buying small bolt on RTOs which then benefit from digitisation of resources, cross selling and back office efficiencies allowing the people running these businesses to focus on expansion and growth.

Alignment of interest is maintained by a typical part cash, part equity transaction.

In FY22, Southern Solutions generated sales revenue of $2.0m and delivered EBIT of $364k. 

The acquisition consideration is up to $3.15 million. The upfront payment of $1.35m includes $975,000 cash and $375,000 in equity. Deferred payments of up to $1.8 million are based on FY23 and FY24 EBIT performance and are 75% cash 25% stock. This indicates a price of about 8.5x EBIT.

This feels a bit expensive for the current climate but there may be strategic advantages as this expands the company beyond VET in school and may indicate that this is the direction the company wants to take for further acquisitions given a reasonably large breath of VET in school offerings already.

Thoughts:

Consistent with RCLs strategy not terrible, doesn’t shoot the lights out either. Would really like to see some positive operating cashflow to fuel the roll up strategy.  

$2.35m ($2.48 for prior comparable period) 

$7.07m total cash receipts from customers for the FY22 year-to-date (9 months), up $0.54m on prior comparable period ($6.53m)

Execution of first overseas eBook Solutions deal with leading London-based international online school King’s InterHigh and Second international eBook Solutions deal signed with leading Scottish independent educational publisher Bright Red Publishing (both are likely not substantial enough to matter but open a door for future growth that didn't exist before.)

Successful major national marketing launch of ReadCloud VET Group during the quarter, which has produced a stronger sales pipeline for the 2023 school year compared to the same time last year

Management is confident of increasing revenue growth and achieving positive EBITDA and positive operating cashflow for FY23 

Thoughts

• Results pretty much as expected with receipts and costs timing favourable to last quarter and unfavourable to this one
• This next twelve months is the real thesis test for me - VET group launched with large offering (really needs to demonstrate traction)
• Inflection point still pending

Optimistic commentary.

Cashflow strong but likely due to timing with costs as historically much higher.

Note that its technically Q2 due to the change in RCL's financial year reporting period.

$5.4 million cash in bank

Full report here.

An unusual decision to be sure for a company that was essentially buying up small VET in school businesses to consolidate the market. With only around 4 million in cash it seems like an interesting way to return capital to shareholders.

Of note:

• A roll up strategy does require a high share price as ideally you a purchasing companies primarily with stock. Is this an attempt to boost price to get this ball rolling again?
• However there is strong insider alignment potentially implying that management simply think RCL is undervalued at prevailing market prices

I would like to see insider buying on market as well. On the whole buy back are generally value accretive but I would expect them usually to be done with surplus cash flows. Does this mean that they business is likely to be self financing from here?

Its a tricky one and I'm in two minds about it. Still rightly or wrongly the CEO has always sounded level headed and sensible and has an M and A background while holding ~7% of the stock so inclined to give this the tentative thumbs up.

Seems to have worked well for smart parking...

Generally optimistic commentary:

Strong retention and recommitment of existing schools across the three sales channels (VET-in-Schools, Direct Curriculum and Reseller) for the 2022 school year

New school wins across all three sales channels

Most successful on-boarding season for both VET-In-Schools and the full curriculum segment to date, further validating the investment in our core platform and IP (?Resellers still struggling)

Well advanced for a major brand and marketing launch for the VET segment to drive late 2022 and 2023 VET growth

$4.08 million cash at 31 December 2021

Due to seasonality see graph of rolling latest 4 quarters to help visualise the business over time.

Full report here.

103% increase in cash receipts from customers for the September quarter. (Very low base due to RCLs extreme seasonality in cashflows)

Strong retention and recommitment of existing schools across the three sales channels (VET in schools, Direct Curriculum and Reseller)for the 2022 school year, with the recommitment rate sitting substantially higher than the same time last year (phew!)

