CLUEY LTD — Annual Report 2021

Aug 29, 2021

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ASX Announcement

30 August 2021

Cluey exceeds FY21 Prospectus revenue forecast well placed for growth in FY22

Key highlights:

• Revenue of $15.9m, up 226% on FY20 and ahead of Prospectus forecast (“forecast”)

• Gross Profit of $8.6m, up 270% on FY20 and ahead of forecast

• New students of 17,382, up 134% on FY20 and ahead of forecast

• Student sessions of 250,613, up 198% on FY20 and ahead of forecast

• $563 Variable CAC in FY21, down 28% from $787 in FY20, better than forecast

• Completed a successful IPO, raising $30 million, which is being used to fund Cluey’s core growth strategy, including investment in sales and marketing, product development and operations.

• Strong growth continuing in FY22, including agreement to acquire Code Camp.

Cluey Ltd (ASX: CLU) (“Cluey” or the “Company”) today announced its results for the full financial year ended 30 June 2021 (“FY21”). This is the Company’s first full year financial results release after successfully listing on the ASX in December 2020.

The Appendix 4E and Financial Report released today covers the period from 3 December 2020 to 30 June 2021[1] . These results are detailed later in the release under “Statutory Results”.

Mark Rohald, Cluey CEO, said the Company was pleased to exceed Prospectus revenue forecasts and is well placed to deliver continued growth.

“We are continuing to see growing demand for online learning in K-12 and we are capitalising on these tailwinds to cement ourselves as a leading online K-12 education provider. Our personalised learning services, highly scalable data-driven approach and growing customer base, has placed Cluey in a strong market position in Australia and we are excited to be expanding our quality product offering to New Zealand.”

Trading Update and FY22 Outlook

Our strong growth is continuing into FY22, with the Company achieving record new students, student sessions and revenue in July 2021.

In August 2021, the Company is on track to exceed 45,000 student sessions, generating ~$3m revenue, again a record for any month. Notwithstanding the significant growth in new students, sessions and revenue, customer acquisition cost (“CAC”) per new student continues to decline and is forecast to be below $450 per new student in August, a new milestone. Most pleasingly, student retention is also improving.

During FY22, the Company will continue to expand its product and service offerings via:

1 As part of the IPO restructure, Cluey was incorporated on 28 September 2020 and acquired Quartet Education Holdings Pty Ltd and its operating subsidiary, Cluey Learning Pty Ltd on 3 December 2020.

Cluey Ltd ABN: 65 644 675 909 L8 / 51 Pitt Street Sydney NSW 2000

2

• Expansion into New Zealand

• Rolling out of B2B Schools initiative (NSW Department of Education program)

• Scaling the core, expansion into adjacent subject areas and enhanced Senior Secondary offering

• Strategic M&A, including the agreement to acquire Code Camp being announced to the market today.

An investor presentation with further details in relation to the FY21 Results, Acquisition and Capital Raising has been lodged with ASX today .

Annual financial information from 1 July 2020 to 30 June 2021 (“FY21”)

Annual financial results are provided as if the acquisition of Quartet Education Holdings Pty Ltd and its subsidiaries had occurred on 1 July 2020. Reference is also made to the Prospectus dated 23 October 2020 which includes historical financial data of the operating subsidiaries, as well as forecast FY21 results for the Group from 1 July 2020 to 30 June 2021.

Pro forma financial results in the Prospectus and in this announcement refer to Annual and Statutory financial data which have been adjusted and normalised for specific costs related to the IPO and group reorganisation.

Annual and pro forma consolidated statement of profit or loss: FY21 vs FY20

KPIs for the year ended 30 June 2021[2] vs year ended 30 June 2020[3]

• 250,613 Student Sessions delivered in FY21 (198% increase on PCP[4] )

• $15.9 million in Revenues achieved in FY21 (226% increase on PCP)

• 54% Gross Profit Margin achieved in FY21 (13% improvement on PCP%)

• $563 Variable CAC[5] per student achieved in FY21 (28% improvement on PCP)

2 KPIs are presented for the twelve-month period as if the Company had acquired Quartet Education Holdings Pty Ltd and its operating subsidiary, Cluey Learning Pty Ltd on 1 July 2020.

