JANISON EDUCATION GROUP LIMITED — M&A Activity 2020

May 18, 2020

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Janison Ed ~~u~~ cation Group Limited Acquisition of UNSW Global Educational Assessments

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DISCLAIMER

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Transaction overview

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• Notes: 1. Ranked 43rd in the 2020 QS World University Rankings

  2. Australian Research Council

  3. Headcount prior to acquisition is 49. Janison is assuming responsibility for a core team totalling 32 + 1 internal Janison leadership role

• The Acquisition is also conditional upon the satisfaction of standard closing conditions precedent including, but not limited to, the senior management team accepting offers of employment, an employee attribution condition regarding a sufficient level of employee acceptances or confirmation of capabilities and the exchange of related transaction documents. The business sale agreement also contains warranties, indemnities and other terms considered customary for a transaction of this nature.

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Investor highlights

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Table of contents

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5.

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Educational Assessments business

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Business highlights

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1 “ICAS” = International Competitions and Assessments for Schools

Revenue overview

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Total Revenue by Segment
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Assessment Revenue by Product

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Assessment Revenue by Geography

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$7.6M
Services
Revenue
17%
$12.0m HK 9%
2019 IND MY SG 4%
Assessment 2% 2%
Revenue 83% $1.9M
$0.0M $0.1M
71%
NZ 9%
= product sold region [1]
= contracted / pending region
Product Suite
% of EA assessment
79% 19% 0.5% 1.5%
revenue 2019
Australia, New Zealand, Singapore,
Australia, New Zealand, Singapore,
India, Indonesia, Malaysia, China,
Markets Indonesia, Malaysia, China, PNG, Australia Australia, New Zealand, other
PNG, South Africa.
South Africa.
% of product revenue
97% 61% 100% 95%
generated from ANZ
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• Excludes professional learning and Services revenue

Products and services overview

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Services

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ersonnel Key p

EA Organisational Structure

EA Staff Count by Function

Group Executive (Janison)

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Group Exec 1
Assessment Solutions 3
Assessment Projects & Janison Shared
Sales Item Development Test Development Projects &
Solutions Operations Services
Ops 10
Sales 6
3 staff 6 staff 9 staff 8 staff 10 staff ~100 staff
37 staff
Product Managers; Sales Manager & Psychometricians; Data APOs: STEM Project Coordinators; Marketing,
Consultants;
Guides strategy and Analyst; Reporting; (Mathematics, Science, Graphic Designers; Finance, People &
development to address market product Promotion and sale products to schools of EA’s assessment Development and quality assurance of assessment Digital Technology), Literacy, Contracted projects Customer Service PMO, Technology, Culture, Product, Legal , Customer Test
demand and trends in Australia items (i.e. test questions) for EA and 3rd parties Development and quality assurance of tests (i.e. and product cycles. Back office and Success Development 8 Item Development 9
item curation to achieve Customer Support
Reporting and test / data
specific objectives) for EA
analysis
and 3rd parties
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Note:

• All key personnel being retained with the business

• Prior to completion, UNSW Global employed a headcount of 49 FTE. Janison agreed to transition 36 of these positions necessary to support the ongoing product suite (ICAS, JET, SCOUT, REACH) and some additional services income. Roles not transitioned included general administration roles, those associated with the paper delivery of assessments, and some Projects and Operations roles.

• Shared services currently provided by UNSWG to EA will be transitioned to the internal Janison shared services (Finance, HR, Legal, HR, Marketing).

• IT support services will remain with UNSWG Shared Services for a transitional period of up to 1 year for core services

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Customers

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1 Since 2017 EA has delivered tests to a total of 4,614 Australian schools. There are 9,477 schools registered in Australia in 2018, source: Australian Bureau of Statistics

Strategic rationale

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Context

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Strategic rationale

This acquisition will generate significant value for Janison by increasing revenue and enabling scalability

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1

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Engine for profitable and sustainable growth over the next five years

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Synergies

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Integration

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The integration

• Janison has invested in a new Group Executive (Amy Barouch) - a dedicated and proven leader to grow and successfully integrate EA into the group

• New Project Manager - dedicated to managing the technology, process and data integration

• All supported by top-tier Janison leadership team

• Key commercial focus in 2020 is successful delivery of ICAS in August 2020

• To prevent distraction:

• Core business operations will continue as a distinct division of Janison until ICAS is successfully delivered

• Full integration to commence from September, with detailed planning undertaken from May 2020

• Integration ‘quick wins’ being pursued between now and September - low impact on core business e.g. Finance & HR

• Technology Transitional Services Agreement with UNSW Global entered into for the duration of the integration

• UNSW Global brand licensed from UNSW through to December 2020

• Janison and UNSW Global support functions to work together to ensure a seamless transition

• EA fully integrated by April 2021

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Key people

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Functional integration

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We are have a workplan for the functional integration required from Day 1
25% 50% 75% 100%
Functions Day 1 Degree of integration Day 2 Integration plan
• Retain Brand
• ICAS 2020 campaign
Sales & Marketing •
Leverage CRM and Parent Payment Portal
• Sales optimisation
• System and Third Party application migration
•
Operations / IT Gradually transition from UNSW Global to Janison IT
• Process and technology optimisation planning
• Employee engagement
Human Resources • Cultural alignment of EA and Janison
• Cash controls
Finance • Seamless customer & debtor processes
• Appoint Leader and include on ELT
Governance • Alignment of EA and Janison governance
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Financials

