Appointment of Non-Executive Director to Janison Board - Kathleen Bailey-Lord FAICD 

Again, what does she bring to the table?? Governance... I don't know, but we shareholders are giving 299,145 options to someone who just rocked up and got a job. If there are large shareholders (IRL) who read/participate in Strawman please vote "No" for giving her stock options in the next general meeting.

They should buy shares like we do and not get handed out for free for doing nothing. She clearly has a lot on her plate being the non-exec director in Alinta Energy, QBE Insurance (Auspac), Melbourne Water Corporation and Monash College.

It seems like anyone can be a Non-Exec director at Janison.

Just to show how useless the appointment is

• 299,145 Options representing a grant value of $350,000
• Exercise price $1.17, based on the 15-day volume-weighted average price of the Company’s shares immediately prior to the effective date of appointment
• Vesting subject to continued employment until 23 February 2024
• The expiry date of each Option is the earlier of:
• 5.00 pm (AEDT) on 23 February 2027, being 3 years from the Vesting Date; and
• if unvested, the date that Ms Bailey-Lord ceases to be a Director of the Company.

Basically if the share price does not exceed $1.17 in the next 3 years her options expire and she would leave the company. if the share price is more than that then she will exercise.

I don't want to start a riot but vote "No" haha

While Janison says they bought the company at a low valuation, unfortunately, the terms of the "Earnout Consideration payable" means they overpaid for this acquisition. Honestly, AAS (Academic Assessment Services) negotiated a great deal for themselves. It is very similar to LTC where Janison overpaid for the acquisition.

Diving deeper into the terms:

• Janison will pay $9 million in upfront consideration consisting of $6 million paid in cash and $3 million paid in ordinary shares (“Upfront Consideration”).
• An additional $8 million may be payable on the completion of the FY23 financial year comprising $1 million in cash and $7 million in ordinary shares subject to certain financial criteria being achieved (“Earnout Consideration”).

While most of the expenses are in shares it hurts shareholders as we are diluted since the share count rise. The most troubling part of the acquisition is the terms of the earnout consideration:

• Minimum operating revenue target of $11 million in FY22 & FY23 combined.
• Operating revenue targets measured and paid on completion of FY23.
• Earnout Consideration adjusted up $0.50 for every $1.00 of operating revenue above the $11 million target and down by $1.00 for every dollar below.

I am sorry but that is way too easy of a target to achieve. AAS grew 29% from FY20 to $5M in FY21. They could do nothing for 1 year and generate $1M in FY23 to reach the minimum $11M revenue threshold for FY22-FY23.

Since the straw is about Assessing the acquisition, Janison has to justify the "synergy" otherwise they just overpaid for this acquisition. Cross-selling the ICAS exam is a good argument but how does that grow revenues under AAS? There are too many questions compared to answers and it diverts resources away from PISA. I would have much rather have seen the team spend more resources to win another contract from OECD. I know there are other tenders being pushed, why can't Janison bid on them etc...? Or grow schools in the existing PTBS contract.

Anyhow enough with the rant, very disappointed as it is also my largest position IRL and in strawman. I will hold for now have to readjust the financial model and revalue again...

Janison announced Vicki Aristidopoulos will be joining the board. She was the Chief Marketing Officer for Afterpay. It all sounds great but I don't know what she brings to the table?? Why would Janison need a marketing person for brand management when their product speaks louder than marketing expense. I really hope she doesn't convince the board to spend money on digital advertising. God, I hope not.

Afterpay is a company geared towards consumers so marketing spend and the overall strategy to win customers is really important. However, Janison is a digital education company where the customers are universities, schools and educational institutions that are geared towards the reliability of the product. After all, they are the ones paying for high-pressure exams

The only "consumer" part of the business is the ICAS exam where parents pay the cost. I really don't want her to get involved and shove Facebook ads or try to improve google search ranking. The business already operating in 90%+ gross margins. Janison is building a brand you can trust for online exams. Why would Janison need to spend on additional marketing?

I really hope her involvement in the business is limited to these areas:

1. Buy shares in the business (align with shareholder interest and obviously jump on board to the next big thing which is disruption on the traditional education system)
2. Make suggestions on building a community around paying ICAS customers without spending money on excessive marketing. We all see Afterpay's financials and the marketing spend is not $0.

There's soo much information out there it's quite extraordinary that it is coming from small cap company. I actually don't know if they are reading my straws as they addressed all my points lol. They broke down not only the revenues but even the expenses including cash. We get it... The CFO is awesome :) 

My analysis after reading the 116 page Annual report: 

• Noicewon11's question on OECD not addressed (The question is who is paying Janison in the OECD contract? is it; OECD, the education board of the country or schools? Regardless, Janison recognised $1.6M in revenues and the current ARR ~$3M. Stantons did the accounting so if the numbers are wrong they would be responsible. Tbh the question is irrelevant now as it does not make a difference in current revenues. I wager my last month upstreet cash that they are gonna make an ASX announcement clarifying the revenue source for OECD :D 
• The gross margins (GM) was 55% for combined business segment. However, if you split Assessments & Learning: 
  • Assesment - GM was 53% a 12pp improvement from last financial year 
  • Learning - GM was 64% a 11pp improvement from last financial year 
• I did a GM forecast as Janison has made their intentions very clear on FY24-FY25 revenue to be $80M-$100M. My modelling you can find attached to the straw:
  • OECD at 75% GM till FY24 
  • ICAS at 90% GM till FY24 
  • Assessments contracts (they could be recurring like NAPLAN or one-off like SCIO) at 55% GM till FY24 
  • Services (which is JEM) at 35% GM till FY24
  • Acquisition revenue (I am expecting a tiny acquistion ~ $5M & GM to be 40%) 
  • Tabulating all that into a forecast you get gross margins improve from 55% in FY21 -> 63% in FY24. Hence, assuming 70%+ GM is not practical moving forward.
  • To me, operating margins is a better metric to look at than gross margins as OP Margins inform shareholders the amount left for running the business and doing nothing else (like paying taxes, accounting depreciation etc..). For Janison I actually view it as a loss for FY21 even though they claim EBITDA postive of $3M. The funny thing of being transparent, is that they noted in the footnotes that $0.94M goes towards paying the lease for the new building and the largest depreciation expense is product development cost ~$3.3M. I have to count both of them as valid cost to operate the business which means EBIT is negative and is the right metric to assess performance. 
• The next point is the geographical revenue mix and it is where I am most bullish on the business long term:
  • AUS/NZ accounted ~ 80% of revenues and the latest $15M capital raise is to fund growth internationally. 
  • I hope they win more customers in UK as the cost of business there is much cheaper since they are already serving customers. 
  • Hardly any revenue from America and I hope D2L partnership provide the reach they need to expand the PISA test to schools across districts. 
• The government Job Keeper cash boost 
  • It goes to show the consequences of overpaying too much during acquisitions. 
  • The pandemic stifled existing revenues and they were given $1.6M jobkeeper of which $1M was paid to staff in JEM to keep their jobs. 
    • Great to see a company treat their employees well. Although from a shareholder point of view, it still bugs me that they overpaid for LTC. You can see it in page 34 under depreciation (Acquired intangibles -> $1.8M). It dents EBIT margins. Best way to overcome is through high margin revenue growth.

