READCLOUD LIMITED — Interim / Quarterly Report 2023

Jan 29, 2023

ASX Release

30 January 2023

Quarterly Activities Report & Appendix 4C

Operational Highlights

• Growth in organic revenue for FY23 expected to be achieved through the continued support of current schools, and the addition of new schools in the eBook Solutions and VET in Schools segments
• Successful completion of platform developments to fully align RTO systems and processes across the three ReadCloud VET Group RTOs for the 2023 school year
• Completion of Southern Solutions Training Services acquisition, with integration well progressed
• CEO succession plan in progress.

Financial Highlights

• Record December quarter cash receipts from customers of $2.16 million, representing a 93% increase on the prior comparable period
• $1.32 million cash at 31 December 2022 (typically the low point in the Company's cash cycle) post the settlement of the Southern Solutions Training Services acquisition and acquisition related costs

ReadCloud Limited ("ReadCloud" or "the Company") (ASX: RCL) is the leading provider of digital eLearning solutions to secondary schools and the Vocational Education and Training ("VET") sector in Australia. The Directors of ReadCloud are pleased to provide a quarterly update and cash flow statement for the December 2022 quarter.

Operational update

ReadCloud is pleased to report that continued support of existing schools together with new school wins across the eBook Solutions and VET in schools segments is expected to deliver organic revenue growth in FY23. Total school and user numbers for 2023 for the full-curriculum business will not be known with full certainty until the conclusion of the on-boarding season in the current quarter (and for the VET segment – mid-March student enrolment deadline).

Customer retention in the VET-in-schools segment was particularly encouraging in light of the standardisation of pricing across the three ReadCloud VET Group Registered Training Organisations ("RTOs"). The dedicated VET sales team has achieved strong results in terms of new schools as well as existing schools adding qualifications.

Importantly, ReadCloud successfully completed the development and change management projects that take the Company into the 2023 school year with full alignment of RTO systems and processes across the ReadCloud VET Group.

ReadCloud also successfully completed the 2023 Continuous Improvement cycle, allowing the Company to introduce significant customer feedback driven improvements to its Learning Management System and VET course offerings.

The Company completed the acquisition of Southern Solutions Training Services Pty Ltd ("Southern Solutions") during the quarter. Southern Solutions is a leading national provider of training for certificates in Early Childhood Education & Care ("ECEC"). The acquisition provides a significant growth opportunity for ReadCloud in a market that is adjacent to the Company's core business and in an industry with skills shortages and high national government funding and focus.

Integration of Southern Solutions within the ReadCloud platform and systems is well progressed, with expectations of a mid-year completion. As part of this, Southern Solutions is developing, in conjunction with its larger corporate childcare provider clients, a streamlined enrolment process for new ECEC students.

Late in the December quarter, ReadCloud announced a CEO succession plan. With the recently completed acquisition of Southern Solutions providing significant growth opportunities, together with the increased staff and operational focus required, Mr Lars Lindstrom has stepped down from his role as CEO to focus on a new role as Director of Strategy and Business Realisation.

Executive Director Darren Hunter has been appointed interim CEO. An executive search agency has been appointed to assist the Board, with the search for an appropriately qualified and experienced leader in progress.

Finance Update

ReadCloud's cash flow is highly seasonal in line with the school year cycle. The majority of the Company's cash receipts from customers are received in the quarters ending March and June.

Key points from the accompanying Appendix 4C Cash Flow Statement:

93% increase in cash receipts from customers (on the prior comparable period) to $2.16 million in the December quarter. The record-high December quarter was driven by some earlier invoicing of 2023 auspicing fees to ReadCloud VET Group schools this year (as part of the alignment of business processes between the 3 RTOs) and receipts from Southern Solutions customers totalling $0.38 million;

