ReadCloud’s Tight Cost Control Faces Test as VET-in-Schools Expansion Accelerates

Strong Start to FY25

ReadCloud Limited (ASX: RCL), a provider of eLearning solutions to secondary schools and the Vocational Education and Training (VET) sector in Australia, has reported a record December quarter for FY25. The company achieved a 26% increase in cash receipts, reaching $2.41 million, alongside a 17% rise in revenue. Notably, operating expenses were tightly controlled, increasing by only 1%, positioning ReadCloud for accelerated operating leverage in the year ahead.

This strong financial performance reflects the company’s successful sales efforts, with 59 new schools signed for 2025 across its VET-in-Schools and eBooks divisions. The company also reported an improvement in retention rates for existing eBooks customers, now at 93%, underscoring the stickiness of its digital learning platform.

Momentum in VET-in-Schools and eBooks

ReadCloud’s VET-in-Schools business, branded as ReadCloudVET, continues to gain traction with 52 new schools onboarded for 2025. The company plans to deliver 79 qualifications this year, a 55% increase over 2024. This division is expected to drive revenue growth exceeding 25% for FY25, with gross margins forecast to remain above 90%. Growth will come from both existing customers, with expected revenue increases of 10% to 15%, and new school signings.

The eBooks division is also set for incremental growth, benefiting from both new customer additions and higher retention. ReadCloud’s proprietary eReader platform offers an engaging, interactive learning environment that supports social annotations, media embedding, and text-to-speech in 120 languages, features that appear to resonate well with schools.

Financial Position and Outlook

Despite a net operating cash outflow of $0.35 million for the quarter, this represented a 35% improvement compared to the prior corresponding period. The company ended the quarter with $1.07 million in cash reserves and no debt, providing a solid financial foundation heading into the seasonally stronger March and June quarters, which historically contribute the majority of annual revenue.

Southern Solutions, ReadCloud’s industry training arm, also reported strong trading, consolidating gains made in FY24. This diversified revenue stream complements the company’s core education technology offerings.

Strategic Implications

ReadCloud’s ability to grow revenue significantly while maintaining tight control over operating expenses suggests improving operating leverage and scalability. The strong uptake of ReadCloudVET and the high retention rates in eBooks indicate that the company’s integrated digital learning solutions are gaining meaningful traction in the Australian education market.

Looking ahead, the company’s forecasted growth in VET-in-Schools revenue and continued expansion of its customer base position it well to capitalize on increasing demand for digital and vocational education solutions. However, the company’s performance in the upcoming March and June quarters will be critical to validate this growth trajectory.