Ann: June 2021 Quarterly Report and Appendix 4C, page-6

we have to keep in mind that VET course cycles are 2 years so it's not like we have a base and can keep building on that; we have to hope that there will be a greater number of students interested in the offerings every year to expand the VET numbers.

After ringing around to gain further insight into the industry I've been told that schools are 'fiercely loyal' which is both a positive and a negative for RCL. It means it is unlikely that the schools we are currently in will leave us but equally, it means the only way to get into new schools will predominately be inorganically through acquisitions.

So, the likeliest way we will expand our student base will be via cross selling. Cross selling and if the schools grow in size, or there's a larger emphasis on VET courses (which is a narrative I believe to be happening) for us to increase our base.

Another noteworthy point is the compliance that the RTO must adhere to in order for it to maintain its licence. There's evidence of RTOs losing their licenses and been hammered through audits e.g. Perth RTO goes bust, but told students it's closing for 'renovations' (watoday.com.au)
The governing body ASQA (Aus skills quality authority) came down hard on RTOs around that period and there's still some lasting effects from the ordeal. I don't know if there are random audits but I assume there are, so we must keep in mind that it isn't necessarily a certainty that RCL keep their license, it is purely dependent on compliance, a variable we have no choice but to trust in.
I've looked up each one of the acquisitions and they all have licences until 2023 or 2024 so assuming no audits it means that we won't have to consider a failed registration extension for at least 2 years or so.

You can check our RTO details in the following website https://training.gov.au/Organisation/Details and write in ripponlea, cosamp, aiet and check through the tabs. The registration, scope and delivery tabs are of decent insight.

The problem with growing inorganically is that generally there's a bedding in process that takes time until the businesses are operating somewhat autonomously and therefore creates inefficiencies and higher expenses until they're firing. We have a couple more months to get that right with the recently acquired Ripponlea before the selling season kicks in again. Cosamp was purchased late into last selling season and I would assume was therefore difficult to capitalise on the cross sell opportunities but I am looking for that to experience at least some modest growth.

...but, it's not to say that RCL does not have organic growth, they do, it's just not in the high margin sector of VET but in the second highest margin sector of the business in direct schools. This is one positive in the year! The numbers have been growing organically and should offer a substantial base for the company moving forward. Whilst I don't believe that there are too many barriers to entry in replicating the readcloud's ebook software, I do believe that the 'fierce loyalty' and comfort of the known and learnt that schools display offers enough of an obstacle for a new player to come in and take their territory.

Anyway, back to the direct organic growth...assuming they add an additional year level per year, they should still have at least 3 years worth of organic growth in some schools until they hit saturation there.
Obviously not all our direct schools have this set up otherwise our direct numbers would be going up exponentially. Here's an example to illustrate this
i.e.
year 1 - year 7s
year 2 - year 7 & 8's
year 3 - year 7, 8 & 9's...etc etc

I think we added something like 10,000 direct students this past year. If we assume that the majority of those were organic growth...say 70% organic that means we put on 7000 students organically and can assume that as a base for the following year. for simplicity's sake we will assume~max 200 students in a year level. That means we had at least 35 schools add an additional year level. Which means they are committed to this model and gives us a base of an additional 7000 students for next year.

based on the calculations I've made elsewhere, I got to something like $72/direct student direct full curriculum.
that means for every 10,000 direct students that's an extra ~$700,000 of revenue for a software that we're scaling and leading into some serious economies of scale.

An extra 15,000 direct next year would be sensational and bring in a touch over $1m revenue
+ a claw back of some of the reseller
+ a full year of cross selling with the RTOs,

I think $11m+ is definitely within the scope of the company for FY22.

Here's a graphic showing the number increase from a past announcement

Direct looks to have jumped from say
18,000 FY18
26,000 FY19 (44% increase)
47,000 FY20 (80% increase)
57,000 FY21 (21% increase)

Will be interesting to ask the question why the growth rate in the direct numbers has stagnated. Maybe we have already reached the saturation point with a lot of the schools...not enough data to make that conclusion but it's definitely a question worth asking



anyway, that's enough from me

I'll hold for a while longer and ask these questions in the agm