ReadCloud : June 2022 Quarterly Report and Appendix 4C

For personal use only

ASX Release

28 July 2022

Quarterly Activities Report & Appendix 4C

Highlights

• $2.35m cash receipts from customers for the June quarter ($2.48 for prior comparable period)
• $7.07m total cash receipts from customers for the FY22 year-to-date (9 months), up $0.54m on prior comparable period ($6.53m)
• Execution of first overseas eBook Solutions deal with leading London-based international online school King's InterHigh
• Second international eBook Solutions deal signed with leading Scottish independent educational publisher Bright Red Publishing
• Successful major national marketing launch of ReadCloud VET Group during the quarter, which has produced a stronger sales pipeline for the 2023 school year compared to the same time last year
• Management is confident of increasing revenue growth and achieving positive EBITDA and positive operating cashflow for FY23

ReadCloud Limited ("ReadCloud" or "the Company") (ASX: RCL) is the leading provider of digital eLearning solutions to secondary schools and the VET-in-Schools sector in Australia. The Directors of ReadCloud are pleased to provide a quarterly update and cash flow statement for the June 2022 quarter.

Operational update

During the June quarter, the Company finalised negotiations with leading London-based international online school King's InterHigh for the provision of eBooks to the parents of over 4,000 students. Based in London, King's InterHigh is a British international online school with students based in countries around the world. Pursuant to a 4-year Software Licence Agreement (announced to ASX on 11 July 2022), ReadCloud will be the exclusive provider of eBooks to the parents students aged 7 to 18.

The agreement marks an important milestone for ReadCloud, being the first time that the ReadCloud platform will be used to deliver publisher's eBooks in an overseas market. The quantum of revenues from this agreement will be dependent on the level of take-up of eBooks by the parents of King's InterHigh students, which will not be known until September 2022.

Readcloud Limited | 284 Bay Street, Brighton, Victoria, 3186 P [phone] | W www.readcloud.com

ABN 44 136 815 891

For personal use only

As part of securing the agreement with King's InterHigh, ReadCloud has also signed additional eBook distribution agreements with international publishers in order to cover the range of eBooks required by King's InterHigh as widely as possible.

ReadCloud recently negotiated a second international eBook Solutions deal; this time with leading Scottish independent educational publisher Bright Red Publishing. Based in Edinburgh, Scotland, Bright Red Publishing is a leading independent publishing company that develops study guides and course books for secondary, further and vocational education in Scotland. Pursuant to this agreement, ReadCloud will provide Bright Red Publishing with the ability to securely deliver its educational content in a digital form to its school customers via the ReadCloud platform in return for a share of the revenue from the sale.

The quantum of revenue from this agreement will depend on the rate of digital adoption by Bright Red Publishing's customer base (at present Bright Red Publishing only distributes its content in print format). ReadCloud expects that it will be a gradual move towards digital content distribution which will enable the publisher to realise significant distribution cost savings over the coming years.

The June quarter also saw the successful national marketing launch of the ReadCloud VET Group. With the largest scope of VET qualifications offered in the Australian VET-in- schools market, the key objective of the campaign has been to generate cross-selling opportunities between the three Registered Training Organisations (most schools prefer to deal with fewer providers as it reduces the systems and processes that teachers and students are required to be familiar with). The campaign has encompassed the production of new marketing collateral, standardisation of pricing structures, EDM campaigns, state- based launch events and presentations at EduTech conferences.

More broadly, the Company has also been focused on:

• refining the shared-services layer of operations (including cross-skilling of staff and refinement of operational processes across both key segments) to facilitate greater scalability of the business;
• quoting for the Year 12 "Headstart" sales period for the eBook Solutions segment (where Direct school customers purchase Year 12 textbooks including eBooks in Term 3/4 for current Year 11 students); and
• investing in marketing and business development ahead of the key selling season for the 2023 school year.

Outlook

The ReadCloud VET Group marketing launch has produced promising results to date, with a marked increase in interest from schools wanting to consolidate providers and the pipeline for the next school year is stronger than the same time last year.

Readcloud Limited | Level 1, 126 Church Street, Brighton, Victoria, 3186

P [phone] | W www.readcloud.com

ABN 44 136 815 891

For personal use only

The eBooks Solutions segment has already signed up a number of schools for 2023 and continues to add new schools to its pipeline going into the traditional conversion period of Terms 3 and 4. The segment has also started taking orders for Year-12 early Headstart.