There's way too much information to cover in just one straw but those items were things I have not covered/expanded in previous straws.    

On a last personal note, I rescheduled my CFA for Feb next year and guess where I am going to do it? It's at Ultimo proctored by Janison lol. I thought the $0.94M lease was new HQ for only staff but in-fact it's also for computer based exams like the CFA. I am now contributing to Janison's top line through JEM :D JEM needs all the help it can get. 

More on that in the valuation update... 

Janison provided FY21 results & strategy outlook couple of weeks ago and I had to rethink the investment thesis as I made quite a bold assumption which is no longer correct. 

At long last they broke down revenues within assessment divison which has always felt a black box and I made guesses based on the available information at the time. 

We now can see within $18M Assessments: 

• $3M from OECD contract 
• $5M from ICAS 
• $10M from Assessments contract. You are looking at: 
  • NSW DOE check-in exam 
  • Chartered Accountant exam 
  • NAPLAN
  • SCIO 
  • etc.. 

So the key takeaway is gross margin and Claude grilled me on the margin forecast and he makes a fair point after seeing the revenue breakdown... 

I could have made the case where Gross Margins would be close to 75% if OECD revenues make up more than 70% in FY24, however it will defienitely be below that as Janison is forecasting $30M p.a. run rate. My hope was that OECD would be atleast $60M and my assumption was $80M.

In saying that, they are guiding for $80M-$100M by 2025 which was the gameplan from the start. I got the forecast mix wrong as I was making a stab in the dark without knowing the OECD revenue forecast.  

Does the latest announcement and guidance by Janison dent my valuation? Absolutely! But by how much?

Find out in the next valuation update ;)  

To summarise the latest update -> covid will accelerate revenue growth and force governments to conform to remote exam testing. 

The lockdowns across Australia is preventing in person examination. I did not realise the severity of the situation until I saw the impact of HSC trial exam deferral. If I was doing the HSC again, I would be extremely stressed with the uncertainty & added pressure to perform well. It's a pity that governments do not face consequences for terrible decisions that affect large number of people. Government is a corporation at the limit. They are only held accountable during election time. There's no extraordinary meeting to kick those in power out of power.  

The NSW Department of Education was forced to use the only technology provider capable of "playing a critical role in allowing [the HSC Trial] exams to continue". 3 guesses who that was? What I am quite annoyed at is the slow adoption to change. The HSC exams are coming up in October so why can't they conduct it remotely? We are already in lockdown and it's not like case numbers magically disappear when we reopen. Remote exams was trialled with NAPLAN this year and it worked. I agree it is a completely biased point of view being a Janison shareholder, but come on, Covid is a public health risk why increase the likelihood of transmission with in-person exams? 

Anyhow, the annual report will be provided Tuesday, August 24. I hope the report provide clarity on the 3 pending questions in my previous straw. Most likely have to ask at the webinar.   

Janison renews agreement with OECD to be the US National Service Provider (NSP) for a further three years.

In my previous straws, my assumption was that all agreements whether NSP or IPP would continue till 2024. I was not aware that NSP agreements expire after 3 years. Thus, yesterday's announcement was more of a relief than a positive announcement. If Janison did not renew the NSP there would be drastic changes in forward revenues. It would completely change my current valuation. 

Fortunately, the NSP agreement was renewed. The most important part of the announcement are the revenue targets for USA expansion. We finally at long last have concrete targets to assess US growth. Prior to the announcement, US has always been hidden in management commentary. I consistently faced challenges tracking the US performance but now it is clear what they plan to do:

• "Janison has secured more than 25 schools in our first month of this new school year. At a fixed price of A$7,000 per school this will generate more than $175,000 for Janison in FY22 with future years’ revenue guaranteed from many of these schools signing on for five-year agreements." 
  • Very interesting update, they are still at the very early stages. The recent capital raise makes a lot of sense. Janison need to put a lot of resources to grow in US.  
• "The Janison team and its partners, consultants and US based experts are now focused on recruiting schools to take the PISA for Schools test in the coming school year (starting in August/September) and are targeting 100-200 school registrations in the first year of this renewal."
  • So we have a target: 100-200 schools in FY22. The current ARR from 25 schools is $175K so multiply by 4 = $700K. 
  • My valuation assumption for US was 100 schools in 2021 so I think I am right on the money.
  • The assumption that I have the most uncertainty is 6400 schools in 2024 ~ 20% market share. 
    • If Janison cannot get there, then my $3+ price target is hard to justify. 
    • However, if janison get there in 2024, I believe the company is undervalued for the next 3 years. 

Before wrapping things up, I note couple of questions raised by Claude Walker and Noicewon1 that require clarification before I revalue the business: 

• What is gross/operating margin of the OECD business vs Assessment or Learning business? 
  • I think the more important question is what percentage of Assessments revenues come from the OECD contract?
    • Unaudited total platform revenue is $22M for FY21, but remember platform is a mix of Learning + Assessment. We have to wait for the Annual report before knowing the revenue split. My hunch is that the split could be 70% Assessments & 30% Learning. 
  • Currently, I do not have the numbers to answer this question but my assumption is that the question could be pointless if the OECD revenues makes up > 70% total revenue in 2024. 
• Who pays Janison to conduct the OECD PBTS exam? Is it the OECD or the customer?
  • Bear in mind customers are countries :D and I don't think the Foreign Education Ministries have are paying small cap companies from Australia. Unless if it is for defence related contracts. 
  • My thought is that the OECD pays Janison. Although I am not sure if the payment is made automatically after the testing period for a given country. We probably should ask management on how the cash collection work for the OECD contract. 
• For me, I want to know whether partners that Janison currently have like Benesse in Japan are in discussions with Janison to proctor exams outside of OECD PISA exam? It does not have to be Benesse, I used Benesse as an example. 

