Cluey’s Margin Pressure Persists Despite Student Growth and Cash Flow Gains
Cluey’s Q3 FY25 results reveal a strong 24% surge in new student enrolments and a narrowing underlying EBITDA loss, signaling a pivotal step toward profitability and renewed revenue growth.
- Q3 FY25 revenue of $5.7 million, down 6% on prior year
- Underlying EBITDA loss improved 7% to -$1.7 million
- New student enrolments up 24% year-on-year
- Variable customer acquisition cost per new student fell 7% to $168
- Operating cash flow loss narrowed 49% to -$0.9 million
A Turning Point in Growth
Cluey’s Q3 FY25 financial update paints a cautiously optimistic picture for the EdTech provider as it edges closer to profitability. Despite a 6% decline in revenue to $5.7 million compared to the prior corresponding period (PCP), the company reported a 7% improvement in underlying EBITDA, narrowing its loss to $1.7 million. This progress comes amid a significant 24% increase in new student enrolments, a key metric that underscores Cluey’s growing market traction.
CEO Matteo Trinca highlighted the quarter as pivotal, noting the company’s ability to manage costs effectively while achieving record-low customer acquisition costs (CAC). The variable CAC per new student dropped 7% to $168, enabling Cluey to invest more aggressively in marketing and sales to accelerate growth.
Operational Dynamics and Margin Pressures
While new student growth surged, Cluey faced margin pressures with gross profit margin slipping from 58.2% to 55.3%. This was driven by a combination of increased delivery costs, particularly tutor and instructor expenses, and a higher proportion of students enrolling on promotional starter plans with lower upfront pricing but higher lifetime value. The company is actively pursuing initiatives to improve margins, balancing growth with profitability.
Seasonality also played a role in the quarter’s performance. Extended summer holidays in New South Wales, Cluey’s largest market, led to more students pausing tutoring for longer periods, impacting short-term revenue. However, the company reported improved student retention post-holiday, signaling stronger engagement moving forward.
Cash Flow and Financial Discipline
Cluey’s operating cash flow loss narrowed by 49% to $0.9 million, reflecting disciplined cost management and improved cash receipts, which rose 11% quarter-on-quarter. Cash payments decreased by 10%, underscoring the company’s focus on reducing operating expenses. This improved cash burn rate, down 46% compared to the PCP, positions Cluey closer to sustainable free cash flow generation.
The company’s strategic decision to increase investment in customer acquisition, supported by lower CAC, suggests confidence in scaling enrolments without compromising financial health. This approach aligns with the early signs of revenue growth returning, evidenced by a 2% increase in March 2025 revenue versus PCP.
Looking Ahead
Cluey’s Q3 results mark an inflection point after a challenging period of revenue decline. The combination of accelerating new student growth, improved cost efficiency, and cautious margin management sets the stage for a potential return to top-line growth and eventual profitability. Investors will be watching closely to see if the company can sustain this momentum in the coming quarters, especially as it ramps up marketing spend to capture further market share.
Bottom Line?
Cluey’s Q3 progress hints at a promising turnaround, but sustaining growth while improving margins remains the critical next step.
Questions in the middle?
- Will increased marketing investment maintain the current low CAC and drive sustained enrolment growth?
- How effectively can Cluey improve gross margins amid rising delivery costs and promotional pricing?
- Can the company convert improved cash flow trends into consistent profitability in FY26?
