READCLOUD LIMITED

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Acquisition of Ripponlea Institute Pty Ltd

a leading Vocational Education and Training provider

Investor Presentation - 1 June 2021

Acquisition Overview

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Agreement to acquire 100% of Ripponlea Institute Pty Ltd (“Ripponlea”) for up to $1.8 million

	Ripponlea Overview 1	4 Headquartered in Melbourne, provides nationally accredited VET programs mostly for the language industry to 70 secondary schools throughout Australia 4 National market leader in VET-in-Schools courses for Applied Languages, which is a key vertical in the VET-in-Schools sector 4 Provides Cert II & III courses in Applied Languages covering 12 languages 4 Generated sales revenue of $0.85 million in FY20 and delivered EBITDA of $0.4 million
	Compelling Strategic Rationale 2	4 Proprietary products are entirely complimentary to ReadCloud’s current VET offering 4 Language courses and their course in Training and Assessment (“TAE”), a requirement to hold for VET-in-School teachers, can be offered across the ReadCloud Group providing a substantial growth opportunity 4 Provides Music courses to 17 schools who will be moved to the ReadCloud COSAMP platform to realise synergies 4 Provides ReadCloud with an outstanding opportunity to cross-sell its 50+ VET courses and full curriculum digital education platform into Ripponlea’s schools, and deliver language courses into ReadCloud’s 500+ existing school customers 4 ReadCloud has a track record of successfully acquiring and growing businesses, having grown the AIET business from sales of $0.95 million in FY18 to $2.3 million in FY20 and the COSAMP VET business acquired in October 2020
	Acquisition Snapshot 3	4 Acquisition will be funded by existing cash and shares with the consideration partly based on performance 4 Purchase price is up to $1.8 million, comprising an upfront cash payment of $1.2 million and up to $600k of RCL shares contingent on achievement of two year revenue targets 4 Total acquisition cost is between 3.0 and 4.5 times FY20 Adjusted EBITDA subject to revenue performance over two years

Overview of Ripponlea

Leading Registered Training Organisation (“RTO”) delivering proprietary VET courses mainly in the Applied Languages sector to 70 secondary schools throughout Australia
Provides Cert II & III courses in Applied Languages covering 12 languages
Contracted provider for all VET Applied Language, Small Business, Music Industry and Fashion programs in the Catholic sector
School customer retention has been consistently high, built on high quality course resources and customer support
Ripponlea owner Sarah Pavy, who speaks and has studied multiple languages over the years, including European, Asian and Aboriginal, and one other employee will join the ReadCloud team to continue to grow the combined business

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12 Languages Provided by Ripponlea: Chinese French German Hebrew Italian Indonesian Japanese Spanish Yiddish Aboriginal Languages: Arrernte Djambarrpunyu (Yolngu Matha) Murrinh Patha

Offers the TAE40116 Certificate IV in Training and Assessment which is a required qualification for all teachers of VET across the entire sector
Provides proprietary course materials and accreditation that enables schools to offer these courses under Ripponlea's RTO licence

The Australian Vocational Education Sector

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Increased delivery of VET courses in-school is a key component of the Australian government’s strategy to increase secondary school student retention and improve year 12 or equivalent completion rates, by providing broader options for all students
Courses help address skill shortages across all industry sectors
236,000 school students took VET courses in 2019[1] , implying that nearly 1 in 2 senior students in years 11 and 12 study VET courses[2]
With VET in secondary school courses costing approximately $250-300 per course per annum, ReadCloud estimates it is a $50-75 million industry

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National Centre for Vocational Education Research – VET in Schools 2019 report (up from 60,000 students in 1996)
Based on 1.6 million secondary students in 2016 (Australian Bureau of Statistics) and assuming that one third of these students were in years 11 & 12
National Centre for Vocational Education Research Total VET students and courses 2017

Transaction Rationale

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Ripponlea provides complimentary and highly regarded proprietary VET courses to 70 schools across Australia

§ Ripponlea is the clear market leader in the languages segment of the VET-in-schools market

Expands presence in the § Expands ReadCloud’s product offering in the VET-in-schools market, which is a key strategic focus for ReadCloud VET in Schools Sector § Integrates the market leader in VET language courses which is a key vertical in the VET-in-schools sector Direct access to § Access to Ripponlea’s existing relationships with 70 schools across Australia new School relationships § The acquisition takes ReadCloud to over 570 secondary school customers § Digital delivery of Ripponlea’s course materials (some still paper-based) via the ReadCloud platform will protect Digital delivery Ripponlea’s IP, reduce costs and improve user experience benefits §