Now that the SPP is nearing the close, let's look at the capital raise presentation deck in more detail. Starting with the general summary:

• Janison achieved significant revenue growth despite the COVID impact. Most first time investors might not know that Janison has 2 subsidiaries UNSW Global (acquired 2020) but the other is JEM formerly LTC (Language Testing Consultants, acquired 2019).
  • They overpaid for LTC and paid the price with covid. LTC is the entity proctoring high pressure exams. Some of the notable exams are for IDP Education, and also UMAT (the undergraduate entrance exam for medical students). Hence, you see IDP Education's logo in Janison's presentation deck (slide 6)-> do not tell Rudi that IDP partnered with a small cap company :D  
  • Despite this, covid made in-person exams extremely difficult. Therefore, Janison lost a fair chunk of revenue. They had to transition LTC to proctor online/computer based exams via JEM. 
  • The CFA exam is proctored by JEM in Australia but Prometric is the online exam provider for CFA Institute. Luckily the CA exam was not digital and Janison won the bid to be online provider. 
• Forecasting $30M in revenue for FY21 which is 37% YoY growth. Very close to my valuation of 40% CAGR for the next 5 years. If you do the math, that would be ~$120M in revenues in 2025. 
• Forecasting 54% Gross profit and $3M EBITDA. Therefore, operating margin is ~10% which is quite good considering the LTC acquisition cost still hurt Janison in the bottom line. It should go away during the next financial year.
  • There are no doubts on gross margins, it looks great and we hope it expands with new customers. However the key for shareholders is the operating margins. If operating margins are greater than 20% you are looking at a special business. Promedicus is currently 50%! 
  • Operating margins drives valuations and makes the company worth more even if they don't make as much in revenues compared to other companies. 

Ok, now for the big stuff and the reasons why they raised capital. In my previous straw I speculated that they would need capital for global expansion, maybe small acquisition and raising up to $15M is a good idea. They are using:

1. $5M for Revenue growth (i.e. international expansion)
2. $5M for Acquisitions and product development 
3. $5M working capital 

Smack bang in the middle, $15M cap raise, great amount and for very good reasons. Setting up for US expansion and UK beach heads makes a lot of sense. Thiey are preparing for further growth in FY22-23. Remember $15M capital raise is for 2 financial years (FY22-23). They are signalling to investors that they don't need more capital to grow. I hope so :D Otherwise my $750M valuation makes no sense as the valuation assumes Janison maintain 25% operating margin.    

Breaking down the cap raise by section: 

Product development (~$1M-$2M) 

• Janison has identified a number of opportunities to develop new school assessment products which will expand the offering to parents, teachers and school systems.
• Great use of funds, increase the ARR per customer. They are using it for practice tests and ICAS global. 

Acquisition (~$3M-4M)

• Janison at late stage of several potential acquisition targets in the Assessment division. The aquisition aims to broaden product offering. A portion of the capital raise wouold be used to fund the upfront cost and integration. 
• Considering product development and acquisition cost tally up to $5M. My bet is one strategic $3M-$4M acquisiton. Not expensive and they are at late stages so it is very interesting to find out who it would be? Although the announcement mentioned several, it could be a couple that tally up $4M. More research required. 

Working Capital ($5M)

• They are using this to increase the headcount and expand globally. The beach head in UK requires more employees, so having an office there and recruiting a UK head would require capital. 
• Janison have customers in UK outside of PISA for schools exam (i.e. Cambridge University and University of London). Ideal location to grow more customers in the region. 

Revenue growth ($5M) 

• Expanding UK & US as discussed, they have a go-to market plan. 
• Establishing a key opinion leader framework. I don't know how that works probably need to ask them in the next earnings call. 
• New functionality to support the global roll-out of PISA for Schools and aid delivery automation. Accelerate product innovation and enter adjacent assessment markets (e.g. Global Competency Module). 
  • Wait what? Never heard of the Global Competency Module and that's what makes the Assessment market great. 
  • According to the OECD 
    • "How do we assess global competence?
    • The global competence assessment in PISA 2018 is composed of two parts: a cognitive assessment and a background questionnaire.
      • The cognitive assessment is designed to elicit students’ capacities to critically examine global issues; recognise outside influences on perspectives and world views; understand how to communicate with others in intercultural contexts; and identify and compare different courses of action to address global and intercultural issues.
      • In the background questionnaire, students will be asked to report how familiar they are with global issues; how developed their linguistic and communication skills are; to what extent they hold certain attitudes, such as respect for people from different cultural backgrounds; and what opportunities they have at school to develop global competence."
  • Reading the 33 page report on Global Competency gave me traumatic flashbacks to Year 12 HSC English exam. Unlike that exam :D, the questions are atleast interesting; especially the global warming graphs question. It questions whether the student can make a logical decision from data. I find it a really important skill in the ripe age of misinformation. Heck we are all stock picking and have to sift through countless presentation decks to understand the businesses we are investing. The questionarre section does not capture how students would behave. It should be more fun and interactive, like gaming. The second part of the competancy test is boring especially for a digital age.
  • Anyhow, if OECD gives the greenlight for Janison to do this aspect of the PISA exam then I am all for it. More revenues from OECD the better :D 

So in summary Janison did the cap raise at $0.82 at the same price as institutional investors. I think that is awesome from a small cap to give the same right as us retail shareholders. I participated IRL, let's hope the SPP not get scaled back due to demand. Although, I doubt it. 

SPP close July 15th if I remember correctly. 

Janison put on a trading halt today regarding capital raise. Great move by management to do it at a high valuation as it lowers the dilution. The presentation to Wilsons advisory makes more sense now as they were looking for fund managers to add to the register. Ben Clark from TMS capital was really impressed by Janison. If you watch "The Call" at Ausbiz, Ben is an amazing investor, his past record is exceptionally strong. For Ben to get excited by an edtech company is a first as IDP usually steal the conversation with every fund manager.

