READCLOUD LIMITED — Annual Report 2021

Feb 6, 2022

==> picture [360 x 201] intentionally omitted <==

==> picture [360 x 202] intentionally omitted <==

==> picture [360 x 206] intentionally omitted <==

ReadCloud Limited

OVERVIEW

==> picture [177 x 98] intentionally omitted <==

READCLOUD IS A MARKET LEADER IN DIGITAL CONTENT DELIVERY TO SCHOOLS IN AUSTRALIA

We deliver the school curriculum and VET-in-Schools content and assessments digitally

• ReadCloud is a highly scalable SaaS platform and is integrated from publisher to student

• Our product provides sophisticated collaborative learning tools and is well placed for both in-school and remote learning settings

We operate in a large and growing market

• 2,775 secondary schools with 1.6 million students

• 236,000 students yearly doing VET-in-Schools

==> picture [720 x 4] intentionally omitted <==

2

READCLOUD LIMITED

==> picture [177 x 98] intentionally omitted <==

OVERVIEW

==> picture [379 x 270] intentionally omitted <==

==> picture [52 x 52] intentionally omitted <==

• FY21 Finances (year end September 2021) • $7.4m Revenue

• • $4.5m Cash Balance

==> picture [52 x 52] intentionally omitted <==

550 Schools

• 53% increase over FY20

==> picture [52 x 52] intentionally omitted <==

116,000 Students and Teachers

• 56% increase in VET-in-School

• • 21% increase in Direct Curriculum

==> picture [52 x 52] intentionally omitted <==

$63 Average Revenue Per User

==> picture [720 x 4] intentionally omitted <==

READCLOUD LIMITED 33 3

4

==> picture [465 x 294] intentionally omitted <==

SaaS PLATFORM EXPANSION

ReadCloud VET Group

==> picture [21 x 18] intentionally omitted <==

==> picture [47 x 46] intentionally omitted <==

==> picture [34 x 36] intentionally omitted <==

==> picture [36 x 23] intentionally omitted <==

==> picture [49 x 47] intentionally omitted <==

==> picture [35 x 43] intentionally omitted <==

==> picture [177 x 98] intentionally omitted <==

==> picture [49 x 47] intentionally omitted <==

Teacher Student eBook Online Teacher Certificate Approval Enrolment Courses Assessments Marking Issue

ReadCloud Curriculum and Resellers

==> picture [47 x 15] intentionally omitted <==

==> picture [15 x 21] intentionally omitted <==

==> picture [38 x 9] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [6 x 12] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [6 x 10] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [18 x 15] intentionally omitted <==

==> picture [28 x 24] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [6 x 12] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [6 x 10] intentionally omitted <==

==> picture [8 x 8] intentionally omitted <==

==> picture [57 x 49] intentionally omitted <==

==> picture [42 x 25] intentionally omitted <==

==> picture [53 x 48] intentionally omitted <==

Publishers Encryption Integration to Publisher Portals, Reseller Cross platform Social eContent of eBooks eCommerce and School Timetables eReading Apps Annotations

Continued investment in the ReadCloud platform further strengthens our competitive advantage

==> picture [720 x 4] intentionally omitted <==

5

SaaS PLATFORM EXPANSION (CONT’D)

ReadCloud VET Group Platform

ReadCloud Curriculum and Resellers

In November 2021, ReadCloud went live with its newly developed VET-In-Schools platform which offers an end-to-end digital process from

• VET Teachers online uploading their CV and credentials for approval

• Teachers inviting students to enroll being approved, students enrolling, students receiving the

• Students gaining access to their course materials as eBooks in the ReadCloud eReader

• Students being able to complete assessments online in the ReadCloud Hub

• Teachers being able to mark the assessments online to complete the course and issue a Certificate

All of the above steps are underpinned by ReadCloud technology

The new VET-in-Schools platform provides an excellent opportunity to scale the offering to this market without having to substantially increase the number of staff

• In October 2021, ReadCloud went live with a new quoting, onboarding and invoicing system for Direct Curriculum customers. This has greatly enhanced the scalability of this business where more schools can be on-boarded with the same customer support team

• During FY21, ReadCloud continued to invest in the Company’s proprietary eReader platform to improve user experience, remove pain points for our customers and maintain a strong competitive advantage in regard to the platforms’ feature and function sets

==> picture [102 x 7] intentionally omitted <==

----- Start of picture text -----

READCLOUD LIMITED
----- End of picture text -----

==> picture [720 x 4] intentionally omitted <==

6

7

==> picture [465 x 294] intentionally omitted <==

READCLOUD VET GROUP

The ReadCloud VET Group is now the largest Private operator of VET-in-Schools in Australia by scope of courses offered

