The extra funding will enable Schrole to have working capital as it pursues its growth drive into new global markets, particularly Europe and North America.

Rapidly growing edtech specialist, Schrole Group (ASX:SCL)  has announced a capital raise of more than $2.6 million to support its global growth drive, including marketing in new regions.

The capital raise is being broken up into two tranches. The first tranche of more than 360 million shares to a maximum of ~$3.582m at 1 cent per share will be available to sophisticated and institutional investors.

The second tranche involves a share purchase plan (SPP) for a minimum of $1000 and maximum of $30,000. Schrole has announced that sophisticated and institutional investors have already committed more than $2.6m.

Profit for purpose investor Inspire Australian Equities, which already holds a range of edtech companies, has come on board.

Bletchley Park Capital are lead manager of the placement, due to be completed by the end of this week.

The capital raise comes as a report by equity research firm RaaS Advisory revealed SCL trades at a significant discount to the base case discounted cash flow (DCF) valuation of 3.5 cents per share.

On the market, Schrole shares were last trading at 1.1 cents.  RaaS estimates SCL is trading on a 2x price to revenue multiple for 2022, “which looks cheap compared to small cap ASX listed SaaS peers which trade on an average of 8x price to revenue”.

Funding from the capital raise will support Schrole’s global growth drive, including marketing in new geographies and cross-selling its expanded HR SaaS suite.

 

Expanded HR SaaS suite driving growth

CEO Rob Graham launched SCL in its current form in 2013 as an HR software and training solutions company developed by educators for educators.

Schrole HR is the company’s flagship full SaaS product suite, comprising six Human Resources SaaS offerings, including Schrole Connect, Verify, Engage, Cover, Develop and Events.

During Q3FY21, updated Schrole Connect 3.0 was released with new functionality and enhanced existing features.

Recruitment events software solution Schrole Events was also launched, which provides interactive and regionalised online recruitment events for Schrole’s network of 400 schools and 140,000 teachers globally.

To participate in Schrole Events, both schools and candidates must be on annual premium level subscription. Candidates must upgrade from the free Schrole Connect to Premium for US$75. Schools must upgrade from Schrole Connect to Schrole ConnectPlus, the highest subscription tier with base fees from US$9000.

More than 1700 participants registered for SCL’s first online event targeting the Southeast Asian market in late October, with a full pipeline of 14 events up to April 2022 coinciding with school hiring season.

Schrole Engage, which is due for first release in the first quarter of 2022, providing staff management and onboarding software, will enable further cross-sell and sales generation across the full calendar year.

 

Solid financials to support growth

SCL recently released its September quarter results with solid growth across a range of value drivers including customer numbers, software margins and average contract value.

The company’s cash receipts grew 28% to $1.18 million in Q3FY21. Customer numbers for Schrole Connect, the company’s flagship product, rose by 9% to 419 with 91% contract renewals.

Software margins increased to 34% in Q3FY21, up from 26% in Q2, with further growth expected.

Annual revenue continues to grow with the company recording the revenue at more than $6m.

 

Strong outlook forecast

SCL described multiple factors supporting its strong growth outlook, including a positive start to Q4FY21, which is historically the strongest quarter.

The company’s sales pipeline is growing, with several new high-profile schools and school groups, undergoing free product trials or in contract negotiations.

SCL also sees an upside from global Covid-19 recovery, as international travel and commerce resumes with stronger engagement from northern hemisphere customers.

The company expects its expanded SaaS product suite to provide increased cross and upsell sales opportunities, providing revenue generation across the full calendar year.

SCL is targeting further growth through an expanded direct sales team selling in new geographies such as Europe and North America, which were previously restricted due to a now terminated sales distribution contract with International School Services (ISS).

SCL has also commenced co-marketing to the customer base of more than 10,000 schools of its strategic partner, US-headquartered Faria Education Group.

Faria is a highly regarded global edutech provider, with more than 4 million students in around 155 countries.

Faria’s strategic partnership with Schrole is both through its 19.79% ownership of Schrole and via co-marketing of Schrole’s HR SaaS to its significant customer base.

SCL is looking to expand its offering into other growth markets including higher education, healthcare, aged and community care.

This article was developed in collaboration with Schrole, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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