Soo, let the speculation begin. But first, reading the announcement, a couple of things: 

• "[Janison] anticipates that the trading halt will remain in place until the earlier of the commencement of normal trading on Friday 25 June 2021 or the release of an announcement by the Company in relation to the capital raising". So either way we will know by Friday regarding what the cap raise is for. 
• "The capital raising is material to the Company." Very very interesting and it raises a lot of possibilities. 
  • Could the capital raise be for an acquisiton? 
  • How much will they raise? 
  • Would the capital raise be used to setup a beach head in UK to conduct the OECD PBTS tests there as Janison would be a NSP?
  • Finally, would the capital raise be expansion in US for the PBTS test?
• My guess would be international expansion for NSP areas. That is the best use of funds as they make more being the NSP.
• It would be great if retail investors could participate in the SPP, but Janison did the whole roadshow with Wilsons Advisory. Soo, most likely an institution raise. Good for those that bought earlier ;) 

Forward Speculation (Nothing true, just my thoughts)

• International expansion UK 
  • Good place to start would HQ in England. Most likely due to the GDPR regulations, data cannot go outside Europe, but also makes a lot of sense as University of London is a customer and Cambridge University is a partner.
  • Janison could also deploy the ICAS exam to Europe with the England HQ. 
  • How much would I raise? As the great philospher Micheal Scott would say "more money more problems". They have $10M in the bank from 1HFY21 results. So raising another $10M would not overly dilute shareholders. 
• International Expansion US 
  • I really think it makes a lot of sense to setup a HQ in US later down the track. It is the largest market opportunity. However, it assume that Janison renew the OECD contract and that is too big of a risk. Considering they have not won any customers other than OECD to enter USA, it does not make much sense to do it now. 
• Acquisition 
  • Small value add acquisition that win hard to reach customers is not a bad idea. 
  • I really hope they don't go the Bigtincan route and acquire a company every quarter. 
  • I also do not want to see Janison over paying for the acquisition. They overpaid LTC which lead to revenue loss due to COVID-19. 
• Looking at it holistically $10M - $15M capital raise is a good amount. $15M-$30M is pushing it considering they have $10M cash that we know of. There was no quarterly report. It would be interesting if Wayne Houlden participate in the capital raise or sell a chunk of his holding (31% weighting with 60 million shares), it adds more liquidity to the stock and would influence the stock price.           

Kazakhstan added to the list making it the 15th country doing the PBTS exam. Janison would be the IPP not the NSP - so less revenue. It is a good call as there are 7,500 schools there and physically getting schools together would be too time consuming. Tests expect to start October this year, so that is really quick. I assume it's for small number of schools but I can be wrong with this. 

A really interesting note from Janison in their latest presentation deck to Institutional investors (i.e. Wilsons Advisory investor conference) - IPP ~ $200Kp.a. per country. Which means for the next 3 years Janison is projecting on average around 1,000 schools per country. For the IPP agreements, the expected ARR is $18M p.a. 

For me the valuation comes down to the execution in US and how many schools they can onboard for the PBTS. Getting the first 1,000 will be difficult and thus, the partnership with Brightspace is vital.

Mr Market likes the progress. 

Janison is national service provider for UK. This is astounding especially if they get 7000 schools in 2 years. 

$7K * 7000 schools ~ $49M in revenue that’s if they get everyone in UK doing the PBTS exam. As a shareholder I hope they get there but what gets me excited is that they are a NSP. It is higher margins for Janison than being the ISP. The $120M in revenues by 2025 is one step closer to with this announcement. In saying that, we can’t predict the future and things are not going to pan out as you hope. 

I hope they execute in getting more schools in UK than Australia on the second year of testing. 

Before Janison announce their quarterly results either next week or the week after, I have pulled together a valuation that makes a lot of sense. This straw is my revenue growth assumptions, I could have put it in the Valuation update but that would be too long for anyone to read.  

What no one is doing (professional investors/brokers) is analysing the potential revenue recognition from the OECD contract. From Janison's own estimates they aim to reach $120M in revenues by 2024. It seems absurd but when I played around with the numbers, there is a way for them to get there. OECD contract holds the key to their success. 

• From the attachment below, I project $85M of revenue can be attained with the current 10 countries in the OECD contract.
• USA contributes half of total OECD revenue assuming Janison acquires 6,400 schools to participate in the PISA test for schools. 
• Australia assumption would be by 2023 all schools would participate in PBTS. $20M guaranteed revenues to Janison. 
• Russia made their intention clear that 70,000 schools will participate by 2024 therefore $18M should be obtained. 
• China was a very recent win and I not sure with the rollout - Janison is not the NSP. Thus, I made conservative assumptions on the TAM and how many schools would participate by 2024. I think I am significantly undervaluing the China potential with both the TAM and the number of schools. 
• Brazil I am hesitant to give high penetration rate as we are not given guidance on revenue potential long term. Janison is not a NSP and Brazil is part of the Emerging market despite having many schools. Therefore 1% penetration rate I chose for safety. 

I have not considered future countries like India, UK or Canada in the revenue growth assumption. Even if Janison win these countries, the first year is the pilot trial with less than 200 schools. Afterwards, more schools take the PBTS. 

ICAS revenues long term would be around $15M assuming $15/test. The latest webinar indicates that $15M will take a couple of years, most likely 3 years for them to deliver 1M tests. 

Finally, other revenues from Universities or NSW Department Education I predict around $20M would be possible. They will/have done deployments for SCIO, UOL, NSW Department (Check In and NAPLAN), Chartered Accountants etc... Therefore $20M revenue potential is a genuine possibility if Janison can maintain relationships with customers they serve. 

Summing it up = $85M (OECD) + $15M (ICAS) + $20M (other) = $120M revenues by 2024. 

I do not know what happens afterwards, but there should be a discussion on whether Janison can renew the OECD contract? If they can, then $300M in revenues by 2031 is a likely outcome.           

The time consuming compilation of the OECD contract is done. Currently I am estimating ARR for all current contracts for the first year ~ $2.2M (which is not much) but let's look at the big picture.

OECD contract signed in 2019 netting 10 countries of which 2 of them are NSP (National Service Providers). There are 80 OECD countries participating in PISA every year with Non-OECD countries not restricted to participate. 12.5% penetration after 1.5 years is a very good start as they manage to win countries with very large populations (China, USA, Brazil). India is the next obvious target from my perspective. The first year is always the pilot trial with less than 200 schools per country are trialled.

Russia

Although, in the case of Russia 1,750 was trialled, the Russian Education Ministry have plans to expand to 70,000 by 2024. If Janison gets all of those schools, it correspond ~ $17.6M revenues. That's reaching my definition of TAM in Russia, need clarification from management if that is realistic. Aso another clarification is the contract itself, has it been revised to $250 per school over 200 schools? The exisiting contract is based on student test volumes in excess of 20,000.   

Australia 

Refer to my previous straws, and they are doing a great job. 68 schools signed up in the first 3 weeks for PISA, my question would be whether those are from ICAS. My hunch is most likely ICAS. 

