The Janison Education Group Ltd (ASX: JAN) share price moved sideways after the EduTech (Education Technology) company released its report card to the market. The Janison share price has been in a downward spiral since Covid started to wane.
Janison share price
This chart compares the Janison share price against the diversified Vanguard Australian Shares Index ETF (ASX: VAS).
The key results, as I see them, are as follows:
- At the very end of the year, the company entered ‘phase two’ of its overall growth program (more on this below).
- Late in the year Janison removed 35 employees and contractors and simplified the business segments – reducing forward costs by $6 million – which surprisingly did not result in an outpouring of criticism on Glassdoor or Seek… yet.
- Revenue came in at $36.3 million, up 20%, with $25 million of annualised recurring revenue (ARR), up 12%. That puts the company on a multiple of ~3-4x sales.
- Gross margin improved to 64%, and I suspect the margin could nudge towards 70% in the years ahead as all three of the company’s growth drivers offer margins over 70%.
- The launch of RiSE+, an education program for parents, focusing on math and English, was built in 6 months using Janison’s existing IP and is now live. The website traffic I monitor seems to suggest the website only really took off in July. Even still, it’ll need much more than 20,000 monthly visits to be a meaningful business for Janison.
- The company says, perhaps rather ambitiously, it expects to surpass long-term analyst forecasts for FY25 revenue (~$60 million was forecast by analysts before today, but it wants $80-100 million in the medium term). I struggle to see why it matters what analysts think. The bigger unknown I have is if they’ll get to $80-$100 million without meaningful acquisitions. The chart below shows their expectations.
- Given the margin benefits attributable to the previous platform capex, monetisation of the existing IP (e.g. tests, question banks, software, etc.) and scale benefits, the company plans to be cash flow positive in FY23.
My takeaway
After a few years of investing in consolidating its platform into one backbone, then ramping sales & marketing in 2020/2021, I think Janison is now primed to move into a period of cash flow generation. My concern is the company could adopt a ‘growth at any cost’ approach because of their ambitious FY25 target. I would rather them discover which organic channels are working and reinvest into those, before acquisitions.
The thing is, normally this would be an exciting time for Janison. However, as the world order of in-person (over digital) tests resumes, investors have clearly been spooked and seem to be implying Janison’s advanced digital platform won’t keep firing. Given what we’ve seen from the likes of Kip McGrath (ASX: KME) with its online push, I think it may be too early to tell if the company won’t be able to grow its top line at low double-digits. A leaner cost base will at least make Janison nimbler and help it survive a period of uncertainty. Has the market got it wrong?
From here, I see Janison becoming a more scalable, profitable and agile company as racks in more recurring revenue and monetising what it already has. With an aligned management team and a multi-year view of digital education, I think there’s more long-term upside than downside at today’s share prices but it’s a small-cap company with lots of risks, so buyers beware. I’d only have it as a really small part of a diversified portfolio.
For Rask members, you can ask me questions about Janison (or any company or ETF) by jumping into the Rask forums
or inside Rask Rockets Beyond
(now closed to new members).
