READCLOUD LIMITED — Investor Presentation 2022

Jul 12, 2022

ReadCloud Limited

Company Presentation 13 July 2022

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

KING'S INTERHIGH AGREEMENT

First overseas eBooks Solutions deal

Four-year agreement to become the exclusive provider of eBooks to the parents of around 4,000 students

Provides an additional revenue channel

King's InterHigh is part of the Inspired Group, which provides education to over 55,000 students worldwide

READCLOUD LIMITED 4 * Source: Australian Curriculum, Assessment & Reporting Authority

TOTAL AUSTRALIAN SECONDARY STUDENTS*

Secondary education market is consistently growing

READCLOUD ADDRESSES A

LARGE AND GROWING MARKET

ReadCloud also operates in the VET-in-schools market, which is provided to year 11 and 12 students

ReadCloud has a strong foundation in the market to leverage

Sector well supported by State and Federal Governments

READCLOUD'S MARKET OPPORTUNITY

ADDRESSED BY

ReadCloud eBook solutions

• The full-curriculum eBooks (maths, english, science etc.)
• We estimate a market size of $170 million (conservative estimate $100 per student p.a. for learning resources)

ReadCloud Vocational Education & Training-in-schools

• 241,000 school students took VET courses in 20201 , implying nearly 1 in 2 senior students in years 11 and 12 study VET courses
• With VET in secondary school courses costing approximately $250-300 per course per annum, ReadCloud estimates it is a $60-75 million industry

Broader VET market

• Digital distribution agreements with leading VET course publishers delivering course materials to VET students in Universities, TAFEs and Registered Training Organisations (RTOs)
• The ReadCloud SaaS Platform is designed to support the Broader VET market

1. National Centre for Vocational Education Research – VET in Schools 2020 report (up from 60,000 students in 1996)

2. Australian Curriculum, Assessment & Reporting Authority

OUR PROPRIETARY SAAS PLATFORM SERVES KEY MARKETS

ReadCloud eBook Solutions

PublisherseContent	Encryptionof eBooks	Integration to Publisher Portals, ResellereCommerce and School Timetables		Cross platformeReadingApps	SocialAnnotations
ReadCloud	Vocational Education & Training
TeacherApproval	StudentEnrolment	eBookCourses	OnlineAssessments	TeacherMarking	CertificateIssue

Continued investment in the ReadCloud platform further strengthens our competitive advantage

EBOOK SOLUTIONS

Digital delivery of full Australian curriculum to secondary schools in all States on one platform

Over 200,000 eBooks from the world's leading publishers

Two sales channels covering the entire secondary schools market:

• direct customer relationships
• distribution via Reseller agreements with traditional booksellers

EBOOK SOLUTIONS GROWTH STRATEGY

Continued organic growth in existing schools choosing to expand user numbers across year levels and increase the eBooks penetration rate

Leveraging outbound sales strategy that yielded a strong conversion of schools for 2022 school year

New Reseller partnerships with traditional booksellers seeking a digital delivery platform to complement their existing physical book / stationery offering

Uplift in school interest in digital education

platforms post COVID lockdowns indicative of the secondary textbook market getting closer to tipping point towards eBooks

VOCATIONAL EDUCATION & TRAINING- IN-SCHOOLS ("VET-IN-SCHOOLS")

ReadCloud VET Group is the largest private operator of VET-in-schools by scope of courses offered

• 3 Registered Training Organisations, each with strong brand and reputation
• collectively deliver more than 60 qualifications
• Private operators have grown 30% over the last five years

Positive market dynamics

• schools prefer to deal with fewer RTOs as it reduces systems and processes that teachers and students need to become familiar with
• schools that are RTOs in their own right are struggling with compliance burden and lacking consistent systems and processes

ReadCloud has made significant investment in scalable systems:

• compliance monitoring
• new learning management system
• VET course resources better suited to unique requirements of delivery to secondary school

OUR BRANDS

Established in 2009, COSAMP (RTO 41549) has continued to build a strong reputation across the sector as a specialist Creative Industries RTO. COSAMP offers 17 qualifications across these industry areas:

Established in 2003, AIET (RTO 121314) is our Trades, Outdoors and Service Industries RTO and offers 25 qualifications across these industry areas:

Established in 2002 Ripponlea Institute (RTO 21230) specialises in Community, Work and Business, including Applied Languages. Ripponlea Institute offers 15 qualifications across these industry areas:

• Music

• Sound Production

• Visual Arts

• Dance

• Creative Industries

• Screen and Media

• Horticulture

• Building and Construction

• Plumbing and Electrotechnology

• Automotive

• Engineering

• Furniture Pathways

• Hair and Beauty

• Laboratory Operations

• Sport, Fitness and Recreation

• Tourism, Hospitality Cookery and Events

• Business and Workplace Skills

• Community Services and Volunteering

• Language

• IT and Digital media

• Fashion

• TAE40116 Certificate IV in Training & Assessment

VET-IN-SCHOOLS GROWTH STRATEGY

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

Just 21% of the three ReadCloud RTO's collective schools' customers have used more than one of the RTOs in FY22, up from 15% in FY21, and this is expected to increase in the coming years

Platform has been successfully offered to a number of schools who are RTO's themselves, and management believes this trend will continue

Increasing State and Federal Government support and funding for skills-based training to address labour market shortages

Market will continue to expand

ReadCloud continues to assess opportunities to add qualifications to the scope of its RTO licences based on market demand

FIRST-HALF FY22 HIGHLIGHTS

* Revenue is heavily skewed to 1H with change in financial year end from 30 June to 30 September: 1H FY22 EBITDA and statutory profit not indicative of likely FY22 result Consolidated revenue and other income of $7.08 million (up 33% pcp)