3 As per the Quartet Education Holdings Pty Ltd 30 June 2020 Audited Annual Report

4 Prior corresponding period

5 Variable CAC per student is a non-IFRS measure used for management purposes which represents variable acquisition expenditure for a period divided by new students with a session in the same period. Variable acquisition expenditure is calculated based on Media marketing expenses of $7.7 million (including brand spend), plus learning advisor (sales) employment costs and commission of $2.3 million (included in employee benefits expense).

Cluey Ltd

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Profit and Loss for the year ended 30 June 2021 vs year ended 30 June 2020[6]

Profit and loss statement	12 months to 30/6/21 ("FY21") $ 12 months to 30/6/20 ("FY20") $
Revenue from services rendered Cost of sales Gross profit Gross profit margin % Operating expenses Marketing expenses Occupancy expenses Administration expenses Employee benefits expenses Total operating expenses Other income Interest revenue calculated using the effective interest method Total other income Pro forma Annual Operating loss before specific items Total specific items including IPO and related costs7 Loss before income tax expense Income tax expenses Loss after income tax for the period	15,869,591 4,869,426 (7,255,638) (2,539,623)
	8,613,953 2,329,803
	54% 48% (8,035,647) (4,427,428) (200,246) (350,418) (3,496,670) (2,264,800) (13,227,140) (10,304,564)
	(24,959,703) (17,347,210)
	308,990 294,744 146,120 160,496
	455,110 455,240
	(15,890,640) (14,562,167)
	(23,053,466) (670,695)
	(38,944,106) (15,232,862)
	0 0
	(38,944,106) (15,232,862)

Revenue from services rendered

Revenue grew significantly to $15.9 million in FY21, an increase of 226% from $4.9 million in FY20. Revenue growth was driven by:

• New students[8] in FY2021 of 17,832, an increase of 134% on FY20

• Student sessions in FY2021 of 250,613, an increase of 198% on FY20

• Average revenue per session in FY2021 of $63.32, an increase of 9% on FY20

• Active students[9] in H2 FY21 of 15,543, an increase of 131% on 6,722 Active students in H2 FY20

6 Per 30 June 2020 Financial Report of Quartet Education Holdings and its subsidiaries

7 Refer the ‘Profit and Loss for the year ended 30 June 2021 vs Forecast’ table below for further details.

8 New students who have completed at least one session, i.e., does not include new enrolled students yet to complete their first session.

9 Active students represent the number of students who completed at least one session in the period.

Cluey Ltd

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Cost of sales

Cost of sales includes payments to tutors for their services in the provision of online tutoring. Tutor costs increased by 186% to $7.3 million in FY2021 compared to FY2020. Revenue growth (226%) exceeded the growth in tutor costs primarily due to the increase in small group sessions. Small group sessions, launched in January 2020, including up to four students in the same session with one tutor, increased to 12% of total student sessions in FY21. This contributed to an increase in Gross Profit Margin, which increased to 54% in FY21 from 48% in FY20.

Operating expenses

• Direct marketing expenses (including media and brand expenses) increased 81% from $4.4 million in FY20 to $8.0 million in FY21, of which $0.9 million of this was invested in brand spend to develop Cluey’s long term brand equity.

• Administration expenses increased 54%, mostly due to IT costs associated with the investment in remote working capability, new product development and increased public company, audit, and compliance costs post listing.

• Employee benefits expense, excluding share-based payments issued in conjunction with the IPO, increased 28% from $10.3 million in FY20 to $13.2 million in FY21. FTE increased 21% from 97.5 in June 2020 to 118.4 in June 2021. 10 FTE were added to the sales team and 10 FTE were added to the customer support team to manage and support the increase in forecast student enrolments and student sessions.

Variable acquisition expenditure

• Total variable acquisition expenditure, which includes direct marketing expenses, Learning Advisor (sales) employment costs and commissions, increased by 67% from $6.0 million in FY20 to $10.0 million in FY21 delivering an increase of 134% in new students.

• Variable acquisition expenditure per new student decreased by 28% from $787 in FY20 to $563 for FY21 due to ongoing optimisation of online and media channels, process and performance improvements in the sales team and increasing benefits associated with brand activities.