1

Two acquisitions added to AIET

• In FY21, ReadCloud acquired two VET-in-Schools RTOs, COSAMP and Ripponlea Institute

• COSAMP is the number one supplier in the Music Industry vertical in VET-in-Schools and added 184 school customers

• • Ripponlea Institute is the number one supplier in the Applied Languages vertical in VET-in-Schools and added 70 school customers

• Combined with AIET, the ReadCloud VET Group services over 400 school customers and offer over 60 qualifications

2

• There is a strong sense of excitement in anticipation of a nationwide launch of the ReadCloud VET Group planned for early 2022

Platforms integration and operational synergies

• By bringing many of the systems used by the three RTOs together and integrating the ReadCloud eReader for the delivery of VET course materials, efficiencies are already being extracted

• The previous owners of the three RTO’s ReadCloud has acquired have integrated well and are all senior members of the ReadCloud VET Group. They remain highly motivated (and have large RCL shareholdings from the sale of their businesses) and are fully behind the Company’s strategy to accelerate growth

3

Cross selling and accelerating growth

• The cross selling of each RTO’s services to the customers of the other RTOs presents a large growth opportunity

• • Of the three ReadCloud RTO’s collective schools, 85% of those school customers use only one of ReadCloud’s VET providers (AIET, COSAMP or Ripponlea) in 2021

• Cross selling has already happened this selling season and management expects the number of school customers using more than one of ReadCloud’s RTOs for 2022 will be substantially higher

==> picture [720 x 4] intentionally omitted <==

READCLOUD LIMITED

8

TRENDS IN THE VET-IN-SCHOOLS MARKET

==> picture [378 x 148] intentionally omitted <==

----- Start of picture text -----

225,295 VET-IN-SCHOOLS STUDENTS
18% ReadCloud is
34% well placed to
15% capitalise on the
shift towards
Private RTOs
33%
School RTOs Private RTOs Tafe Unis & Other
----- End of picture text -----

==> picture [177 x 98] intentionally omitted <==

5-YEAR TREND (2016-2020)

==> picture [183 x 106] intentionally omitted <==

----- Start of picture text -----

School RTOs 12%
Private RTOs 30%
TAFE 20%
Unis & Other 21%
----- End of picture text -----

Feedback from ReadCloud school customers

Schools prefer to deal with fewer RTOs as it reduces the administrative compliance burden

ReadCloud has already cross-sold its course offering for 2022 to a number of existing school customers of the three RTOs in the ReadCloud VET Group

Schools who are RTOs themselves are often finding it difficult to keep up with the regulatory changes and compliance demands

ReadCloud has already sold its Platform, eBooks and Assessments to a number of school customers that are RTOs themselves

Recent data release from the National Centre of Vocational Training Research (“NCVER”) which shows an increase in VET-In-Schools Enrolments of 30% for Private RTOs and a decline in all other categories over the last five years

==> picture [720 x 4] intentionally omitted <==

Source: NCVER 2020

9

10

==> picture [465 x 294] intentionally omitted <==

OUTLOOK - ACCELERATING GROWTH

==> picture [221 x 277] intentionally omitted <==

----- Start of picture text -----

Leveraging the
ReadCloud platform
• The newly developed VET-in-Schools
platform provides an excellent
opportunity to scale the offering to this
market without having to substantially
increase the number of staff
• The platform has been successfully
offered to a number of schools who are
RTO’s themselves and management
believes this trend will continue
• Platform automation for the Direct
Curriculum customers also provides
improved scalability for quoting to and
onboarding new schools with fewer
staff
----- End of picture text -----

==> picture [221 x 277] intentionally omitted <==

----- Start of picture text -----

High retention rates, strong new
business growth and cross selling
• ReadCloud is seeing high retention rates
at this stage with re-registration of
existing schools still on-going during
December/January 2022. Management is
expecting to see a very small level of
churn across the business
• ReadCloud continue to see strong new
business sales growth across all channels
• A substantial cross selling opportunity
exists over the coming years to deliver a
wider range of courses to existing school
customers who, in general, prefer to deal
with fewer RTOs to reduce the
administrative compliance burden
----- End of picture text -----

==> picture [222 x 277] intentionally omitted <==

----- Start of picture text -----

International
interest
• Global Victoria selected ReadCloud for
participation in a number of Virtual
Trade Expo across South East Asia and
the UK
• The learnings so far suggest that there
may be a gap in certain overseas
market for ReadCloud’s Platform and in
particular the ability to encrypt and
protect publishers’ eBooks
• As such, ReadCloud is making an
investment in exploring and
quantifying a number of overseas
markets
----- End of picture text -----

