Ann: JAN FY22 Trading Update, page-7

Thank you to Janison management for disclosing so much useful data so early after the end of FY.

There were a couple of negatives that I will get over first:

• EBITDA declined by half since FY21 from $3M to $1.5M. It was also lower than the previous 2 FYs.
• H2 FY22 revenue of $16.6M was $2.9M lower than H1 FY22 revenue (it should be noted however that for each of the last 3 FYs, H2 revenue has been lower than H1 revenue).
• Operating expenses grew faster than revenue, which is the reason why EBITDA declined.

IMO, the positives far outweigh the above negatives:

1. Janison has introduced a more streamlined operating model with material cost-out starting 1 July 2022. There will be a material improvement in the cost base for FY23. It is also a nimbler organisation.
2. The Cost of Sales declined in FY22, from $13.5M to $13.1M, meaning that all of the additional $6M revenue went straight to Gross Profit. Gross Profit rose by 37.7% to $23M. In only 2 years, Gross Profit has more than doubled from $10.1M to $23M. This is why Gross Margin has grown so quickly to 63.7%. This is one of the best features of Janison's business - the relatively fixed Cost of Sales through its scalable platform.
3. Apart from the normal organic growth in revenue that Janison is experiencing, Janison can expect the following growth: An additional Pro-forma $1.8M from the 2 acquisitions over a full year; recovery of some of the covid impacts of around 10% of revenue; $1.15M pa from the 2 new significant contracts (Cambridge Box Hill and ACECQA). Even if they only recover half of the covid impacts in FY23, the total of all of this is around $5M, or around 14%. Organic growth is on top of this.
4. The ICAS underlying growth rate was 50% in the lead-up to school closures last year. Schools are increasingly being removed from the sales process for ICAS, a big positive given the shortage of school administration resources. PISA growth was 47% in FY22. Higher education has signalled a return to exams operated by JEM. There is a robust pipeline of new platform clients.
5. The domestic launch of the new school parent SaaS product RiSE+ is highly significant, with > 100,000 parents contacts already captured.

Outlook for FY23 (my opinion only, but entirely based on the comments made by Janison's management):

1. Revenue growth of 20%, or by $7.2M to $43.2M (I believe this is very conservative - see item 3 above);
2. 90% of the additional revenue goes to Gross Profit, which therefore increases by $6.5M to $29.5M (In FY22, all of the additional revenue went to Gross Profit);
3. Operating expenses also remain steady based on Janison's statements above about a "material improvement in the cost base". This would mean that all of the additional Gross Profit goes straight to the EBITDA, which would therefore increase from $1.5M to $8M.