Cluey Ltd

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Annual and pro forma consolidated statement of profit or loss: FY21 actual vs FY21 Forecast[10]

KPIs for the year ended 30 June 2021 vs forecast

• 250,613 Student Sessions delivered in FY21 (exceeded forecast of 241,348 sessions by 4%)

• $15.9 million in Revenues achieved in FY21 (exceeded forecast of $15.5 million revenue by 3%)

• 54% Gross Profit Margin achieved in FY21 (consistent with forecast of 54%)

• $563 Variable CAC per student achieved in FY21 (1% improvement on forecast Variable CAC of $571 per student)

Profit and Loss for the year ended 30 June 2021 vs forecast

Profit and loss statement	FY21 Actual $ FY21 Forecast $
Revenue from services rendered Cost of sales Gross profit Gross profit margin % Total operating expenses Total other income Pro forma Annual Operating loss before specific items Specific items including IPO and related costs Covid-19 Cash Boost income Initial Public Offer and capital raise costs Employee Gift Share Offer Share based payment expenses Interest expense on convertible loan notes ("CLNs") Net fair value loss on financial instruments Total specific items Loss before income tax expense Income tax expenses Loss after income tax for the period	15,869,591 15,474,966 (7,255,638) (7,152,952)
	8,613,953 8,322,014
	54% 54%
	(24,959,703) (22,118,731)
	455,110 426,177
	(15,890,640) (13,370,540)
	50,000 50,000 (1,747,664) (1,950,856) (66,282) (90,217) (936,926) (1,182,346) (6,027,520) (6,190,801) (14,325,074) (10,201,476)
	(23,053,466) (19,565,696)
	(38,944,106) (32,936,236)
	- -
	(38,944,106) (32,936,236)

10 Being the FY21 annual forecast provided in the Prospectus

Cluey Ltd

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Revenue, Cost of Sales and Gross Profit

• FY21 actual revenue of $15.9 million exceeded forecast by 3% ($0.4 million) as a direct result of 250,613 student sessions exceeding the forecast of 241,348 student sessions by 4%.

• Actual cost of sales increased in line with revenue, achieving the forecast Gross Profit margin of 54%.

• Gross Profit of $8.6 million exceeded forecast by 4% ($0.3 million)

Operating expenses

• Total operating expenses of $25.0 million were $2.8 million (13%) above forecast as detailed below.

• Marketing expenses of $8.0 million were $1.4 million (21%) above forecast and represented additional investments of:

• $0.9 million in Brand, the majority spent in H2FY21 to develop Cluey’s long term brand equity, and

• $0.5 million in media and direct response marketing focussed on short term customer acquisition, which took advantage of additional media inventory available at or below forecast variable CAC per new student

• Notwithstanding the increase in total marketing expenses, Variable CAC per new student of $563 was 1% better than forecast.

• Administration expenses of $3.5 million exceed forecast by $0.6 million (20%) due to IT spend, including increased investment in remote working capabilities and investment in new product development and technology to roll out new services (including Schools and New Zealand).

• Employee benefits expense of $13.2 million exceeded forecast by $1 million (8%) primarily due to additional Sales and Customer Support resources in anticipation of a step-change in students and sessions in FY2022, and $0.5 million FY21 short-term incentive bonuses and $0.3 million of share-based payment expense, both of which were not included in the forecast as the amounts could not be accurately measured at the time of preparing the forecast. This was partially offset by $0.8 million of employee benefit expenses capitalised as intangible assets.

Specific items including IPO and related costs

• IPO and capital raising costs of $1.7 million were below forecast by $0.2 million (10%) due to lower than forecast advisor fees ($0.1 million) and the forecast contingency of $0.1 million not being required.

• Share based payment expense (issued in conjunction with the IPO) and interest on CLNs were marginally below forecast due to differences between the forecast calculation and actual expense calculated.

• The net fair value loss on financial instruments of $14.3 million exceeded the forecast loss of $10.2 million by $4.1 million (40%) due to the final accounting valuations applied to the Cluey shares issued on conversion. The forecast assumption was based on the IPO shares being issued at the mid-point of the valuation range, whereas the final valuation was set at the top of the valuation range.