USA 

Now their latest announcement for USA made me quite excited "preparing for growth in 2021/22". My assumption would be that D2L integration has been completed and now they are netting schools. The TAM is given to us, it is 32,000 secondary schools eligible for PISA. 

Just rough maths, if Janison gets the same number of schools as Australia (2000 schools ~ AU$14M). If they reach the TAM of 32,000 schools ~ AU$224M in revenues. Quite a massive gap between TAM and Australia. Realistically, by 2024, they could attain 20% market share. Which means 6,400 schools ~ AU$44M in revenues. We don't know until they give us guidance. 

China

So I missed this part, but they are using BenBen as the NSP to deliver the test. The data obviously will be stored in China and not leave outside China. The likelihood of Janison being NSP there is 0%. However, they will recieve platform fee $150k p.a. I wonder if they also get the same fee for more than 200 schools -> $250 per additional school? It was not mentioned. 

Pakistan

Pakistan delay till 2022 is curious, not sure why, should be checked by management. The test was meant to happen during November 2020. So delayed by over a year. 

Summary

We are given enough information to project revenues for the OECD contract. Now revenue growth assumptions will be better explained as we can split OECD with other assessments revenues for the valuation. Gross margin should differ but only sightly. If gross margins were to make an impact, it would be on the NSP countries (Australia and USA), my reasoning is that additional supervisors/ employees are required to deploy, monitor PISA exams. More staff, more cost = lower gross margins. As stated in the last half yearly, they are currently experiencing 75%+ gross margins for OECD contract.  To date, the key countries that will drive revenues for the OECD contract are (USA, Russia, Australia and China) - especially USA. 

Final step -> Revaluation. Why does it take soo long? :D

Australian Ethical sold around 1% of their weighting in Janison. Before they had 9.37%, now it is 8.33%. My guess would be to prevent them owning more than 10% of a company as per their investment mandate.

They sold 2M shares on 1st March (at $0.635 share price) ~ $1.3M. Subsequently share price did drop from $0.635 to $0.59. It does not mean much, but if large holders sell there is a drop in the market value - in this case, not a substainal move. 

Anyhow, Australian Ethical is trimming in very small increments. They still maintain a decent weighting on the business. I don't understand why they would be trimming for any other reason besides meeting the investment mandate.

Janison has grown and I will revalue the business based on the latest announcement which not only exceeded my expectations but provided more information on the OECD revenue projections. They will report more updates in the next quarterly, but I feel I understand the business well enough to revalue the business with the current financials.     

Janison recently announced China is added to the OECD PISA based test for schools exams. They now have around 9 countries out of 90 countries conducting the benchmark test. China is apparently a large country with some of the largest education providers in the world. 

 Janison will not be the National Service provider, but they will be the technology provider. Now, if Janison was a normal technology business, they would have to compete with companies like Alibaba and Tencent to provide the infrastructure. However, as this is an OECD contract, China has no incentive to target technology providers as everyone receive the same benchmark report. Usually tech companies get wiped out by the large players, Janison is a rare case where that doesn’t apply. For the long term shareholder, we want contract to be renewed in 2024. If they can do that, then they will sustain their competitive advantage. 

The latest update on the number of schools that have already completed the PBTS warrants a revaluation of the business. A couple of years, management was targeting $100M in revenues by 2025 and I thought it was a joke especially with the new CEO. Now, not so much. More on that on the valuation update ;) 

Companies like Brainchip trading on future cash flows vs Janison who are  displayig their competitive advantage with the market oblivious. I’ll take Janison all day.

Janison becomes the NSP in Australia for the OECD PBTS exam. Massive news as the fee for the test per school is $7k. Around 1,500 schools are contracted by ICAS, therefore you are looking at an additional $10M of revenue per year.

Last financial year, Janison did around $22M, so with this announcement you are looking at one country generating 50% of FY20 revenues. That’s if all schools that are customers of ICAS are willing to pay $7k per year to compare themselves with other schools in Australia and globally. I would be very surprised if schools cannot afford to pay for the exam. The gross margins for running PBTS is a minimum of 80% so ~$8M would fall to the bottom line. That is extremely scalable if Janison become the NSP for future countries. 

Market cap of $150M for a company winning key deals in their expansion strategy. Take my money haha. Janison has more room to grow and hopefully the share price follows. It has to be a winner, I can’t see the bear thesis playing out with the current management team.

I took some notes on the call today, but before I started writing, I saw Matt Joas and an analyst from VGI Partners on the call. I think they are interested in the business and are doing further due dilligence before thinking about investing. Institutions are interested in Janison, hopefully having them on the register can improve the liquidity in the stock. 

Here are my notes: 

• The OECD contract deliver the PBTS and management are confident that they can sign one country a month (imminently), although it will be lumpy and unpredictable. Currently 7 countries conduct the PBTS, so I am hoping another 7 countries by the end of this year. 
• D2L second phase integration complete which means revenues should flow in 2HFY21. 
• 1750 schools are doing the PISA test in Russia. The 1st year license revenue in Russia was $197K based on 80,000 students sitting the test. Russia was one of the early countries Janison acquired, and the agreement back then was revenue per student. I am not sure if they have changed the agreement to revenue per school, like with recent countries. A new PISA table will come when they announce the next country.
• Management has reiterated their plan to expand ICAS internationally and are considering options. North America would be my pick but that would mean investing into sales and marketing. The ICAS test has incredibly high 80% gross margin, so it is extremely scalable.       
• A unique aspect of the business is that gross margins are 2.5x higher from new customers. They dedicated a slide towards Gross Margin Expansion which will drive "value investors" over the moon. 
• Interesting note on free cashflow. They expect positive cashflow in FY22. What that means, is that this financial year they reinvesting heavily into the business to build the infrastructure to scale. 
• Interesting question on competitive advantage 
  • Deep relationships with customers since inception of the company. I wrote straws here on those relationships. 
  • The platform was created from scratch. Previous management team signed a development agreement with SEAB (Singapore Examination Authority Board) to build and stress test the Janison insights platform under high stakes Singapore exams. There was extensive testing done with a polytechnic university to create high pressure testing environment that does not breakdown. It will give confidence to future customers like (Universities, Schools and Professional institutions) to trial the Janison insight platform. The worst thing that happens to a customer is when an online testing platform breaks down half way through the exam. They need the platform to be reliable and soo far Janison have not had any issues.     
  • Product differentiation. From my interpretation, it means the platform is flexible. They have ICAS, and can be used off the shelf to multiple customers. The platform is hosted in the cloud so you have fast deployment to many locations quickly. 
• One of the questions I asked was whether Janison have plans to set up a base in North America as it is one of the largest education testing markets: 
  • Janison at this stage not focused on putting working capital towards another beachhead. They are focused on building the partnership with D2L in America. 
  • The D2L/Brightspace integration have significant sales pipeline, so what I am thinking is that they are focused on getting revenues first before making decision to expand.   
• The second question I asked was whether Janison have plans to use service providers like Benesse from Japan to expand into more tests and countries. 
  • Short answer is yes and that is the genius behind winning the OECD contract. Janison not only got their foot on the door though the PISA exam but they also won new relationships with service providers that operate in multiple countries with multiple customers. Through strategic partners like Benesse their cost to market entry decreased and speed to market entry increased. 
• Other notable things
  • JEM will become a computer testing hub. This will be the case for the CFA exams. I should know as I am doing the exam :) Ironic that Promteric is the testing platform but JEM would be proctoring  (supervising) the exam.  
  • The learning business to grow single digits. I am not surprised and they have expressed their intention to focus on the Assessment business. They did win 3 customers, but it is not in their intention to grow Learning division. 
  • Before Janison the ICAS exam had a net promoter score of -60 (haha). The net promoter score is now 59 - no wonder they generated $4.8M in revenues.  
  • Janison is the NSP (National Service Provider) in the USA for the PBTS. Very interested to see how this progress as they are not using a third party to proctor the exam.   

