READCLOUD LIMITED — Investor Presentation 2018

May 14, 2018

Investor Presentation | May 2018

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.

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.

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Forward looking statements

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 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).

Investment Overview

• ReadCloud is leading the transition to digital eLearning in Australian secondary schools
• ReadCloud delivers the school curriculum, across all key platforms, integrated from publisher to student
• Very strong start to the 2018 school year, with a significant increase in inbound enquiries from new schools as the ReadCloud platform becomes better known in key school communities
• ReadCloud now has over 50,000 contracted users in 70 schools on its SAAS platform, a 130% increase in users in FY18 year to date
• Operating systems, on-boarding processes and professional training sessions for teachers have all run well, and according to schedule
• ReadCloud has the strongest sales pipeline in its history leading into the 2019 school year and has expanded its sales team since the IPO to further accelerate sales
• Based on strong growth in schools and user numbers in school year 2018, the Directors estimate that the Company is on track to achieve the management target of $2 million Total Revenue in FY18 up from $838,000 in FY17

	ASX Code: RCL, RCLO

Share Price ( 14 May2018)	$0.30
Market capitalisation (@ 30 cents)	$24.6m
Shares onissue (listed)	43.7m
Escrowed shares	38.2m
Options on issue	20.6m
Performance Rights	13.1m
Current cash (31 March 2018)	$5.4m
Tradingrange (since listing)	$0.22 to $0.41
Averagedaily volume	128,096

Directors
Paul Collins	Non-Executive Chairman
Lars Lindstrom	Chief Executive Officer
Darren Hunter	Chief InformationOfficer
Guy Mendelson	Non-Executive Director
MelanieLeydin	CFO & CompanySecretary

Substantial Shareholders

Amity Agency Pty Ltd	17.5%
Group*Thorney	13.1%
Lars Lindstrom	7.9%
PollaersFamily Trust	6.3%
Holdings/Darren Hunter*Hunmar	6.0%
Kimberley Marshall	5.8%
Jonathan Isaacs	5.2%
Top 20	78.2%
Shareholdings*Total Board	16.5%

*Includes indirect holdings

Q3 FY18 Highlights

• User number growth has accelerated, more than doubling in 9 months from 21,800 in FY17 to 50,200 in Q3 FY18, with the Company's strongest ever sales pipeline leading into school year 2019
• Year to date revenue growth was strong with $1.7m in revenue from Ordinary activities in Q3 FY18 YTD. Revenues are seasonal, due to the school year cycle, with the majority of revenue booked in Q2 and Q3 in each financial year
• Strong growth in Queensland schools was a direct result of targeting Book Hire schools with a very competitively priced eBook curriculum
• Significant investment in capabilities in 2018, more than doubling employee numbers to 14, with two new developers and five dedicated sales staff significantly expanding the Company's capabilities Revenue from Ordinary Activites*
• The ReadCloud platform, with its competitive eBook pricing, has opened a large opportunity for expansion of direct sales in QLD, NSW, SA & WA states who have predominantly Book Hire schools
• Higher margin direct sales have increased from 12% to 29% of total user numbers with sales via Resellers representing 71% of users
• Ongoing Platform development with deeper integration with school Learning Management Systems and new features added * Operating Revenue excluding R&D tax incentives and other income ** Unaudited revenue

ReadCloud is the complete Digital solution

The ReadCloud platform is the complete solution for eLearning and management of all Digital Content.

Fully integrated platform delivering a complete solution for schools, students, publishers and intermediaries

Australian developed, all IP owned 100%

ReadCloud Benefits

Students
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• Australian Curriculum in one App
• Integrates digital content from multiple publishers
• Cross Platform
• Operates on all hardware/operating systems
• Social collaboration and annotations
• Social learning share notes, videos & ideas
• Single Login to all content
• Offline reading notes and annotations are automatically synchronised

Schools & Teachers

• Automatically creates and synchronises students and classes
• Automated provisioning of resources detects new students and class movements
• Curate own content teachers can upload their own content
• Rich analytical data on student usage and progress
• Management console reporting

Publishers

• Solves online delivery problem for publishers
• Efficient delivery of DRM encrypted content
• Updates are imported automatically
• 175,000+ eBooks from the world's leading publishers
• All logins centralised with one password
• Integrates content from traditional and nontraditional publishers

Channel Partners

• Provides a comprehensive eLearning platform
• Utilises Channel Partners' regional strengths
• Real-time ordering
• White label available
• Access to a broad range of content
• Content management
• Management console for client support
• Automated onboarding services and utilities