The two recent overseas deals won by ReadCloud, and the additional eBook distribution agreements secured with international publishers, provides a potential for ReadCloud to offer eBooks Solutions to international schools and publishers in other overseas markets.

The Company continues to actively assess M&A opportunities to further drive growth and to utilise its solid balance sheet.

Platform update

Further development of ReadCloud's proprietary SAAS platform during the June quarter continues to provide ReadCloud with a strong competitive advantage. During the quarter, further improvements were made to the ReadCloud VET Group's learning management system ("LMS") based on the largely positive feedback received from Australian Institute of Education and Training customers on-boarded onto the new LMS for the current school year.

These improvements will see an even smoother transition of COSAMP and Ripponlea Institute customers onto the new LMS at the end of this year in readiness for the 2023 school year.

The Company has continued to invest in refining VET courses and adding new qualifications to scope to accommodate customer requirements.

An upgrade to the Company's parent facing eBookstore has been implemented in anticipation of the start of the British school year, to service the parents of King's InterHigh, and work is underway to upload and encrypt content from the new international publishers.

Finance Update

Key points from the accompanying Appendix 4C Cash Flow Statement:

• $2.35m Cash receipts from customers for the June quarter ($2.48m for prior comparable period);
• $7.06m total cash receipts from customers for the FY22 year-to-date (9 months), up $0.54m on prior comparable period, with additional revenue (and cash receipts) from both Year 12 Headstart sales and the King's InterHigh deal expected mainly in the current quarter;
• Payments to publishers for the June quarter were $2.24 million, after the majority of publisher payments relating to March quarter eBook sales were delayed;
• Staff costs for the June quarter were $1.16 million, in line with the March 2022 quarter ($1.13 million); and
• Payments to related parties (item 6.1 of the attached Appendix 4C) consisted of remuneration paid to Directors during the quarter.

Readcloud Limited | Level 1, 126 Church Street, Brighton, Victoria, 3186

P [phone] | W www.readcloud.com

ABN 44 136 815 891

For personal use only

The Company's Appendix 4C Cash Flow Statement accompanies this report.

-Ends-

CONTACTS:

Investors & Media:

Luke Murphy, Chief Financial Officer

[phone]

About ReadCloud Limited

ReadCloud is the leading provider of eLearning software solutions, including eBooks, to over 600 Schools and in the Vocational Education and Training (VET) sector in Australia. ReadCloud's proprietary eBook platform delivers digital content to students and teachers with extensive functionality, including the ability to make commentary in, and import third party content into eBooks.

Students and teachers can share notes, questions, videos and weblinks directly inside the eBooks turning the eBook into a place for discussion, collaboration, and social learning, substantially improving learning outcomes.

ReadCloud sources content for its solutions from multiple publishers, delivering the full Australian school curriculum in digital form in all States, on one platform. In the Vocational Education and Training (VET) sector, ReadCloud provides over 60 digital VET courses and auspicing services to schools across Australia.

ReadCloud currently has over 131,000 users on its platform.

Readcloud Limited | Level 1, 126 Church Street, Brighton, Victoria, 3186

P [phone] | W www.readcloud.com

ABN 44 136 815 891

For personal use only

Rule 4.7B

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

ReadCloud Ltd
ABN	Quarter ended ("current quarter")
44 136 815 891	30 June 2022

Consolidated statement of cash flows	Current quarter	Year to date (9
			$A'000	months)
				$A'000
1.	Cash flows from operating activities
1.1	Receipts from customers	2,352	7,067
1.2	Payments for
	(a)	research and development	(137)	(404)
	(b) product manufacturing and operating	(2,241)	(3,010)
		costs
	(c)	advertising and marketing	(154)	(360)
	(d)	leased assets	(48)	(148)
	(e)	staff costs	(1,156)	(3,374)
	(f) administration and corporate costs	(183)	(524)
1.3	Dividends received (see note 3)
1.4	Interest received
1.5	Interest and other costs of finance paid
1.6	Income taxes paid	-	(70)
1.7	Government grants and tax incentives	-	396
1.8	Other (provide details if material)
1.9	Net cash from / (used in) operating	(1,567)	(427)
	activities
2.	Cash flows from investing activities
2.1	Payments to acquire or for:
	(a)	entities
	(b)	businesses
	(c) property, plant and equipment	(22)	(36)
	(d)	investments
	(e)	intellectual property	(47)	(201)
	(f) other non-current assets

ASX Listing Rules Appendix 4C (17/07/20)	Page 1
+ See chapter 19 of the ASX Listing Rules for defined terms.