ReadCloud Eyes FY26 EBITDA Outperformance With All Six Targets on Track
ReadCloud’s school businesses deliver strong first-half momentum
In its 1H FY26 results presentation released 28 May 2026, ReadCloud Limited (ASX: RCL) reported sales and fee revenue from continuing operations of $8.5 million, up 6% on the prior corresponding period. Cash receipts from school customers reached $7.0 million, up 22%, while operating cash flow from school businesses grew 18% to $2.5 million. The company closed the half with a cash position of $3.7 million at 31 March 2026, up from $1.9 million at 30 September 2025, with no debt and no capital raise anticipated. Both school divisions, ReadCloudVET and eBooks, are performing to plan, and the exit of Southern Solutions is clearing the path to a pure-play school EdTech business from FY27. The presentation also confirmed a CEO transition, with Andrew Skelton departing 31 May 2026 and Luke Murphy stepping in as Interim CEO from 1 June 2026.
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Two divisions, one direction — unpacking the half-year performance
ReadCloudVET — record courses, record enrolments, expanding margins
The presentation revealed a VET-in-schools division firing on multiple metrics simultaneously. Key figures from the half included:
- 385 contracted schools for 2026; 55 new schools added; retention above 90%
- 775 courses running, a record, up 6% on 2025
- Average courses per retained school: 2.1 in 2026 (up from 2.0 in 2025 and 1.6 in FY22)
- Student enrolments on track to exceed 16,000, another record
- Core VET-in-schools partnering revenue: $4.1 million, up 15% on the prior corresponding period
- Gross margins continuing above 90%
The trend in partnering revenue illustrates the compounding growth trajectory management highlighted across recent periods:
| Period | Partnering Revenue |
|---|---|
| 1H FY23 | $2.5m |
| 1H FY24 | $2.8m |
| 1H FY25 | $3.6m |
| 1H FY26 | $4.1m |
The forward pipeline reinforces the positive trajectory. Management noted that 10 new schools have already been signed for 2027, 20 are in advanced discussions, and inbound enquiries have stepped up materially.
eBooks — retention holds, reseller channel recovery adds new dimension
The eBooks division delivered steadier but strategically meaningful progress across the half. Key points from the presentation included:
- School retention of 89%; 5 new schools added
- Average annual revenue per school tracking to exceed $84,000 in FY26, up more than 18% on FY24
- Average customer tenure extended to 5.02 years, up from 4.77 years
- Reseller channel school numbers up 30% to 13 in FY26; the largest school ever contracted by the reseller channel is set to commence in 2027
- The reseller channel previously contributed 30% of eBooks revenue, and its recovery restores a low-cost distribution capacity to the division
- International pipeline active, with schools in China, central and southeast Asia currently in negotiation
- 2 new digital publishers added to the platform in 2026
What is EdTech SaaS retention and why does it matter for investors?
In a subscription-style EdTech model, school retention is the single most important commercial metric. When a school renews year after year, the revenue it generates requires no incremental sales effort and no customer acquisition cost. A retention rate of 89–92% means the overwhelming majority of last year’s revenue base carries forward automatically into the next period.
Rising average customer tenure compounds this effect. ReadCloud’s eBooks division now retains schools for an average of 5.02 years, meaning each school customer generates substantially more lifetime value than the headline annual revenue figure suggests. When revenue per school is also rising (up more than 18% on FY24 for eBooks), the economics improve on both dimensions at once.
For investors, these metrics signal a business with high revenue visibility, low churn, and expanding value per customer. Both ReadCloud divisions sit at or above 90% retention targets, providing a durable foundation for the earnings growth the company is targeting.
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Financials clean up, targets on track, and a clearer story ahead
FY26 targets — all six on track at the halfway mark
The presentation detailed six FY26 targets and their status at the half-year mark. Underlying EBITDA (uEBITDA) is defined as earnings adjusted for interest, tax, depreciation, amortisation, share-based payments, and one-off restructuring costs.
| Target | Metric | Status |
|---|---|---|
| 60+ new school customers | New schools contracted | 61 already contracted at half-year mark — full-year target achieved early |
| Retain 90%+ of school customers | School retention rate | On track and above target |
| Revenue growth 10–20% per annum | Sales and cash receipts growth | VET on track; eBooks on track for single digit revenue growth in FY26; cash receipts from school customers up 22% in 1H FY26 |
| Operating cost increases <7% | Operating expense growth | On track — disciplined cost management maintained |
| $1m+ uEBITDA in FY26 | Underlying EBITDA (continuing operations) | On track for outperformance; $2.1 million uEBITDA generated in 1H FY26 alone |
| Positive operating cashflow for full year | Operating cash flow | On track; $2.1 million generated in 1H FY26 |
Southern Solutions exit clears the deck for FY27
Management framed the Southern Solutions wind-down as a deliberate, value-creating strategic decision. Government funding volatility had made the industry training business a drag on the stronger, more differentiated school-facing model, and the decision to cease commencing new students was described as executing to plan.
The financial footprint of the exit is finite and contained. Cash receipts from Southern Solutions customers totalled $0.3 million in 1H FY26, down 73% on the prior corresponding period, reflecting the deliberate halt to new enrolments. The division generated a net cash outflow from operating activities of $0.4 million for the half. For the full year FY26, the expected negative uEBITDA contribution is less than $600,000, described in the presentation as fully absorbed within the group’s broader earnings base.
On the balance sheet, intangible assets attributable to Southern Solutions have been written down to nil. This impairment of $1.3 million is the primary driver behind the statutory loss of $52,000 for the period, despite $2.1 million in uEBITDA from continuing operations.
Looking ahead, the company’s capital, management attention, and salesforce capacity are directed exclusively to school-facing businesses from this point. At the reporting date, $2.1 million in issued invoices was outstanding for school-facing businesses, with further invoicing continuing. ReadCloud expects to generate positive operating cash flow for the full year ending 30 September 2026, a position the 1H FY26 result firmly supports.
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