Ann: Half-Year Results Presentation - March 2021, page-2

One new piece of information in this presentation, is the graph "Platform users by sales channel" on Page 9. After a closer look (and assuming the graph is accurate), it appears that the 117,000 users is made up of 53,000 Direct users, 46,000 Reseller users and 18,000 VET users.

Hence since FY20, Direct has gone up 6,000 (47,000 to 53,000), Reseller has gone down 10,000 (56,000 to 46,000) and the high margin VET has gone up 9,000 (9,000 to 18,000).

As I understand it, for VET, RCL receive around $250 per user. As a rough calculation this would generate for RCL 18,000 * $250 = $4.5m in FY21. This is around double the VET contribution of $2.2m in FY20. There will be extra costs with professional services, extra staff and COSAMP, but it will still be a decent amount of cash flowing into RCL during FY21 (mostly during Q3 and Q4). I think (but could be wrong) that this will push RCL comfortably into positive EBITDA territory. A lot still depends on extra signups/cancellations that are happening in the schools at the moment.

I believe that the gains in Direct will be greater than the losses in Reseller (which have lower margins). I also think RCL are in a strong position given their expanded cross sell opportunity, the (hopeful) return to normal after COVID, and their highish cash levels to buy other VET companies.

The RCL selldown has been hard to watch, but I think the market may have this wrong. Losing the reseller schools hasn't been nice, but I think it will be just a blip in the bigger picture.

Please note that this is not advice and I could have the numbers and my analysis wrong.