==> picture [720 x 4] intentionally omitted <==

11

OUTLOOK - ACCELERATING GROWTH (CONT’D)

==> picture [221 x 277] intentionally omitted <==

----- Start of picture text -----

Direct Curriculum
Customers
• Continued organic growth in existing
schools choosing to expand user
numbers across year levels and
increase the eBooks penetration rate
• Continued cross selling of VET into
Direct Curriculum Customers
• Given COVID learnings to date, the
outbound sales strategy implemented
this year supported by dedicated sales
staff actively managing numerous
opportunities across each key market,
has yielded a strong conversion of
schools for the 2022 school year
----- End of picture text -----

==> picture [221 x 277] intentionally omitted <==

----- Start of picture text -----

Resellers Curriculum
Customers
• ReadCloud continues to partner with
Resellers who offer a one-stop-shop
solution to schools wanting a
combination of eBooks and physical
books/stationary and have recently
signed up two new Resellers who both
have large school customer bases
• This provides a strong pathway to
market for FY22 and beyond
----- End of picture text -----

==> picture [222 x 277] intentionally omitted <==

----- Start of picture text -----

M&A
• ReadCloud will continue to access
further consolidation opportunities as
management has a strong track record
of successfully acquiring and growing
businesses substantially
----- End of picture text -----

Management estimate ReadCloud will have well over 600 school customers for 2022

==> picture [720 x 4] intentionally omitted <==

12

December 2021 Quarterly Highlights

• Strong retention and recommitment of existing schools across the three sales channels (VET-in-Schools, Direct Curriculum and Reseller) for the 2022 school year

==> picture [177 x 98] intentionally omitted <==

• New school wins across all three sales channels

• Most successful on-boarding season for both VET-In-Schools and the full-curriculum segment to date, further validating the investment in our core platform and IP

• Well advanced for a major brand and marketing launch for the VET segment to drive late 2022 and 2023 VET growth

• 21% increase in cash receipts from customers in the December quarter (over the prior year December quarter) to $1.12 million

• $4.08 million cash at 31 December 2021 (the low point in the Company’s cash cycle), positioning the Company well for growth

==> picture [720 x 4] intentionally omitted <==

READCLOUD LIMITED 13

14

==> picture [465 x 294] intentionally omitted <==

FY21 FINANCIALS

Underlying EBITDA

• Change of financial year-end from 30 June to 30 September:

	Year ended	Year ended		● ● ●
($)	30 Sept 2021 (proforma)	30 June 2021 (audited)	Variance (%)
Sales and fee revenue	6,988,396	7,172,072	-2.6%
Less publisher & bookseller fees	(2,904,162)	(3,050,995)	-4.8%
Margin after publisher & bookseller fees	4,084,234	4,121,077	-0.9%
Add: Other revenue	429,677	515,304	-16.6%
Less operating expenses:
Advertising and marketing	(183,618)	(114,172)	60.8%
Employment expenses	(3,789,844)	(3,373,377)	12.3%
Legal & compliance	(85,288)	(87,033)	-2.0%
Professional services expenses	(474,920)	(391,871)	21.2%
Telephone, internet & data hosting	(96,609)	(90,364)	6.9%
Travel expenses	(96,642)	(92,059)	5.0%
Other expenses	(554,816)	(470,527)	17.9%
Finance costs	(17,537)	(14,257)	23.0%
Total operating expenses	(5,299,274)	(4,633,660)	14.4%
Add: Net interest expense / (revenue)	16,354	12,833	27.4%
Underlying EBITDA*	(769,009)	15,553	N/A

• a 30 June year-end that straddles two business cycles (school years) presented challenges in communicating operational and financial performance to investors

• the change to 30 September for full year reporting and 31 March for half year results more closely aligns with the school year and will improve the clarity of the Company’s results

• Slight decline in Sales and fee revenue between the 2 periods due to timing:

• majority of “Year 1 2 headstart” eBook sales booked in October 2021 versus September 2020; partially offset by

• higher revenue contribution in the year to 30 September 2021 from the VET segment

• Operating costs for the year ended 30 September 2021 include:

• 11 months of costs for the COSAMP business (acquired October 2020); and

• 4 months of costs for the Ripponlea Institute business (acquired June 2021).

• In total $0.73 million of increased costs without obtaining the the full revenue from COSAMP or any of the revenue from Ripponlea

• Operating costs for the year ended 30 June 2021 include:

• 8 months of costs for the COSAMP business; and

• 1 month of costs for the Ripponlea Institute business

• EBITDA adjusted for Interest, Tax, Depreciation and Amortisation, Share-based payments, transaction costs incurred on the COSAMP and Ripponlea Institute acquisitions and one-off ASX fees.