Janison is my largest holding in Strawman and I am impressed with their performance. 

The key driver of the company is the Assessment division with a massive 143% growth. This is not from a small base. Going from $4M to $9.5M is a massive achievement. The main contributor is EA which they acquired dirt cheap for $700K. It has now generated $5M in revenues. Surely has to be one of the most ingenious acquisitions in the edtech sector. I view it as a 5x return in 6 months. 

Another key metric to note is recurring revenues. Janison's ARR is $13.4M which is nearly 85% of total revenue. Contract wins fall to the bottom line and we will see margin expansion going forward. We saw that in the Gross margin of 54% up 8%. 

The OECD contract is key as if you read my previous straws "Janison has a 5-year exclusive agreement with the OECD to assist its 90 countries sitting the tri-annual PISA assessment". They currently have the license to 7 countries: USA, Brazil, Portugal, Russia, Pakistan, Thailand and Japan. This has not changed from last time. I attached a screenshot below to show how much each country is willing to pay Janison for the PISA test. I assume this table will change when new countries come on board. 

Janison is capitalising the EA acquisition by launching the REACH progression test in Q4 FY21. This is on top of the ICAS test revenues expected to happen around September. Janison was meant to deliver NAPLAN but due to COVID that was not possible. In saying that, it is a good thing as the 2021 NAPLAN will be fully digital. The pandemic has forced the NSW Department of Education to conduct exams digitally. Which means more future contracts for Janison. They have a 10-year relationship with the NSW Department of Education. I am hoping the Janison will be awarded a contract for the HSC exam this year. In saying that, they did generate $800K for creating the new assessment tool, “CHECK-IN” as COVID halted NAPLAN. It is a vital tool for teachers to assess how much of an impact school closures have on the student's learning. This could be an ongoing stream of revenue. 

Looking ahead, they plan to win more countries from the OECD, expand partnerships for the assessments division, deliver NAPLAN and reinvest heavily into R&D to make the platform scalable. Janison generated a positive $1.3M operating cash flow and invested $2.4M back into the business for R&D. Thus, overall we saw net cash outflow. I don't mind that, especially if it involves growing top line and retaining customers for the long term. They have met guidance which is always fantastic to see and build trust with shareholders. 

Overall, I trust Janison will succeed as they have proven they can execute, their assessment platform is well received by customers and the management is honest with expectations (very rare to find that from a small-cap company).              

Janison certainly ticks all boxes for me. The current valuation at $128M market cap still feels undervalued in my opinion. The recurring nature of the revenues makes it very difficult to get killed by a competitor.  

When I did my deepdive on Janison I noted that they acquired Educational Assesments (EA) for $750k, which had to be one of the cheapest acquisitions I have seen. The ICAS test alone did $7.6M in FY19 ~ 650k tests. UNSW Global wanted to get rid of EA soo badly that they did not bargain a premium.

Now, the acquisition is starting to pay off. They had to make the test digital and quickly deploy. Their guidance was $3.7M but it ended up being $4.8M from 300k tests . It is 30% above management expectations. What's even more impressive was that gross margins was 80% for the ICAS test - Janison did mention that the reason for high gross margin was that the development cost incurred prior to acquisition.

The primary reason for selling EA to Janison was the customer complaints. Parents found miscommunication from EA and did not have their complaints addressed. Now, customer complaints reduced by 98% and received overwhelming number of positive comments from teachers who felt that this year’s online test delivery was significantly better than in previous years. 

"Next year the test will offer the full suite of subjects (writing test not delivered in 2020) in a more favourable environment where COVID is contained and a greater number of schools are able to sit the test. In advance of 2021 Janison will be investing to improve the quality of test questions – enriching content to enhance student experience and further raise the ICAS competition standard". What I find fascinating is the flexibility of the platform and how they have the capability to increase revenue per customer by potentially controlling pricing. 

The real announcement is management guidance for 1HY21. In the Q1 update, Janison is targeting $15M-$16M, but now are saying it would be closer to $16M. I am assuming this is due to the $1.1M outperformance from ICAS. Platform revenues is expected to grow substantially from $6.3M in 1HFY20 to $11.6M in 1HFY21 (expected). This is recurring revenue, which means the business is further derisking. Exam services as expected would shrink due to Covid prohibiting in-person exams although it makes up small portion of overall revenues. Another guidance assumption is "through improved pricing, targeted cost reduction programs in Cost of Sales, and now a stronger than expected ICAS 2020 result, Janison is predicting gross margins for the first 6 months of FY21 (1H FY21) to be above 50%". Finally they are investing heavily into sales and marketing and are expected to increase Opex of approximately $1m per quarter. 

Soo far, management has done a great job in delivering on their FY21 goals. What's even better is that they are keeping themselves accountable and keeping the market informed on the progress. The 1HY21 report will be very interesting to see, especially on how they are going with the OECD contract and customer wins. 