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Reconciliation to Prospectus forecast Proforma NPAT[11] for the year ended 30 June 3021

NPAT	$’000
Pro forma annual Operating loss as shown in table above Incremental public company costs12 Executives’ salary reductions13 COVID-19 salary reductions14 Proforma NPAT per Prospectus	(13,371) (342) (393) (662)
	(14,768)

Statutory financial results for the period from 3 December 2020 to 30 June 2021

The statutory consolidated statement of profit or loss in the Appendix 4E and Financial Report released today includes the results of the Group from the date the Company acquired the operating subsidiaries, being 3 December 2020, to 30 June 2021. The key financial metrics for that period include:

• Revenue from services rendered of $10.1 million, driven by significant growth in new students and student sessions

• Gross Profit (revenue less tutor costs) of $5.5 million, and Gross Profit margin of 55%

• Marketing spend of $5.7 million including increased investment in media and brand activity to accelerate future growth

• Employee benefits expense of $8.1 million including increased headcount to support growth

• Net loss from operating activities of $10.1 million (excluding IPO related costs), and $11.9 million total loss

• IPO related costs of $1.3 million, excluding equity raise costs of $1.9 million the latter of which are deducted from equity

• Total cash held as of 30 June 2021 of $28.0 million

11 NPAT is Net Profit (Loss) After Tax

12 Incremental public company costs include the incremental expenditure required to be a publicly listed company including Board, listing and ASX fees. These costs are added back as if the Company had been listed since July 2020.

13 Executives’ salary reductions related to voluntary pay reductions of certain executives to preserve cash. In return, the executives were granted options in the Employee Share plan that vest on an IPO event. On IPO, a share-based payment expense was recognised for these options. These costs are added back as if they had been paid in the periods the restrictions were made.

14 COVID-19 salary reductions relates to the reduced salary expense as a result of a company-wide reduction in salaries for all permanent employees earning over $50,000, due to the uncertain impacts of COVID-19 on the Company and its ability to raise capital. Salary reductions were normalised 1 December 2020. These costs are added back as if they had been paid in the periods the reductions were made.

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Cluey FY21 results and Code Camp acquisition webinar:

Cluey is pleased to announce that Mark Rohald (CEO) and Greg Fordred (CFO) will be hosting a year ending 30 June 2021 and Code Camp acquisition investor webinar at 2:00pm (AEST) on 30 August 2021.

Investors can register for the session using the following link: https://us02web.zoom.us/webinar/register/WN_Q2cWuHNTQl2y6WyNNXyP0A

Prior to the webinar, investors are invited to submit questions to: melanie@nwrcommunications.com.au

ENDS

Authorised for release to the ASX by the Board of Cluey Ltd.

For enquiries please contact:

Mark Rohald Simon Hinsley CEO Investor Relations investor.relations@clueylearning.com simon@nwrcommunications.com.au

ABOUT CLUEY

Cluey is an innovative, ASX-listed Edtech company that combines education, technology and data to deliver quality education outcomes and an enhanced experience for students. Cluey has a highly experienced management team and Board with a track record of building successful education businesses and is supported by an Independent Education Advisory Board comprising four eminent independent education sector thought leaders.

Cluey key facts:

• Cluey provides support for students in years 2-12 in Mathematics and English and years 11-12 in Chemistry, as well as test preparation for NAPLAN and Literacy and Numeracy Test for Initial Teacher Education

• Through regular live online tutoring sessions, Cluey’s learning model is underpinned by personalised and tailored programs, content mapped to the national and state curricula, targeted tutor feedback and comprehensive reporting to students and parents

• Cluey’s platform captures > 100,000 data points in every learning session to deliver valuable data-driven insights in teaching and learning using proprietary analytics

• • Cluey is headquartered in Sydney, Australia and is relocating to new offices at Suite 2, Level 2, 117 Clarence Street, Sydney in October 2021. At the end of June 2021, Cluey had 118.4 full-time equivalent staff and 1,114 qualified tutors.

Cluey has been recognised in the prestigious HolonIQ inaugural list of most innovative Edtech companies in Australia.

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Cluey Ltd