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Trading

2016-2018

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Assessments Revenue & Gross Profit % • Consistent Assessment Revenue of ~$12m through calendars 2016 to 2018, largely from a paper
delivery of the ICAS assessment.
Revenue ($m) GM% • Robust gross profit despite higher cost of sales associated with printing, postage, logistics.
65.0%
62.9%
60.8% 61.5%
2019
$12.1M $11.6M $11.6M • EA partially transitioned to digital delivery of exams with inadequate planning, ineffective communication
$10.0M and rushed delivery. Schools not prepared for transformation; test volumes fall by 50% in 2019.
• EA withdraws from unfavourable overseas partnerships causing reduction in assessment revenue.
• Price increases partially absorb the lost test volume.
• Cost of Sales wearing committed cost for higher expected volume of paper-based tests.
CY16 CY17 CY18 CY19
• OPEX investment in building additional item bank for new tests (REACH) impacting profitability.
• The business was operated at approximately break-even EBITDA over the past four years.
2020+
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• Janison is switching the business to a fully digital exam delivery model and assuming only 60% of the existing cost structure.

• Janison will leverage its existing internal shared services for further back-office synergies.

• Due to the impact of COVID-19 Janison expects revenues to be materially lower than CY19 and the business to break even in FY20 with improvement in future years

• Subject to completion of the acquisition occurring and satisfaction of the conditions precedent under that arrangement, the parties have agreed to terminate the existing arrangement between them in exchange for payment to Janison of the proceeding 12 months licence income.

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FY19 pro-forma pre-synergy financials

A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated	A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated	A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated	A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated	A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated	A$ millions (unless otherwise stated) Janison UNSW Global EA1 Consolidated Cost Synergies Pro Forma Consolidated
Recurring Assessment Revenue	5.8	10.0	15.8	--	15.8
Recurring Learning Revenue	5.7	--	5.7	--	5.7
Services Revenue	11.0	2.0	13.0	--	13.0
Total Revenue	22.5	12.0	34.5	--	34.5
COGS	14.6	4.2	18.8	1.6	17.2
Gross Profit	7.9	7.8	15.7	1.6	17.3
Gross Profit Margin	35%	65%	46%	--	50%
OPEX	5.9	9.5	15.4	1.4	14.0
EBITDA	2.0	(1.7)	0.3	3.0	3.3
EBITDA margin	9%	(14)%	1%	--	10%

Note:

Janison financial information prepared based on audited financial statements. UNSWG EA financial information prepared based on unaudited management accounts. 1 UNSWG EA financial statements are unaudited management accounts for the calendar year ending 31 Dec 2019

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Services revenue

Service revenue ($m)

Comments

• 1 Test scanning for 3[rd] parties (e.g. UNSW, University of Wollongong, University of Sydney, Macquarie University)

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2.7 University of Wollongong, University of Sydney,
Macquarie University)
0.5
2.3
2.2 2 Contracts with ACARA to develop national
0.1
0.5 2.0 standardised assessments for NAPLAN
1.9
0.6
0.0
0.5 5
0.5 3 Other various contracts to develop assessments
1.1 0.0 0.6 0.1 4 for 3 [[rd]] parties (e.g. Kaplan – financial planning
0.0 0.2 3 assessment, Sydney Catholic Schools – religious
0.7 0.3 education test, and UK Standards & Testing
Agency)
0.8 0.8 2
0.6 0.5
0.5 4 Professional learning workshops and hosting
conferences
0.4 0.4 0.5 0.4 1
0.3
5 Past paper sales
FY15 FY16 FY17 FY18 FY19
Data processing Third party - NAPLAN Third party - other Other project revenue Other income
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• 3 Other various contracts to develop assessments for 3[[rd]] parties (e.g. Kaplan – financial planning assessment, Sydney Catholic Schools – religious education test, and UK Standards & Testing Agency)

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COVID-19 impact in 2020

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1 “ICAS” = International Competitions and Assessments for Schools

Key Risks

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Key risks and mitigation strategies

Key Risk	Implication	Mitigation Strategy	Mitigation Strategy
Secondary COVID-19 outbreak	ICAS needs to be delivered	•	No paper delivery of ICAS in 2020, with proactive support of schools who used
closes schools again	at home		paper version of ICAS in 2019
		•	Establish parent as invigilator or remote proctoring solution
		•	Virtual medal ceremonies
Cultural misalignment between	Negative impact on	•	Early interactions suggest UNSW Global EA culture is actually very aligned to
Janison and UNSW Global	integration success and		Janison with both having strong entrepreneurial roots with a shared purpose of
Educational Assessment	subsequent growth		improving educational outcomes for students
employees (i.e. university vs. ASX		•	Dedicated and proactive effort already underway to reinforce a positive,
listed corporate)			entrepreneurial Janison culture by incoming CEO
Technology integration is not	Multiple systems and third	•	Dedicated Project Manager to oversee, with sufficient capacity already allocated
successful	party applications required		from both UNSW Global IT and Janison IT functions
Technical capability is not retained	Lack of Assessment	•	Transition of key employees is a condition of purchase
during transition	psychometric and test	•	Pre-planning was undertaken to ensure key people and skills were retained
	development expertise in
	Janison

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Thank you

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