• Global Market
  • Education is a $5.8 trillion market, with Ed-tech representing just 2% (IBIS)
• Australia
  • 3.8 million students in over 10,000 primary and secondary schools
  • ReadCloud's immediate target market is 2,700 secondary schools with 1,600,000 students
  • Of these target schools, 63% expect to move to 100% digital learning by 2020 (ORC Int. 2017)
• ReadCloud's Market Position
  • Rapid early traction with over 50,000 users in 70 secondary schools on the platform, with the opportunity to rapidly increase market share in the 1.6 million secondary student target market
  • 7,500+ primary schools in Australia provide a longer term growth opportunity
  • Readcloud is accelerating direct sales to schools and benefits from its Channel Partners established school relationships
  • ReadCloud aims to double users in 2019 to more than 100,000

Increasing Market Penetration

• ReadCloud's sales cycle has shortened significantly in 2018 compared to 2017 as ReadCloud's platform becomes more widely known and accepted in key school communities
• The shortening sales cycle is demonstrated by the sales process for two large schools who have come onto the ReadCloud platform in 2017 and 2018 respectively

• February 2017 Trinity Bay State High School is contacted through an existing school referral
• March/April/May 2017 Four in person, at school meetings and presentations to Principal and key stakeholders
• 29 May 2017 Principal confirms school's intention to roll ReadCloud out across Years 7-12 commencing Term 3 2017
• 9 June 2017 Trinity Bay signs ReadCloud's 4-year software license agreement

• 21 March 2018 Gordonvale State High School attends ReadCloud's stand at the National Future Schools Expo and Conference in Melbourne
• 27 March 2018 ReadCloud presentation to Principal, Deputy Principal, key HODs and Teacher Librarian at school
• 27 March 2018 Principal confirms school's intention to roll-out ReadCloud across Years 7-12 commencing Term 3 2018
• 16 April 2018 Gordonvale signs ReadCloud's 3-year software license agreement

Ongoing Platform Development

• Ongoing development during the quarter has delivered:
  • Deeper integration with school Learning Management Systems
  • Seamless access to a growing list of content providers
• Several new features are well underway and will be released in time for the start of school year 2019 including:
  • Enhanced eReader and Annotation framework to also support Drawing on Pages and sharing
  • Ability for School Networks to manage the platform
  • Support for remote Distance Education via USB with encrypted content
• Since listing ReadCloud has increased its Software Development & Support team by 2 employees as it continues to invest in the platform
• During the latest quarter, ReadCloud has seen the largest take up by schools to date of:
  • The ReadCloud Content Server which allows students to download eBooks from inside their school's intranet with the content remaining encrypted; and
  • The ReadCloud Integrator which provides automatic syncing of the school's timetabling software with the ReadCloud clouds (virtual classrooms)

Outlook

• ReadCloud is experiencing its strongest level of inbound enquiries and has its strongest ever sales pipeline leading into school year 2019
• Significant investment in sales & marketing, development and support capabilities in 2018, more than doubled employee numbers to 14, and now with five dedicated sales staff will significantly expand the Company's direct sales capabilities
• The investment strategy, to capitalise on the strong sales pipeline and increasing demand from schools, will bring forward expenses compared to previous budgets, and as a result the Company does not expect to meet the Performance Rights target of FY18 EBITDA of $500,000
• This investment will benefit the long-term value of ReadCloud by enabling the Company to on-board an accelerating rate of schools converting to digital curricula for school year 2019
• The ReadCloud platform, combined with very competitive eBook pricing, has opened a large opportunity for expansion of direct sales to predominantly Book Hire schools in QLD, NSW, SA & WA
• ReadCloud is also in discussion with a number of umbrella organisations that each represent multiple schools
• Based on strong growth in schools and user numbers in school year 2018, the Directors estimate that the company is on track to achieve the management target of $2 million Total Revenue in FY18, up from $838,000 in FY17

Investment Highlights

• ReadCloud is the leading digital education solution for Australian schools, delivering clear educational benefits and saving schools and students money
• Large market opportunity in Australia with an immediate target market of 2,700 secondary schools with 1.6 million students
• Have historically been growing at >100% p.a. with 50,000 users in 70 schools in Q3 FY18 with the opportunity to rapidly increase market share in the 1.6 million secondary student target market
• Increasing proportion of high margin direct sales to schools
• Strategically positioned with Channel Partners including Jacaranda (John Wiley), OfficeMax in Australia, Harley's Educational Supplies and Impact Office Supplies reselling the ReadCloud platform
• Recently expanded sales team and improved marketing resources to accelerate market share growth
• Highly scalable platform is leveraged to improving operating margins as user numbers increase
• Experienced and motivated team with a clear growth strategy
• ReadCloud is on track to exceed $2 million in Total Revenue in FY18, with performance targets based on Total Revenue of $7.5 million and 100,000 users in FY19

ReadCloud Limited 1/426 Glenhuntly Rd Elsternwick VIC 3185

Contact: Lars Lindstrom CEO lars@readcloud.com