Schrole to capitalise on peak teacher recruitment season in Q4
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Special Report: Global education ‘software-as-a-service’ provider Schrole is heading for a record-breaking final quarter, thanks to a worsening teacher shortage in international schools.
Best-ever September quarter earnings has positioned Schrole Group (ASX:SCL) to ‘shoot the lights out’ with a record-busting final quarter to 2019.
In the process, the education recruitment and training software company is within striking distance of consistently operating at cash flow neutral over a 12 month cycle- and not just in its peak quarters of September and December.
In the past, international school teacher recruitment may not have occurred until the March quarter of next year, but schools are now moving a lot faster to secure staff as they battle ongoing shortages.
This means that Schrole, which assists international schools in finding staff along with providing other services, is well positioned to capitalise.
Schrole reported an impressive one third rise in September quarter revenues, even though the first part of the quarter is traditionally quiet, due to school holidays in target markets.
September quarter revenue lifted to $2.3 million, while revenues in the three quarters ending September rose by 41 per cent to $4.2 million.
More important is the annual recurring revenue, which surged by 58 per cent to $4.5 million.
Investors were quick to seize on the strong numbers, pushing the shares up 14 per cent to 1.6c in very active trading.
Interest in Schrole was buoyed recently by private research which argued the company’s shares were fundamentally undervalued and should be trading on a multiple, valuing the company at closer to 7-10 times revenues.
This is the case for another online service provider in the school sector, ReadCloud, which trades at around 8-9 times revenues.
“We’re still not very well known, but there are more [investor]small cap funds coming in,” Schrole managing director Rob Graham told Stockhead, referring to the recent strength of his company’s share price.
“We’re very happy with the company’s performance in the quarter. It is a peak quarter for us, with renewals and fresh sales, which continues now into early December.
“The shortage of teachers means [international schools] need to get onto the platform a lot earlier.”
The strong growth achieved during the third quarter was particularly pleasing because it was achieved across all business units, Graham said.
“This positive momentum ensures the company is well placed to capitalise on the peak teacher recruitment period from September to December.”
At present, almost half of the group’s revenue is coming from Asia, with 68 schools in China alone using the company’s platform. Along with growth in the large Asian market, Schrole is seeing rising interest in schools in the Middle East and Latin America in using its services.
Growth for Schrole is coming from both expanding the number of modules offered on its platform, along with expansion into what Schrole’s Graham terms “parallel markets” such as ESL schools, which target non-native English speakers.
Acquisitions, too, are on the agenda, although this is likely to move to the fore once Schrole demonstrates it is generating positive cashflow, which will follow from expanding the number of service modules offered to clients.