After registering big losses over the past two years, online learning company EduFocal Limited is banking on the introduction of new exam marking software, new clients and cutting more than half of its staff to turn its fortunes around.
The delayed release of its audited accounts for year ending December 2023 came with an admission by the company – one that was highlighted by its auditor Baker Tilly – that its deficits and cash position may cast doubt on its ability to continue as a going concern unless it reduced costs and increased revenue.
On Friday, the company’s first quarter results were posted on the stock market results, showing a steep drop in revenue from $112 million in March 2023 to $30 million in the current period, signalling a bad start to the current year. The $11 million in administrative cost savings in the period did little to cover the shortfall.
Still, in an interview with the Financial Gleaner just as the latest numbers were being released, EduFocal CEO Gordon Swaby projected confidence, saying the company may make a profit by the end of the current financial year ending December, if it is successful in onboarding a new software on a smartphone with the promise to revolutionize how tests are marked.
“We spent a lot of time and significant effort building out technologies that do not require significant human resources, that have high margins and have no receivables attached to them,” Swaby said on Thursday.
The software, called Amigo, facilitates the marking of school assessment items using a cell phone, completing in minutes a task that could take days, according to Swaby.
“We piloted it at St Andrew Preparatory recently. A task that would take a teacher three to four days took them five minutes. We were able to mark 156 papers in five minutes using the software,” Swaby said.
Amigo, which took 20 months to develop at a cost of $40 million, would improve productivity in the classroom, he added.
EduFocal is targeting 100 customers at the primary, secondary and tertiary education levels for yearly contracts at a cost of $20,000 per month by the end of September.
The company reported a loss of just over $79 million for the financial year ended December 2023 following an even heavier loss of $179 million the previous year.
Amid it all its deficits grew to $248 million at the company level and $255 million at the group level, while its working capital was in deficit of around $56 million.
The losses, EduFocal said, were mainly due to bad debt write off of $65.7 million and an impairment amounting to $38.4 million.
The precariousness of EduFocal’s position was manifested in its cash holdings, which amounted to less then $160,000.
One positive for the company was that its revenue improved from $187 million to $264 million, last year.
However, the March quarter did not maintain the trajectory, with revenue falling 73 cent. Earnings in the quarter also spun from a profit of $42 million to a loss of $25 million. Its accumulated deficit worsened to $280 million, working capital descended deeper into red with a deficit of $89 million and its cash also slipped into deficit, due to a $17-million bank overdraft.
Still, the company is banking on its new investments for a reboot.
“This change is part of our strategic shift towards more predictable recurring revenue streams. The team has been focusing on developing Amigo, a new initiative designed to produce significant recurring revenues based on the proposed business model,”, the company said.
Swaby also said staff cuts would save the company about $8 million per month.
“We had to make some tough decisions of the last few months, such as cutting our headcount by about 40 people made up of permanent staff and contractors,” leaving a complement of about 23 persons,” said the edtech entrepreneur.
The company still plans to approach its shareholders, via the market, for fresh capital to buttress the operation.
The renounceable rights issue previously approved last year will be pursued towards the end of 2024, Swaby said. It will allow stockholders to procure new shares in the company. Under a renounceable rights offer, the shares not taken up by existing owners may be offered to the general stock market investing public.
“We are looking to raise between $250 and $300 million to recapitalise the balance sheet and to give us the dry powder we need to execute on the plans we have,” he said.
Swaby is also looking to the company’s corporate learning division for further growth. This division focuses on creating e-courses for organizations and provides them with a proprietary learning management system.
