The good:

• Revenue up 20% to 36m, all segments of the business reported growth
• New product Rise+ launched as a direct-to-consumer offering for practice tests, allegedly has a TAM of $200m. This is evidence of Janisson starting to monetize the IP of its huge bank of questions.
• Gross margin has expanded 9% to 64%
• Delivered NAPLAN testing to 1.2m students, a 48% increase. The Insights platform supported 0.5 million concurrent users during this test, which was conducted 100% online for the first time. This is very impressive.
• "Management have confidence in surpassing analyst consensus and achieving +20% CAGR in revenue for the next 3-5 years with gross profit margins of 70-75%"

The not so good:

• $4.1m of revenue came from the acquisition of Academic Assessment Services in November 2021 (upfront cash payment of $6m.) $0.7m came from the acquisition of QATs in October 2021 (upfront cash payment of $1.25m). If you take the acquired $4.8m out of the total revenue of $36.3, then the organic revenue growth on FY21 is only 4%, or $1.3m
• A paltry $0.9m of revenue came from new or expanded customers using the Insights platform. According to the investor presentation "New client acquisition (Chartered Accountants ANZ) and expansion of existing assessment platform clients in FY22 added $1.6m of revenue", yet platform revenue only increased $0.9m for the year so most probably the missing $0.7m will be recognised in future years.
• Still not profitable, but expects to be 'operating cash flow' or 'net cash flow' positive in FY23 after a significant rationalisation and cost take out process in FY22.
• PISA has only grown from 15 to 17 countries in the past year, out of the TAM of 90+ countries. In the prior year it added 8 countries, and reported that ARR was $2.6m, which no longer seems to be accurate. The segment of PISA where Janisson is the National Service Provider increased revenue 69% from $0.8m to $1.3m, thanks mostly to becoming the NSP in the UK, as well as more take up of the test in the US. Being charitable, I have to assume that Covid is responsible for the lacklustre performance of this business unit.
• Cash reduced by $11.3m to a balance of $11.7m. There could be another capital raising on the cards.

The ugly:

• EBITDA declined 38% to negative $1.9m, and net loss increased a whopping 181% to $9.1m.
• The company highlights that it's cost of sales has declined slightly (3%), contributing to 9% improvement in gross margin, without mentioning that operating expenses have increased by 56%. This is explained as a 'necessary step change in the operating structure of the business to satisfy the growth in revenue' A step change of $7.7m in opex to support a $6.1m increase in revenue either means the company is very positive about its future growth opportunities, or is lacking in budget discipline.
• Personnel costs increased 100% ( but headcount only increased 34%) and share based payments increased 300%.
• 'Non operating expenses' (restructuring, acquisition costs and share-based payments) have increased by 145%.
• Janisson stil seems to be struggling with how they classify the different segments of their business. 6 months ago the business units were grouped into two buckets 'Educational Assessments' and 'Assessment Platform'. Now we still have 'Educational Assessments', which basically seems to mean the administration of tests where Janisson owns the IP for the tests themselves, as in the case of ICAS and PISA. 'Assessment Platform' has become 'Janisson Solutions', and seems to refer to the use of the Janisson platform for executing large scale testing, where Janisson does not own the IP for the tests, e.g. NAPLAN. To make matters more confusing, revenue from PISA tests in countries where Janisson is the National Service Provider is classed under 'Assessments', whilst revenue from other countries is classed under 'Solutions'. The business unit structure still seems like a work in progress to me.

Takeaways

• The upside still beats the downside with many revenue drivers
• The scalability of the Insights platform and the depth of test bank IP gives Janison a healthy moat
• I'm happy to keep holding my very small rl allocation to Janisson, but see no reason to increase my holding whilst profitability still seems to be a few years (and CRs) away