==> picture [720 x 4] intentionally omitted <==

15

==> picture [177 x 98] intentionally omitted <==

FY21 FINANCIALS

Balance Sheet

$	Note	30-Sept-21	30-Jun-21	Notes 1. T f J a 2. I d o C 3. I $ o 4. D s I r i a i C i h
Cash and cash equivalents	1	4,471,184	6,295,556
Trade and other receivables		787,073	887,705
Prepayments		126,089	59,927
Total current assets		5,384,346	7,243,188
Non-current deposits		40,563	40,563
Property, plant & equipment		239,868	267,675
Intangibles	2	8,108,809	8,038,723
Right-of-use assets		258,019	300,603
Total non-current assets		8,647,259	8,647,564
Total assets		14,031,605	15,890,752
Trade and other payables		651,107	627,330
Borrowings	1	-	462,837
Other current liabilities	3	605,851	412,020
Employee entitlements (Current & NC)		422,317	330,050
Contingent consideration (Current & NC)	4	1,000,000	1,000,000
Lease Liabilities (Current & NC)		286,006	328,045
Total liabilities		2,965,281	3,160,282
Net assets		11,066,324	12,730,470

1. The vast majority of the Company’s cash receipts from customers are received in the March and June quarters each year. Also – a bank loan assumed with the Ripponlea Institute acquisition was repaid in full in July 2021

2. Intangibles include capitalised software development ($2.26m), goodwill ($5.40m) and other intangibles acquired as part of the AIET, COSAMP and Ripponlea Institute acquisitions

3. Includes contract liabilities (unearned revenue - $0.52 million) and company tax payable in respect of COSAMP and Ripponlea Institute

4. Deferred consideration payable in ReadCloud shares to the vendors of COSAMP and Ripponlea Institute upon achievement of FY21 and FY22

revenue performance hurdles (any shares to be issued will be at greater of $0.38 and 30-day VWAP and these shares will be escrowed). The Company issued 1.45m shares at $0.38 each to the vendors of COSAMP and Ripponlea Institute on 1 October 2021 in respect of the achievement of FY21 revenue hurdles.

==> picture [720 x 4] intentionally omitted <==

16

DISCLAIMER

This presentation has been prepared by ReadCloud Limited (“Readcloud”), based on information available as at the date of this presentation. The information in this presentation is provided in summary form and does not contain all information necessary to make an investment decision.

==> picture [177 x 98] intentionally omitted <==

The distribution of this presentation may be restricted by law and you should observe any such restrictions.

Forward looking statements

This presentation does not constitute an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any security in ReadCloud, nor does it constitute financial product advice or take into account any individual’s investment objectives, taxation situation, financial situation or needs. An investor must not act on the basis of any matter contained in this presentation but should make its own assessment of ReadCloud as part of its own investigations. Before making an investment decision, investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs, and seek legal, taxation and financial advice appropriate to their jurisdiction and circumstances. ReadCloud is not licensed to provide financial product advice in respect of ReadCloud securities or any other financial products.

Although reasonable care has been taken to ensure that the facts stated in this presentation are accurate and that the opinions expressed are fair and reasonable, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, neither ReadCloud, nor any of its officers, directors, employees and agents, nor any other person, accepts any responsibility and liability for the content of this presentation including, without limitation, any liability arising from fault or negligence, for any loss arising from the use of or reliance on any of the information contained in this presentation or otherwise arising in connection with it.

This presentation may contains certain forward looking statements that are based on ReadCloud’s beliefs, assumptions and expectations and on information currently available to ReadCloud’s management. Such forward looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results or performance of ReadCloud to be materially different from the results or performance expressed or implied by such forward looking statements. Such forward looking statements are based on numerous assumptions regarding present and future business strategies and the political and economic environment in which they operate in the future, which are subject to change without notice. Past performance is not necessarily a guide to future performance and no representation or warranty is made as to the likelihood of achievement or reasonableness of any forward looking statements or other forecast. To the full extent permitted by law, ReadCloud and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to information to reflect any change in any of the information contained in this presentation (including, but not limited to, any assumptions or expectations set out in the presentation).

The information presented in this presentation is subject to change without notice and ReadCloud does not have any responsibility or obligation to inform you of any matter arising or coming to their notice, after the date of this presentation, which may affect any matter referred to in this presentation. The cover image is illustrative only.

==> picture [720 x 4] intentionally omitted <==

17

==> picture [720 x 209] intentionally omitted <==

ReadCloud Limited 284 Bay Street Brighton VIC 3186

Lars Lindstrom | CEO lars@readcloud.com

==> picture [76 x 20] intentionally omitted <==

==> picture [62 x 30] intentionally omitted <==