My takeaways from both the Conference call and Annual report

• The main focus of the business is Assessments while acknowledging that they have slacked off in the Learning segment. They are increasing Sales and Marketing spend from 8% of revenues to 16% with some of the efforts geared towards getting corporates to the Janison Academy. Prime use of their sales and marketing spend is to get more countries & schools signed for the PISA based Test for Schools (PBTS).  
• OECD is highly scalable test where they disclosed that they are hitting 75% gross margins. One of the advantages is using their "Replay" feature where tests can be adminsitered in areas with low internet penetration without increasing development costs. Stuart Halls (CFO) reiterated that OECD contract is one of the prime goals for FY21, where countries that have done the pilot ($100K for implementation, will roll out to more schools, that's where the additional recurring revenue kicks in). They have 8 countries out of 90 countries (Spain, Portugal, Japan, Pakistan, USA, Brazil, Russia, Thailand). In August, Thailand was a recent customer win, and I expect to see an announcement on them soon. From their presentation deck, "In FY21 [we] will invest in Business Development and Account Management to further expand PBTS into more countries and develop existing relationships secured in FY20." 
• UNSW Global EA is a business they acquired this FY20. EA create multiple tests but the most prominent is ICAS. The pre-covid pricing for ICAS was $15/test where ~1million test p.a. equating $15M p.a. in platform revenue. They state that ICAS can generate 90% Gross margins from platform revenues.
• Excluding Naplan, 1million candidates took tests using Janison's Insight platform in 2020, 50% yoy increase. Roughly 1.7million tests were conducted in 2020, 25% yoy increase. David Caspari mentioned in the conference call that it is one of the metrics the company will use to judge internal performance. 
• As predicted, Janison's Exam management (JEM) services revenue (Formerly LTC) is dependent on the number of students sitting tests in-person. Janison experienced a material downturn in JEM revenue due to government restrictions on gatherings causing universities and professional associations to cancel exams or defer until later this year. Q4 of a financial year is where JEM experience the most revenue in a quarter (~$3M). This year, Q4 contributed $0.         
• From a financial standpoint, we are starting to see Janison starting to achieve operating leverage. Prior to the platform model, there was increase in development cost per customer. The software was not scalable. Transitioning to an off the shelf platform product increased recurring revenue by 62% to $9.4M in FY20. Customers that paid the implementation fee in FY19 are now paying recurring revenues. The platform has enough features for a user to write their own tests without increasing additional development costs. This is highlighted by the lower cost of goods sold this financial year compared to last year. When tests are reusable, the cost of implementation decreases shown by a lower COGS. 
• There are global competitors and one of them is Prometric who is in charge of the CFA exams. David agrees that they are one of the main competitors to Janison and "welcome the competition".  

What I did not like 

• Hiring a 3rd party advisor to assist M&A strategy for school customers in the assessment business. 
  • I particularly don't know why they want to go towards acquisition again as they already have UNSW global. If they want to go there, atleast get companies at a very cheap valuation. This is on top of the M&A fees. 
  • If I were acquiring someone, it would be an organisation that have more than 10 years of experience and >50% market share in a semi-large market. Acquisition for market share makes more sense to me than acquiring a company which specialise in 1 product. 
• Neglecting the Learning business but saying that Janison would increase Sales and Marketing in this segment. I think Janison could sell the corporate arm to another player. Despite high gross margins, it does not make sense why they would reinvest if the goal is not to improve the platform for corporate learning customers. The mining companies left in FY20 as the platform was not flexible for the mining industry. The learning business itself is fine for schools and higher education.

What I liked 

• Clear plan for international growth through (OECD, Higher education (University of London, SCIO- Czech Republic)) 
• Building additional products for schools like benchmarking tools, reports and teacher training solutions to analyse performance. This can increase the recurring revenue per customer. Their goal is "one core product set for repeatable sales across our target markets"
• Increasing sales and marketing to reduce the length of the sales cycle, support existing customers and to increase revenues. 
• Matt Wolf is a new addition to the team, he is head of product/ Chief product offier who was formerly the head of product at 3PL from 2008 - 2016. I think he is a great addition to the team. 
• They are starting to get operating leverage with existing customers who are now migrated to SaaS model. 

I leave with this, which in essence shows what they have done and how they see the education market in the near term.  

"Janison is at the beginning of the third phase in its evolution. Our first phase began 22 years ago when Janison’s founders Wayne and Jacquie Houlden saw the role technology could play in transforming education. We then transitioned to our second phase in 2015, our ‘establishment’ phase. Under Tom Richardson’s leadership we have established a global customer base, market-leading product offerings generating recurring revenue, and solid financial foundations.

And that now leads to our 3rd phase, our ‘growth’ phase. The global education market continues to grow. By 2025, half a billion more students are expected to be in schools and universities, and education spend per student is increasing year on year. Prior to the extraordinary impacts of COVID-19, digital spend in this sector represented 2.6% of total spend. The pandemic has accelerated a decade’s worth of technology and cultural transformation in this sector into less than six months. It has done more to speed up the transition to online in the education space and the way people educate and learn than any other trend in recent times. Post COVID-19, digital spend will lift substantially as adoption levels stabilise at far higher levels than pre-pandemic. Janison is well placed to capture this market opportunity." 

Please DYOR. There are a lot things missing in my takeaways so please read the annual report and presentations :) Also,  the Zoom call was very hard to hear, it made notetaking a pain. FY20 was a lot of restructuring and implementation. To me, the reported numbers has not materially affected my valuation, but will revisit the valuation after the AGM. The AGM is on the 1st October.              

Investor Briefing Conference Call - 11.00am 11 August 2020

Janison sent out an announcement regarding FY20 results. I believe their conference call will be regarding the financial year report that is released to the market tomorrow. 

Here is the zoom link for tomorrow :) https://janison.zoom.us/j/96605540684?pwd=YXl2N09TVTJxcEtkQmc0K1hQR1BiQT09&from=msft#success  

I am expecting LTC revenues to drag the full year results down. Will write up a straw on the major discussion points addressed on the call tomorrow and how it affect the valuation especially on their FY25 target. Etiher me or someone else from Strawman :P  

This makes or break for investors looking at this company. Currently, the company is controlled by insders. The insiders own 50% of the company with the majority stake coming Wayne Houlden (founder) who owns 40% through (Diptoe Pty Ltd and Tentickles Pty Ltd). Also former CEO Tom Richardson's trust own 7% through Lenroc Investments Pty Limited (Richardson Family A/C).

Hence, with high inside ownership, the stock trades are very illiquid and does not bounce during a market rebound. Also, the actions by insiders dictate the direction the company. They have the power to change course without scruitinty from outside shareholders. This can be both an advantage or hinderance as shareholders are dictated by insiders. Thus, investing in this company require high conviction that management executes on their vision. It is structured like a family-own business and shareholders are reliant on management.     