New school signings for 2022 in VET-In-Schools, Direct Curriculum and Resellers are positive. Given the strong pipeline, Management is confident the momentum will continue going into the key selling/closing season of Term 4;

Cross selling of VET courses across the customer base is increasing and showing positive momentum;

Increasing interest in the ReadCloud platform may provide new revenue generating opportunities; (Not sure what this is hinting at)

85% of school customers use only one of ReadCloud’s VET providers (AIET, COSAMP or Ripponlea) in 2021. Management expects the number of school customers using more than one of ReadCloud’s RTOs for 2022 will be substantially higher. (Thesis supporting information).

Report here.

Thoughts: The pivot to a roll up of small VET in school RTOs to leverage their technology platform is an excellent idea and given the commentary I'm becoming increasingly optimistic of posting greater than 50% revenue growth this FY most of which is likely already baked in. Would not be surprised to see more small tack on acquisitions but hopefully after the share price has recovered a bit.

I feel like I can summarise this year’s report simply as disappointing.

Firstly the loss of a lot of reseller revenue meant actual revenue was flat and VET organic growth was not explosive ~ 12%.

Readcloud has morphed from a software play to a VET in schools roll up. This could definitely work as they are apparently now the second largest player in this space. The software aspect could also be great if they onboard small entities digitize their product then cross sell into their network. It is a pivot though and one you have to get comfortable with.

They remain well capitalized with cash in the bank ~$6m and no debt.

Over the next year they should put up some great numbers with the current run rate already baking in 30% revenue growth if they achieve just 15% growth on top of this they will be able to post a 50% increase in revenue.

Hopefully with COVID concerns likely to ease, cross selling opportunities and the return to growth of the reseller channel (indicated in the companies report) then FY22 should be much more pleasant as a shareholder.

Financial Highlights

17% increase in cash receipts from customers for the June quarter ($2.5m compared to the prior year June quarter of $2.1 million)

16% increase in annual cash receipts from customers for FY21 ($6.8m) over FY20 • $7.51 million unaudited consolidated revenue for FY21 (FY20 $7.46 million) despite a $1.0 million reduction in Reseller revenue compared to FY20

Current annualised run rate of $9.0 million pro-forma revenue for FY21 (assuming COSAMP and Ripponlea Institute were owned for all of FY21)

Strong cash balance of $6.3 million at 30 June 2021 (but now with a sneaky 500k debt picked up with the acquisition) 

Thoughts

Overall dispointing but expected result with the business finances set back about twelve months comparative to my expectations due to reseller revenue loss. I guess this demonstrates a risk of a third party selling your product.

Stating their run rate with aquisitions at year end is about $9 million. If you assume 15% topline growth + one more acquisition of revenue about 1 million you get to a revenue next year of ~$11 million or 45% growth (albiet mostly not organic). 

This assumption whilst not even baking in optimistic asssumptions invites skepticism given headwinds with resellers.  

Full report here.

RCL have announced the acquisition of Ripponlea Institute a small VET in schools provider.

At a glance:

-       Revenue of $0.85 million and adjusted EBITDA of $0.4 million in FY20.

-       Currently in 70 Secondary schools

-       Add language courses and a training and assessment qualification for teachers required for delivery of VET

-       Existing owner + 1 employee to continue with Readcloud

-       $1.2 million + 300k in RCL shares with a further 300k contingent on revenue milestones.

Essentially this is management doing exactly what they said they would do. Small bolt on acquisitions with cross sell and efficiency benefits with incentives aligned to allow existing business managers to focus on expanding their offering benefitting them and the Readcloud shareholders.

Announcement can be found here.

$7.3 Million unaudited consolidated revenue this FY so far with some still to be invoiced. (~4% increase)

$3.1 Mil cash reciepts for this quarter ~7% increase.