§ VET courses are significantly enhanced by audio and video content, which can be embedded within course materials via the ReadCloud digital platform

Significant cross-selling potential Value accretive transaction

§ The ReadCloud Group doesn’t currently offer language courses nor TAE courses for teachers which provides an immediate cross-sell opportunity
§ Ripponlea provides a unique point of entry to new schools to introduce ReadCloud’s broader VET and digital education platform
§ Ripponlea is growing and was profitable in FY20
§ Increases the average sales per user across ReadCloud VET products
§ Immediate cost savings through conversion to digital delivery of courses and from shared services § ReadCloud has a track record of successfully acquiring and growing businesses, having grown the AIET VET business 5 from revenue of $0.95 million in FY18 to $2.3 million in FY20

Acquisition Terms

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ReadCloud to acquire 100% of the issued capital of Ripponlea Institute Pty Ltd
The purchase price is up to $1.8 million including a 2 year earn-out
Acquisition will be funded by existing cash and the issue of shares, with consideration in three tranches based on performance:
$1.2 million in cash up front; and

o shares in ReadCloud up to the value of $600,000, contingent on achievement of Revenue performance hurdles in FY21 and FY22

Shares issued as deferred consideration relating to the performance hurdles to be issued at the greater of $0.38 per share and the 30 day volume weighted average share price at the time of issue
The deferred consideration shares will be escrowed, 50% for 1 year from the date of issue, with the balance escrowed for 2 years from the date of issue
Total acquisition cost represents between 3 and 4.5 times FY20 adjusted EBITDA depending on achievement of performance hurdles
The Vendor of Ripponlea and one other employee will join the ReadCloud team to continue to grow the combined business

Key Investment Highlights

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ReadCloud is the leading digital education solution for Australian schools, delivering clear educational benefits and saving schools and students money
ReadCloud is growing rapidly with over 113,000 users in over 570 school customers with ongoing growth in market share
Strategic acquisition of Ripponlea provides a valuable addition to ReadCloud’s VET in Schools business together with near-term crosssell opportunities across Ripponlea’s 70 secondary school customers nation wide
The acquisition provides a substantial growth opportunity by offering Ripponlea’s Teacher Training and Assessment courses for teachers across the ReadCloud Group
Large market opportunity in Australia with an immediate target market of 2,700 secondary schools with 1.6 million students and 236,000 students yearly taking VET in Schools courses
ReadCloud expects significant revenue growth from its existing direct school customers - from expansion of year levels using the ReadCloud digital education platform, additional eBook sales, and further penetration of the VET sector
ReadCloud’s highly scalable platform is leveraged to improving operating margins as user numbers increase
Experienced and motivated management team with a clear growth strategy

Corporate Snapshot

ASX Code: RCL

ASX Code: RCL	ASX Code: RCL
Share Price (31 May2021)	$0.38
Market capitalisation (@ 38 cents)	$44.0m
Shares on issue (listed)	118.3m
Options on issue (unlisted)	1.5m
Current cash (31 May2021)	$7.5m

Board & Management

Board & Management	Board & Management
Cristiano Nicolli	Non-Executive Chairman
Paul Collins	Non-Executive Director
Guy Mendelson	Non-Executive Director
Lars Lindstrom	Executive Director (CEO)
Darren Hunter	Executive Director (CIO)
Luke Murphy	Chief Financial Officer
Melanie Leydin	Company Secretary

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Substantial Shareholders

Substantial Shareholders	Substantial Shareholders
ThorneyGroup*	10.1%
Kinderhook LP	8.5%
Lars Lindstrom	7.2%
Hunmar Holdings/Darren Hunter*	6.0%
West Elk Partners LP	5.8%
Top20	74.4%
Total Board and management shareholdings*	19.8%
*Includes indirect holdings

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Includes indirect holdings
$1.00 Price ($) Share Price Performance and Volume Volume (m) 2.5
$0.80 2.0
$0.60 1.5
$0.40 1.0
$0.20 0.5
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May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21
Volume Share Price
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Disclaimer

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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.

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.

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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’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).

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ReadCloud Limited 284 Bay Street Brighton VIC 3186

Lars Lindstrom | CEO [email protected]

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AI assistant

READCLOUD LIMITED Investor Presentation 2021

65670_rns_2021-05-31_7ef6e204-39a6-4a07-825b-d456c84296da.pdf