When assessing management, Janison has experienced directors leading the company. Looking at the executive leadership team, nearly all of them have more than 10 years of experience. Most of them gained that experience in the education sector. From a board level, you double the experience, Tom Richardson the former CEO is the youngest with 19 years of experience. Did not know that Mike Hill (Chairman of Janison) was also the founder of Bomborra. One of the best investment managers in Australia. They invest in tech startups, grow them and exit through IPO. Those guys did 40% net of fees last year.    

When you buy Jannison, you are relying on Wayne Houlden to execute on international deals. As of 2nd July, he was promoted to Vice-chair and is now gonna play a strategic role in the company. The current CEO David Caspari will rely on Wayne for M&A counsel. The company is like a family and depending on the quality, management could out/under perform. I think they can outperform.            

Janison have a long history like 20 years worth. So instead of boring the details of everything that happened. I'll summarise what they do. Janison builds scalable online education solutions for schools, Tertiary institutions and workplace customers (Government + corporates). 

They have 2 businesses 

1. Digital Assessments
   • Provide large-scale digital exams for Schools and Tertiary customers using Janison Insights platform product.
   • Looking at revenue growth it is the fastest growing division at 40% annual growth rate. However, it has low 20-25% Gross margins. 
   •  Strategy 

     • To expand the Janison Insights globally. Going through APAC and targeting countries that have poor internet connection. They created a next generation product called “Janison Replay” allowing exams to be conducted in remote locations (with poor internet connection). Janison Replay, will ensure students receive a consistent, uninterrupted test experience no matter the quality of their schools’ internet connectivity. This solves a critical challenge and pain point in high-stakes online testing scenarios for educators and students alike.  

     • Utilise channel partners to enter new countries. In 2019, they signed a 5 year agreement with OECD that would allow them to access 80 countries. Currently, 7 countries are using Janison for the PBTS test. The test targets 15 year olds and allow schools to fins out how they are positioned with other schools in the same country. It is an optional test so not every 15 year old in that country would be doing it.  

     • Long term strategy is to use data from the tests to evaluate education systems (in a school, in a country). Through feedback, they can build products for Janison Academy or maybe even add consultation revenue stream for government departments. That last part is speculation, but they want to improve content for the academy. End goal is to get schools and tertiary institutions to use learning products in Janison Academy.  

     • Strategic acquisitions like UNSW Global to expand geographical presence by digitising key exams like ICAS. Also, acquiring LTC to create an "exam like environment" by using online inviglators.      

2. Digital Learning 

   • Currently, provide learning content modules for government and corporate customers using Janison Academy platform.  
   • Modules are either Risk or Performance based 
     • Risk involve regulatory compliance and operations training 
     • Performance invlove life-long learning (like soft and technical skills)
   • Looking at revenue growth, it is slower than Assessment at 15% annual growth rate. However it has high Gross Margins at 50-55%. The learning business % of total revenue have been decreasing from 46% to 38%. 
   • Strategy 

     • Build additional learning modules to nurture existing customers. Utilise the acquisition of Ascender to build a library of learning content relevant to future corporate customers. 

     • Target customer have (1000+ geographically diverse employees) 

     • Increase Average Revenue Per Customer (ARPC) on the current 60 customers in the Learning platform by creating new learning products.  

     • Take advantage of COVID-19 and expand offering to Education institutions. I.e. digitize paper-based courses.  

   • Notably 2 large existing customers stopped using the learning platform. The customers were Kinross and Rio. They switched in 1H FY19 to either a low-cost LMS provider or to using in-house content which better suited for the mining industry.  

Overall, the company is reinvesting heavily on the assessment side. Although, recently due to COVID-19 Janison have been getting in-bound enquiries by education institutions to digitize learning content.   

Janison has put FY25 guidance as shown in the attachment below. They aim to get $110M in Assessments segment and $40M in Learning. 

The assumptions for Assessment business are:

1. Schools 
   • 50m participants, on average students take 4 tests annually giving 200m total tests for the year. Attaching an average revenue per test at $1 give market size of $200m. Janison believe they can capture 10% of the market giving target market od $20m 
2. Language 
   • 40m participants, on average students take 1 test annually giving 40m total tests for the year. Attaching an average revenue per test at $7.50 give market size of $300m. Janison believe they can capture 10% of the market giving target market od $30m
3. Higher Education 
   • 2.5m participants, on average students take 4 tests annually giving 10m total tests for the year. Attaching an average revenue per test at $20 give market size of $200m. Janison believe they can capture 25% of the market giving target market od $50m. 

From the attachment below, the dark green shading shows proportion of Janison's revenues to the target. They have made headway in the schools market reaching 25%. However, they are yet to make headway in Language through acquisition from LTC and higher education. 

Janison has also provided more inforgraphics and in particular market size in global test market. What struck me is that China & India accounted for 70% of global test takers in schools and higher education. Globally there are 517m school students and 87m higher education students take test annually. Janison has mentioned that entering those markets is a potential catalyst and was not accounted in the market size assumption.  

From the previous straw, it is apparent that the business model for Assessments is integral for their strategy. 

Digital Assessments business model 

• When acquiring a new customer, the customer pay an initial project service fee. The fee is 25% of the total estimated contract value paid in advance. Afterwards, the costs are SaaS nature with platform fee being the only variable. 

• After acquiring LTC, Janison gets expsoure to the Exam Services revenue. This is revenues from companies like IDP Education and British Council for doing the logisitics for high pressure exams like IELTS. The revenues are service based and due to COVID-19 this portion of the business will take a hit in overall FY20 revenues.  

• In the attached file, we see that project services fees are lump sum while Service and License fees are Annual recurring revenues.
  • In 2018, 54% of total revenues were lump sum and by 2019 it fell to 40%. During 2018-19, you see that project services revenue remained flat at $5.6M however recurring revenue grew from $4.5M to $5.8M. Meaning that customers that paid lump sum in 2018 are now paying recurring revenues and that in 2019, Janison acquired the same amount of new customers as they did in 2018. 

• The drivers of the business model 

  • Customer requests multiple exams (not just one) -> Service & license fee grow

  • Increase cost per test -> License fee increases 

  • Increase number of schools/students taking tests -> License fee increases 

  • The drivers depend on usage of services & license fee recurring revenues.

Digital Learning business model 

• The learning model is similiar to the assessments but there is an additional "content recurring revenue fee". The customer pays an annual content recurring fee on either content made by a 3rd party or their own proprietary content.