Of the three business segments:

- VET (Best margins, Largest opportunity) + 50% (organic + COSAMP acquisition)

- Direct (better margins) 22% growth

- Reseller (worst margins) -19% growth

So interestingly the worst but biggest part of the business significantly underperformed which wacked the results. Apparently the ship is being righted and there is positive commentary Re: The outlook. Thy basically say they are going to be acquisitive too.

My thoughts: 

Whilst far from ideal if part of the business had to stumble I'd pick this bit. It is the worst looking in the short term but the least impactful in the long term. If this segment can recover combined with ongoing similar growth in the other segments its not impossible to imagine a very healthy FY22.

Full report can be found here.

Highlights

Revenue up 11% to $3.5 mil

Statutory loss $1 mil

Balance sheet $7mil

Number of schools 530 (+51% YoY)

Users 117,000 (+14% YoY) – More VET yet to be signed up

VET in schools still sounds like it is firing on all cylinders and is fast becoming the crown jewel of this business (Higher margins, rapid growth).

Negatives

-       Some churn

o   “Four existing full-curriculum school customers have not renewed for 2021 having moved to a single publisher model for their eBook requirements.”

o   “Reseller partner has suffered significant school customer losses due to servicing issues”

o   Some AIET churn due to strict auspicing requirements

-       “Publishers sympathetic to the impact of COVID-19 on schools in 2020 have offered schools the ability to reactivate eBooks for the 2021 school year at a significant discount to the price of new digital resources;” ?One off effect you may assume

-       Late sign ups still deciding on print/digital mix hence delayed revenue

Thoughts

Looks like they are on track for $9-11 million range in revenue this year. Now trending towards the lower end due to the issues mentioned above. They tend to give a lot of updates if previous years are any guide so we may hear about the VET sign ups in late April. I remain optimistic but there are some definite setbacks reported that will need to be watched closely.

HY report here.

Interview with CEO

Another more bullish interview with Alan Kohler - can access for free sign up to 15 day trial

My entirely paraphrased summary of what I feel were the important points of the 2020 AGM.

Chairman’s address:

Hints at further acquisition opportunities.

CEO presentation:

Automated onboarding systems à increased scalability

-       eBook ordering / quoting

-       Can onboard “twice as many schools” with no/minimal staff increases

COSAMP acquisition

-       Popular among end users

-       Cross sell opportunities

-       VET compliance complicated especially with multiple RTOs  and hence movement towards one RTO

-       Hoping for acceleration in growth with back and forth cross sell opportunities

VET

-       Organic expansion within schools

Cannot give forecasts due to needing contracting revenue (ASX rules)

-       Full visibility not available due to unclear of number of books / Students

-       Commentary very positive with number of schools already signed and early book sales – Comes across as he’s pretty much trying to say read between the lines.

Questions:

Any current further acquisition targets?

-       Yes but no specifics

-       “Good deal flow”

Will ARPU increase?

-       Fair to assume

-       COSAMP likely to contribute (VET has higher ARPU)

Board view of company in a couple of years?

-       Difficult to answer

-       Twice the size in revenue but not in staff (maybe 1/3)

-       Growth with controlled expenses – due to automation

-       3 years out very difficult to interpret mix of business between VET/Schools

Why multiple verticals of VET and secondary schools? What is VET competitive landscape like?

-       Applicable across many verticals – Software platform applicable to most situations of content delivery

-       “Streets ahead” in technology due to platform ownership (competitors licence other’s software)

-       Sticky within schools

-       Only provider with social collaboration tools

Will they be Cashflow positive in FY2021?

-       Can’t answer

-       Good signs based on previous growth

Are there any plans to go international?

-       Not currently planning on it currently

-       500/2800 Australian schools currently so lots of local growth left

-       Currently opportunity is in Australia then could consider it but not interested in pumping the stock and burning cash with a premature international expansion. Reiterated management are large shareholders. (Basically felt like he was saying the risk/reward wasn’t there)

Plans to expand beyond VET and schools?