VET segment revenue of $3.10 million )up 89% on pcp)

Full-curriculum segment revenue of $3.99 million (up 8% on pcp)

$1.35 million 1H FY22 underlying EBITDA*

Strong cash balance of $5.4 million on 31 March 2022 (and no debt), positioning the Company well for growth

FIRST-HALF FY22 HIGHLIGHTS

SCHOOL & USER GROWTH

PLATFORM USERS BY SALES CHANNEL

Strong retention of existing school customers and new school wins for the 2022 school year

Strong growth in ReadCloud SaaS platform user numbers

ReadCloud platform now used by more than 600 schools and educational institutions

Direct full-curriculum ReadCloud platform user numbers of 69,000, up 23% yoy

VET-In-School user numbers of 15,000, up 25% yoy

OUTLOOK

Strong retention of customers provides platform for future growth

ReadCloud's investment in platform, compliance and support systems can be scaled and leveraged into new opportunities in this market

COVID rear-view mirror – getting closer to tipping point towards eBooks replacing print

Major brand and marketing launch aimed at cross-selling for the VETin-schools segment to drive growth late 2022 and 2023

Actively assessing M&A opportunities

Early stages of delivering publisher content in overseas markets via the ReadCloud platform, with additional plans to expand

Management is confident of increasing revenue growth and achieving a positive EBITDA and a positive operating cashflow for FY23

CORPORATE SNAPSHOT

ASX Code: RCL

Share Price (11 July 2022)	$0.19
Market capitalisation (@ 0.19 cents)	$22.8m
Shares onissue	119.8m
Options on issue (unlisted)	1.0m
Current cash (31 March 2022)	$5.4m

Board & Management		Readcloud 12-Month Price & Volume$0.40
Cristiano Nicolli	Non-Executive Chairman	$0.35
Paul Collins	Non-Executive Director	2.0$0.30
Guy Mendelson	Non-Executive Director	$0.251.5
Lars Lindstrom	Executive Director (CEO)	$0.20
Darren Hunter	Executive Director (CIO)	1.0$0.15
Luke Murphy	Chief Financial Officer	$0.100.5$0.05
Melanie Leydin	Company Secretary	$0.000.0

Substantial Shareholders
Group*Thorney	10.9%
Lars Lindstrom	7.2%
Microequities	6.2%
Holdings/Darren Hunter*Hunmar	6.0%
West Elk Partners LP	5.8%
Top 20	70.9%
and management shareholdings*Total Board	21.5%
*Includesindirect holdings

Additional information

1H FY22 FINANCIALS

UNDERLYING EBITDA

	Half-Year ended
($'000)	31 Mar 2022	31 Mar 2021	Variance (%)
Sales and fee revenue	6,925	5,108	35.6%
Less publisher & bookseller fees	(2,935)	(2,453)	19.7%
Margin after publisher& bookseller fees	3,990	2,655	50.3%
Add: Other revenue	159	227	-30.0%
Less operating expenses:
Advertising and marketing	(163)	(62)	162.9%
Employment expenses	(1,990)	(1,716)	16.0%
Legal & compliance	(36)	(54)	-33.3%
Professional services expenses	(289)	(198)	46.0%
Telephone, internet & data hosting	(53)	(47)	12.8%
Travel expenses	(29)	(60)	-51.7%
Other expenses	(240)	(301)	-20.3%
Finance costs	(4)	(7)	-42.9%
Total operating expenses	(2,804)	(2,445)	14.7%
Add: Net interest expense / (revenue)	4	6	-33.3%
Underlying EBITDA*	1,350	444	204.0%

• 1H FY22 Underlying EBITDA reflects:
  • sales & fee revenue ↑ 35.6% mainly driven by revenue growth for the VET segment
  • margins on 1H FY22 eBook sales for the full-curriculum segment (to which publisher & bookseller fees mainly relate) broadly in line with prior periods
  • increased investment in advertising and marketing for both key operating segments
  • employment expenses ↑ 16.0% attributable to Ripponlea Institute acquisition (completed late June 2021) and additional sales and marketing staff
  • professional services expenses ↑ 46.0% attributable to Ripponlea Institute acquisition and increased use of recording studio engineers by PKY Media's Salt Studio's recording studio business
  • other expenses ↓ 20.3%, with the main components including payroll tax, software licences, insurance and occupancy expenses
• Revenue is heavily skewed to 1H with change in financial year end from 30 June to 30 September
• 1H FY22 Underlying EBITDA and statutory profit not indicative of likely FY22 full-year result

1H FY22 FINANCIALS

BALANCE SHEET

$ '000	Note	31-Mar-22	30 Sep-21
Cash and cash equivalents	1	5,444	4,471
Trade and other receivables		2,154	787
Prepayments		94	126
Total current assets		7,693	5,384
Non-current deposits		36	40
Property, plant & equipment		202	240
Intangibles	2	8,112	8,109
Right-of-use assets		171	258
Total non-current assets		8,521	8,647
Total assets		16,214	14,032
Trade and other payables		2,531	651
Other current liabilities		143	606
Employee entitlements (Current & NC)		444	422
Contingent consideration(Current & NC)	3	75	1,000
Lease Liabilities(Current & NC)		198	286
Total liabilities		3,391	2,965
Net assets		12,823	11,066

Notes

• 1. The vast majority of the Company's cash receipts from customers are received in the March and June quarters each year.
• 1. Intangibles include capitalised software development ($2.22m), goodwill ($5.40m) and other intangibles acquired as part of the AIET, COSAMP and Ripponlea Institute acquisitions
• 1. 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.