30-Sep-2020:  CCZ Equities Research: Janison Education (JAN): Q1FY21 Trading Update: On track through testing times

CCZ Analyst:  Chris Macrow, cmacrow@ccz.com.au, +61 2 9238 8222

Recommendation: BUY, Target Price: 47cps (unchanged), Market Capitalization: $80m, Share Price: 38cps (39.5 cps on 02-Oct-2020), Sector: Technology.

• Q1FY21 trading update:  JAN reported a solid September 2020 quarter given the current environment. Highlights from the trading update include: 50% growth in revenue (vs pcp) to $7.6m in Q1FY21 driven by $2.4m (70%) growth in assessment revenue ($2.7m from the recently acquired ICAS assessment offset by $0.5m downturn in physical assessment revenue) - CCZ estimates ~7% organic group revenue growth if ICAS revenue and $0.5m COVID related downturn in physical exam management revenue are both excluded; 12% growth in learning revenue (vs pcp) due to 3 new client wins and further expansion of Centennial College coursework digitisation; 75% of Q1FY21 revenue related to assessments and 72% of Q1FY21 revenue was platform revenue; Q1FY21 gross profit of $3.6m at 47% GP margin - this is in line with 1HFY21 CCZ forecasts of $7.4m GP at 47.5% margin; $1.4m EBITDA in Q1FY21 (up 393% vs pcp) – this is unlikely to repeat in Q2 due to the loss of ~$0.8m in JobKeeper and recruitment of more sales and key management positions; Q1FY21 NPAT of $0.1m is a solid result for JAN vs $0.5m loss in pcp; Strong operating cashflow of $2m in Q1FY21 (vs negative $1.2m in pcp, ~$0.9m JobKeeper benefit) with expected cash on hand of $11.8m at 30 September 2020. No material changes were required to CCZ forecasts based on the trading update and outlook.
• 1H21 outlook commentary:  JAN management have guided towards similar revenues in Q2FY21 to Q1, which equates to an expected $15m - $16m revenue for 1HFY21 (COVID dependent). This is in line with current CCZ forecast of $15.5m. The key positive hidden in this guidance is that JAN had $2.7m of ICAS revenue in Q1. For JAN’s revenue to remain constant this implies they expect other sources of revenue to replace this ICAS contribution in Q2 (other than the expected ICAS revenue of $1.3m that lands in Q2). JAN’s recent investment in sales and marketing should contribute to strong revenue growth going forward. JAN have identified the 4 key drivers of platform revenue growth in FY21 as: PBTS, D2L partnership (which went live last week), expansion of clients in the higher education sector and ICAS.
• Investment thesis reinforced:  The Q1FY21 trading update reinforces our view that the investment made into developing a functional, scalable, and secure assessment platform will allow for significant uplifts in revenue with relatively stable fixed costs. JAN’s increased spend on sales and focus on the schools and higher education sectors will drive revenue growth and margin expansion as they leverage the Insights platform to lift their share of the growing digital assessments market (estimate from a recent Deloitte Access Economics report is that global students will double by 2025 to 1 billion). JAN will benefit from relationships it is building with governments around the world as more assessments are digitised.

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13-Aug-2020:  CCZ Equities Research: Janison Education (JAN): FY20 Result: Schools and Execution the Key to Success

CCZ have a BUY Recommendation on JAN and a Target Price of 47cps (up from 39cps).  [I do not hold JAN shares]

21-May-2020:  CCZ Equities Research:  Janison Education (JAN):  Bargain acquisition unlocks another opportunity  

CCZ's call on JAN is still "Buy" but their TP has now dropped to 39 cents.  JAN closed at 30.5 cents on Friday (22-May-2020).

CCZ Equities Research have released two updates during February concerning JAN:

04-Feb-2020:  CCZ: Janison Education (JAN): PBTS Gaining Traction

13-Feb-2020:  CCZ: Janison Education (JAN): 1H20 Result: A+ for ARR Growth

CCZ's TP for JAN is 51cps and their Recommendation is "BUY".  JAN closed at 36.5c ($0.365) yesterday (06-Mar-20).

30-Oct-2019:  CCZ Equities Research:  Janison Education (JAN) - An Appealing Assessment

CCZ's call on JAN is "Buy" and their TP is 48 cents.  JAN closed at 39 cents on Friday (Nov 1).

• Initiating coverage: Janison Education Group (JAN) is a digital learning and assessments provider founded in 1998 and listed in December 2017, raising $10m at 30c. JAN’s key offerings are digital learning solutions, digital assessment platforms and assessment facilitation. It now boasts a global customer base supporting revenue of $22.5M in FY19 across 2 divisions, over 120 full time staff and up to 60 contractors working across Australia, New Zealand, Singapore and Vietnam.
• Recent contract wins and partnerships confirm that JAN has an attractive offering: gaining the OECD’s tick of approval against larger competitors gives us comfort that JAN have a leading product and will continue to increase their share of the expanding digital assessments market. The tertiary assessments partnership with CoSector points to Janison establishing sales in the untapped UK market.
• The investments both in time and capital made into developing functional and scalable assessment and learning platforms will allow for significant uplifts in revenue with relatively stable fixed costs. Going forward the shift in product mix from lower margin services revenue (driven by implementation projects which are charged at an hourly rate) to higher margin recurring platform and licensing revenues will improve JAN’s profitability.
• CCZ views the Assessments business as having the most exciting growth prospects (represents 62% of revenue in FY19, expect to approach ~70% of revenue in FY20), specifically in the schools (K – 12) and higher education sectors. The strategic acquisition of pen and paper assessments facilitator LTC (has relationships with 38 of 42 top AU universities & 20 professional associations incl. CFA) should allow JAN to take advantage as the higher education assessments market becomes digital. Expect ~$500k licensing annual recurring revenue (ARR) for each large university.
• OECD PISA-based test for schools (PBTS): Revenue to start coming on board in FY20. There are 10 countries who currently participate in PBTS; 3 (Brazil, Russia and the USA) have recently signed deals to digitise PBTS testing with JAN. The PBTS is available to all countries who participate in Pisa (80 countries in 2018) which represents the total addressable market (TAM) for JAN’s PBTS rollout. Each country that signs up represents a minimum ARR of $100k. ~1 country is being signed up per month at this stage with expectations to speed up. Implementation costs are immaterial for each new country. 

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