-       Broader VET a very exciting opportunity

-       Expansion in schools as new cohort of year 7’s come onboard and then continue on the platform over the coming years.

Can you set out long term margin profile?

-       Unclear but based on what the business mix is going to be.

A really impressive update from Readcloud and the numbers really do not tell the story at all due to the seasonality of cashflows (extreme skew to Q3/4).

Briefly:

-       Receipts 257k (about the same as last year)

-       Negative 921k Cash outflow

-       Cash on hand $2.9Mil (R&D rebate not included of 0.39Mil and don’t forget $4.6 million of in the money options to expire end of November)

Optimistic commentary was really the important takeaway from this report.

-       Record sales pipeline

-       16 Direct school customers signed before the main sales season

-       Early eBook sales of $0.7 mil significantly exceeding last year

-       New reseller agreements have signed up some new full curriculum customers

-       During the quarter ReadCloud’s existing VET business, Australian Institute of Education and Training (“AIET”), had a successful start to sales of VET courses for 2021, including four new schools in Victoria, two in Tasmania, four in Western Australia, two in South Australia and two in Queensland. Three of these new schools are expected to each have circa 600 VET students (versus a historical average of circa 50 VET students per school) – (at previous prices say auspicing fee of $2500 per VET course/school and an annual $195 per student just this announcement alone represents >$400k (+5%) extra revenue)

-       AIET has also contracted to sell VET course content and provide compliance oversight services to two new non-auspiced schools. This generates a new revenue stream for AIET with no RTO compliance obligations and opens up a new segment of the VET-in-schools market

-       Proposed changes in auspicing arrangements for South Australian schools offering VET courses under TAFE SA’s RTO licence have created an opportunity for AIET to target these schools for 2021. AIET commenced marketing to over 130 South Australian schools during the quarter and a number are already in the process of contracting with AIET for 2021

Thoughts:

-       AIET are really delivering and seem to be growing  exponentially.

-       Looking promising for option conversion meaning Readcloud will soon have a lot of cash and I would expect them to do more M&A stuff if the right opportunity comes along.

-       The business really seems to be firing on all cylinders and I’m a very happy holder at this point and am looking forward to the year ahead.

Full announcement here.

Readcloud today announced acquisition of PKY Media Pty Ltd, trading as College of Sound and Music Production (“COSAMP”).

COSAMP is the market leader in VET courses for the music industry, which is a top-10 vertical in the VET-in-Schools sector. Headquartered in Melbourne, the business provides nationally accredited VET programs for the music industry to 184 secondary schools throughout Australia, including Certificate II and Certificate III in Music Industry and Diploma of Music Industry qualifications.

This will be funded by $1,050,000 cash on completion from existing RCL funds;

• up to $250,000, to be satisfied by the issue of shares in ReadCloud, to be issued at a minimum issue price of $0.38 per share, on a sliding scale based on COSAMP achieving defined revenue targets for FY21; and

• up to $150,000, to be satisfied by the issue of shares in ReadCloud, to be issued at a minimum issue price of $0.38 per share, on a sliding scale based on COSAMP achieving defined revenue targets for FY22.

A small bolt on acquisition the COSAMP business generated sales revenue of $0.84 million in FY20 and delivered EBITDA of $0.22 million.

While paying between 4.7 times and 6.5 times FY20 EBITDA depending on the achievement of performance hurdles. It seems like a fair price but the value proposition is probably more about the strategic advantages and cross sell opportunities the immeadiate foot in the door at a further 150 schools provides.

It's worth mentioning that COSAMP's Co-founders will be staying on and will by virtue of this acquisition hold a decent chunk of readcloud equity. It is worth listening to the interview with the CEO in my other straw and the discussion about the AIET acquisition and the reason that led to its rapid growth subsequently.

Overall I see this as a low risk high reward proposition with the price either being fair or very cheap if the cross-sell and stategic advantages are realised. This is great for acquisitions which are often high risk.

