ReadCloud reports robust first half FY25 results, driven by a standout 29% revenue increase in its VET-in-Schools segment, alongside positive cash flow and strengthened operating leverage.
- 1H25 sales and fee revenue up 13%, led by VET-in-Schools growth of 29%
- March quarter cash receipts of $4.6m and positive operating cash flow of $2.0m
- Cash reserves increased to $3.5m with zero debt
- Operating costs grew just 1%, enhancing operating leverage
- eBooks segment revenue rose 10%, with strategic growth options under review
Strong Half-Year Momentum
ReadCloud Limited (ASX: RCL) has delivered a compelling performance in the first half of FY25, posting a 13% increase in sales and fee revenue compared to the prior corresponding period. This growth was predominantly driven by the company’s flagship VET-in-Schools business, which surged 29% in revenue, significantly outpacing its previously stated target of 25% growth. The segment’s success is underpinned by an impressive 94% customer retention rate, the addition of 55 new school customers, and increased uptake of qualifications by existing clients.
The March quarter proved seasonally strong, generating $4.6 million in customer receipts and contributing to a positive operating cash flow of $2.0 million. This cash flow strength boosted ReadCloud’s cash reserves from $1.1 million at the start of the quarter to $3.5 million by quarter-end, with no debt on the balance sheet. Notably, some receipts were delayed into April, adding a further $2.3 million to cash inflows in the current month, indicating sustained momentum.
Operational Efficiency and Cost Discipline
ReadCloud’s operating leverage improved markedly, with operating costs growing a mere 1% year-on-year in 1H25. Employment costs were 3% lower than the prior comparable period, reflecting disciplined cost management. This tight control on expenses, combined with robust revenue growth, positions the company well to unlock further operating leverage as it scales.
The company confirmed its FY25 baseline organic revenue growth target of 15%, emphasizing a strategic focus on managing cost growth to remain meaningfully below revenue increases. This approach aims to sustain profitability and cash flow positivity throughout the fiscal year.
eBooks Segment and Growth Optionality
Alongside the VET-in-Schools success, ReadCloud’s domestic Direct eBooks business grew revenue by 10% over the prior comparable period, supported by a 91% customer retention rate and seven new school customers. The eBooks segment has demonstrated a compound annual growth rate of 9.5% over the past five years, highlighting its steady contribution to the company’s portfolio.
Management is currently evaluating strategic options to accelerate growth in the eBooks business. Potential initiatives include launching an additional distribution channel, expanding sales efforts internationally, targeting the primary school sector, and increasing penetration in Australian states beyond Queensland, where the company traditionally holds strength. The company’s strong cash position and positive operating cash flow provide the flexibility to invest selectively in these growth avenues.
Financial Position and Outlook
ReadCloud’s financial health remains robust, with $3.5 million in cash reserves and no debt as of 31 March 2025. The company generated $1.6 million in net cash from operating activities in 1H25, a 16% increase on the prior corresponding period. Financing activities included $0.5 million from the exercise of 4.97 million options, involving directors, management, and institutional shareholders, further strengthening the balance sheet.
The company reaffirmed its FY25 outlook, maintaining confidence in achieving its organic growth targets while continuing to unlock operating leverage through disciplined execution. This steady progress builds on the positive EBITDA and cash flow momentum established in FY24.
Bottom Line?
ReadCloud’s strong half-year results and disciplined growth strategy set the stage for sustained momentum, with strategic decisions on eBooks expansion poised to shape its next growth phase.
Questions in the middle?
- Which specific growth initiatives will ReadCloud prioritize for the eBooks segment?
- How will delayed receipts impacting quarter-end cash flow affect short-term liquidity management?
- What are the risks to maintaining high customer retention rates in the VET-in-Schools business?