• receipt of the Company's FY22 R&D tax incentive refund ($424,000) is expected in the current quarter;
• cost of sales for the December quarter was $457,000, with the main components comprising publisher payments relating to full-curriculum eBook sales made during the September quarter and trainer costs incurred in the delivery of VET qualifications by Southern Solutions in the December quarter;
• advertising and marketing costs for the December quarter ($105,000) were consistent with prior quarters;
• staff costs for the December quarter were $1.49 million ($173,000 of the $245,000 increase from the prior quarter is attributable to Southern Solutions);
• administration costs for the December quarter were $331,000, compared to an average of $209,000 for the three quarters immediately prior to this period, with the increase attributable to acquisition costs associated with the Southern Solutions acquisition ($48,000) and annual Directors & Officers and professional indemnity insurance premiums ($54,000);
• payments to acquire businesses comprise the up-front cash consideration paid for the Southern Solutions acquisition of $975,000 less cash acquired of $243,000; and
• Payments to related parties (item 6.1 of the attached Appendix 4C) consisted of remuneration paid to directors during the quarter.

Following completion of the Southern Solutions acquisition and acquisition-related costs, ReadCloud had a cash balance of $1.32 million as at 31 December 2022 (December typically being the low point in the Company's cash cycle) and zero debt. As noted above, ReadCloud's cash flows are highly seasonal, with the majority of cash receipts from customers for the year to be received in the March and June quarters each year.

The Company's Appendix 4C Cash Flow Statement accompanies this report.

This announcement is authorised for release to the market by the Board of Directors of ReadCloud Limited.

-Ends-

CONTACTS:

Investors & Media: Luke Murphy, Chief Financial Officer +61 409 933 924

About ReadCloud Limited

ReadCloud is the leading provider of eLearning software solutions, including eBooks, to over 600 Schools and in the Vocational Education and Training (VET) sector in Australia. ReadCloud's proprietary platform delivers digital content to students and teachers with extensive functionality, including the ability to make commentary in, and import third party content into eBooks.

Students and teachers can share notes, questions, videos and weblinks directly inside the eBooks turning the eBook into a place for discussion, collaboration, and social learning, substantially improving learning outcomes.

ReadCloud sources content for its solutions from multiple publishers, delivering the full Australian school curriculum in digital form in all States, on one platform. In the Vocational Education and Training (VET) sector, ReadCloud provides over 60 digital VET courses and auspicing services to schools across Australia.

ReadCloud currently has over 132,000 users on its platform.

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity
ReadCloud Ltd
ABNQuarter ended ("current quarter")

Consolidated statement of cash flows		Current quarter$A'000	Year to date (3months)$A'000
1.	Cash flows from operating activities
1.1	Receipts from customers	2,157	2,157
1.2	Payments for
	(a)research and development	(141)	(141)
	(b)product manufacturing and operatingcosts	(457)	(457)
	(c)advertising and marketing	(105)	(105)
	(d)leased assets	(46)	(46)
	(e)staff costs	(1,486)	(1,486)
	(f)administration and corporate costs	(305)	(305)
1.3	Dividends received (see note 3)	-	-
1.4	Interest received	3	3
1.5	Interest and other costs of finance paid	-	-
1.6	Income taxes paid	(26)	(26)
1.7	Government grants and tax incentives	-	-
1.8	Other (provide details if material)
1.9	Net cash from / (used in) operatingactivities	(406)	(406)

2.	Cash flows from investing activities
2.1	Payments to acquire or for:
	(a)entities	-	-
	(b)businesses	(732)	(732)
	(c)property, plant and equipment	(1)	(1)
	(d)investments	-	-
	(e)intellectual property	-	-
	(f)other non-current assets	-	-

Consolidated statement of cash flows		Current quarter$A'000	Year to date (3months)$A'000
2.2	Proceeds from disposal of:
	(a)entities
	(b)businesses
	(c)property, plant and equipment
	(d)investments
	(e)intellectual property
	(f)other non-current assets
2.3	Cash flows from loans to other entities
2.4	Dividends received (see note 3)
2.5	Other (provide details if material)
2.6	Net cash from / (used in) investingactivities	(733)	(733)

