ReadCloud Limited has secured over 50 new school contracts for 2026, driving strong growth in its VET-in-Schools and eBooks divisions despite ongoing funding challenges in its Industry Training segment.
- More than 50 new schools signed for 2026 across VET-in-Schools and eBooks
- VET-in-Schools revenue forecast to grow over 15% with gross margins above 90%
- School customer retention rates expected to exceed 90%
- Industry Training revenue down 66% due to government funding uncertainties
- Cash reserves at $1.5 million with no debt, supporting upcoming strong quarters
Strong School Sales Drive Momentum
ReadCloud Limited (ASX, RCL), a provider of learning software solutions to Australian secondary schools and vocational education sectors, has reported a robust start to the 2026 school year. The company signed more than 50 new schools during the December quarter, spanning its VET-in-Schools and eBooks divisions. This surge in new contracts is complemented by solid retention rates, with over 90% of existing school customers expected to renew their agreements.
The company also highlighted an upward trend in the average number of qualifications taken per retained school, a key revenue driver. These factors underpin ReadCloud’s forecast for VET-in-Schools revenue growth exceeding 15% in FY26, with gross margins expected to remain above 90%.
Mixed Fortunes in Industry Training
While the school-facing businesses show strength, ReadCloud’s Industry Training arm, Southern Solutions, continues to face significant headwinds. Uncertainty around State government funding has led to a 66% decline in cash receipts from this segment compared to the prior corresponding period. Notably, the NSW Smart and Skilled contract remains under threat, and Victoria’s Skills First funding allocation has been cut to zero for 2026.
In response, ReadCloud has proactively adjusted the cost base of its Industry Training business, including workforce restructuring and reduced variable staff costs. The company is not enrolling new students in NSW or Victoria until regulatory and funding issues are resolved, signaling a reduced role for this division going forward.
Financial Position and Outlook
ReadCloud ended the quarter with $1.5 million in cash and no debt, a healthy position as it heads into the traditionally stronger March and June quarters. Receipts from school customers increased by 12% year-on-year, driven by 15% growth in ReadCloudVET and 8% growth in eBooks. However, overall receipts declined 9% due to the Industry Training downturn.
Operating expenses were well controlled, with staff costs decreasing to $1.5 million from $1.7 million in the prior year period. Marketing spend nearly doubled to $87,000 as part of a strategic push to accelerate growth in FY27, including new international opportunities such as a trial with a school in Indonesia and the signing of ReadCloud’s first direct South Australian government school customer.
Looking Ahead
ReadCloud’s focus remains on expanding its school-based offerings, leveraging strong retention and new customer wins to drive revenue growth. The company’s cautious stance on Industry Training reflects broader sector challenges linked to government funding volatility. Meanwhile, international expansion efforts are nascent but promising, potentially opening new growth avenues.
Bottom Line?
ReadCloud’s solid school sales and cash position set the stage for growth, but Industry Training funding risks linger.
Questions in the middle?
- Will ReadCloud secure renewed government funding for its Industry Training contracts?
- How quickly can international school trials convert into meaningful revenue streams?
- What impact will increased marketing spend have on customer acquisition and retention in FY27?