Given Readcloud's balance sheet and evolving strategy this may not be the last bolt on acquisition we see.

Full announcement here.

Readcloud has $3.4 million at last reporting date. Next two quarters are likely to be cashflow negative to the tune of a few hundred K. This quarter expect 400k from R+D rebate offsetting this. Q2 15million in listed options with $0.30 exercise price expire meaning that that they will in all likelyhood be exercised. This will give readcloud a balance >$8million.

My rough expectations for the Readcloud inflection point

Numbers were basically already known due to previous announcements. 

I think the important takeaways are:

- 10 direct schools signed up earlier than usual selling season

- 2 new reseller agreements that cover 330 schools (Readcloud currently have 360 schools)

- Further resellers in negotiations

- Strong FY21 pipeline

- Several VET in school customers signed to start next year

Reading between the lines around 1.5mil in receivables making this year pretty much breakeven once cash is collected. 

3.4 mil in bank + 400K in R&D rebate expected. 

If we are going to see an inflection point in this business it's looking likely to be FY21. (Early start to selling, lots of cash in bank, options likely to be exercised and roughly breakeven on a FY basis currently)

Full report here.

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.

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.

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

-       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.

Sneaky little non-price sensitive sales update today.

Highlights:

Direct School Users double year on year to 34,000+ students

VET school customers more than double year on year to 200+ schools

New schools include the largest High School in Queensland with over 3,000 students and several other large secondary schools ranging from 1,000 to 2,500 secondary students

And.... Conversion of strong pipeline of schools for 2020 continues

"The revenue impact from the new schools will not be known until eBook orders are finalised early in 2020, and the user numbers in the VET schools will not be known until February 2020 when students elect their courses." (but presumably mo' schools = mo' money)

However "ReadCloud management looks forward to providing a further update at the AGM to be held in Melbourne on Wednesday 27 November 2019."

- So potentially some more information to come... then

Update found here

Digitisation of education is a massive tailwind and accessing textbooks on the cloud makes sense to me. Having used similar services through uni they tend to be publisher specific with a different service for each.

Consolidation under one subscription makes sense.

Disclosure: Held

4C - released 19th of July

Impression is broadly a positive update

- Positive net operating cash flows for the quarter: $0.7 million

- Unaudited FY19 revenue: $4.8 million (up~129% on FY18)

- Cash position at end of FY19: $3.1 million and no debt (Add 376k for R&D rebate, subtract 60K for outstanding publisher payments, subtract 360K for deferred consideration AIET payment) so... ~3mil 

- Seasonality implies that next positive cashflow quarter will be March next year

- Estimated outflows next quarter 1.2mil (excluding deferred AIET payment)

--> Assume this is similar in Dec Quarter leaves me expecting outflows of ~2.5mil with at a guess inflows of only ~600k Which leaves a buffer of only 1mil

With a significant increase in share price recently and the significant illiquidity of the register (have you tried to buy shares at a reasonable price its nigh impossible) I suspect there will be a credit raise probably in the form of an institutional placement.

Cash position aside business is running in top gear with some impressive user growth (80,000 up 60% since 2018), For the first time they have provided an ARPU metric of $55 apparently up 40% CAGR over the last 3 years. Strong sales pipline of new schools plus existing schools expanding thier services to other year levels. AIET aquistion is "exceeding expectations". Blue sky is ATP partnership.

To quote managment: "Overall, the Company’s sales pipeline remains stronger than ever following the significant groundwork laid by the ReadCloud sales team in the last 12 months."

Full announcement here

Readcloud provided an operational update today. Key highlights for me.

- Cashflow positive this half

- Underlying EBITDA breakeven this half

- 22% revenue growth from existing customers (strong organic growth)

- Much optimism inferred Re:2020 (Bulk distribution deal in QLD, large customer pipeline, VET and AIET growth)

- Cash of 3.1mil no Debt

Full announcement here.