3.	Cash flows from financing activities
3.1	Proceeds from issues of equity securities(excluding convertible debt securities)
3.2	Proceeds from issue of convertible debtsecurities
3.3	Proceeds from exercise of options
3.4	Transaction costs related to issues ofequity securities or convertible debtsecurities
3.5	Proceeds from borrowings
3.6	Repayment of borrowings
3.7	Transaction costs related to loans andborrowings
3.8	Dividends paid
3.9	Other (provide details if material)
3.10	Net cash from / (used in) financingactivities	-

4.	Net increase / (decrease) in cash andcash equivalents for the period
4.1	Cash and cash equivalents at beginning ofperiod	2,464	2,464
4.2	Net cash from / (used in) operatingactivities (item 1.9 above)	(406)	(406)
4.3	Net cash from / (used in) investing activities(item 2.6 above)	(733)	(733)

Consolidated statement of cash flows		Current quarter$A'000	Year to date (3months)$A'000
4.4	Net cash from / (used in) financing activities(item 3.10 above)	-	-
4.5	Effect of movement in exchange rates oncash held
4.6	Cash and cash equivalents at end ofperiod	1,325	1,325

5.	Reconciliation of cash and cashequivalentsat the end of the quarter (as shown in theconsolidated statement of cash flows) to therelated items in the accounts	Current quarter$A'000	Previous quarter$A'000
5.1	Bank balances	1,325	2,464
5.2	Call deposits
5.3	Bank overdrafts
5.4	Other (provide details)
5.5	Cash and cash equivalents at end ofquarter (should equal item 4.6 above)	1,325	2,464

6.	Payments to related parties of the entity and theirassociates	Current quarter$A'000
6.1	Aggregate amount of payments to related parties and theirassociates included in item 1	195
6.2	Aggregate amount of payments to related parties and theirassociates included in item 2	-
	Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and anexplanation for, such payments.

7.	FinancingfacilitiesNote: the term "facility' includes all forms of financingarrangements available to the entity.Add notes as necessary for an understanding of thesources of finance available to the entity.	Total facilityamount at quarterend$A'000	Amount drawn atquarter end$A'000
7.1	Loan facilities	-	-
7.2	Credit standby arrangements	-	-
7.3	Other (please specify)	-	-
7.4	Total financing facilities	-	-
7.5	Unused financing facilities available at quarter end		N/A
7.6	Include in the box below a description of each facility above, including the lender, interestrate, maturity date and whether it is secured or unsecured. If any additional financingfacilities have been entered into or are proposed to be entered into after quarter end,include a note providing details of those facilities as well.

8.		Estimated cash available for future operating activities	$A'000
8.1	Net cash from / (used in) operating activities (item 1.9)		(406)
8.2		Cash and cash equivalents at quarter end (item 4.6)	1,325
8.3		Unused finance facilities available at quarter end (item 7.5)	-
8.4		Total available funding (item 8.2 + item 8.3)	1,325
8.5	item 8.1)	Estimated quarters of funding available (item 8.4 divided by	3.26
		Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as "N/A". Otherwise, afigure for the estimated quarters of funding available must be included in item 8.5.
8.6		If item 8.5 is less than 2 quarters, please provide answers to the following questions:
	8.6.1Does the entity expect that it will continue to have the current level of net operatingcash flows for the time being and, if not, why not?
		N/A
	8.6.2	Has the entity taken any steps, or does it propose to take any steps, to raise furthercash to fund its operations and, if so, what are those steps and how likely does itbelieve that they will be successful?
	N/A
	8.6.3	Does the entity expect to be able to continue its operations and to meet its businessobjectives and, if so, on what basis?
	N/A
		Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.
• 2 This statement gives a true and fair view of the matters disclosed.

Date: 30 January 2023

Authorised by: By the Board (Name of body or officer authorising release – see note 4)

Notes

• 1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.
• 1. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.
• 1. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.
• 1. If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee – eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".
• 1. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.