Janison Education Group Limited (JAN) Earnings Call Transcript & Summary

Good morning, everybody. Thanks again for attending today's webinar briefing of the Janison half yearly results ending 31 December. I've got the executive team with me today: David Caspari, the CEO; Stuart Halls; and Amy Barouch will be sharing their presentation for you today. Just a little bit of housekeeping. We will work through the presentation. [Operator Instructions] We'll keep an eye on them. And if there's anything there that is relevant to the slide that we're working through, we will address those as we go. But delighted to have you all here today and also delighted to have the team present what is, I believe, a really strong 6 months trading for the business. There's a bright future for Janison ahead, and the guys will take you through exactly what's going on in the business across the different parts, addressing our different customer needs. So also great to have schools back, great to have universities start today. And really happy for the team now to take you through. So I'll hand over, without further ado, to David to take you through his opening. Thanks.

Thank you, Mike, and welcome to everybody that's joining us for our first half trading update today but also an outlook for the second half. It's an exciting time for Janison and, as Mike said, equally exciting as we start to look at the second half that our core customer marketplace is really starting to show signs of getting back to business as usual. And that's going to have very positive impact on our overall momentum and performance. Today, we've announced strong financial results, a record half on the back of a record year last year. And it's really the result of an extended period of time, maturing our capability and the transformation of our business that we've begun almost 24 months ago. As you look at our performance for the first half, you can really see the results proving out our ability to continue to grow assessment annualized recurring revenue and gross margins on a sustainable basis for the next few years. In particular, we reshaped our portfolio to focus on our assessment platform and our schools assessment products with our OECD-PISA for Schools partnerships, really spanning both of those in terms of the enablers for that growth. And this portfolio collectively delivers on our purpose, which is to unlock the potential in every learner. Our results, the product of really strong focus on operational execution through what was a challenging trading environment. We've been very focused on customer experience. And as we'll take you through, we've seen growth across all our growth drivers of PISA of Schools, the ICAS products and the Insights core assessment platform. We've seen it in revenue. We've seen it in annualized recurring revenue. But most pleasingly, and we've spoken about this now for the last 1.5 years, the key metrics that we are constantly orienting ourselves around is assessment annualized recurring revenue and gross margin expansion. Assessment annualized recurring revenue has grown 47% year-on-year and a really strong gross margin expansion, which has been above what I think are the expectations everyone's been having, moving from 55% to 66%. These results were delivered through what was a very challenging trading environment. The lockdown of the eastern seaboard for much of our crucial sales campaign, particularly for the ICAS competition, and also rolling store closures globally in areas where we've been rolling our PISA for Schools program, have impacted our revenue for the first half. Being able to post 23% year-on-year growth through those trading conditions and 49% annualized recurring revenue in the assessment space growth really speaks to the underlying strength of our business. And we estimate the impact of the -- of our trading environment and COVID to be in the order of $5 million of high-margin revenue. So delivering strong performance, 2 acquisitions, all the while providing a great customer experience in supporting governments, jurisdictions and schools find a way through COVID, it's been a very pleasing half. So we've got a lot of people on. I know a lot of people have been on the journey with us for a number of years. But for those people who are new, we will take a period of time to take you through our growth drivers, the introduction of the business, an important evolution of our business as we bring the ICAS business together with AAS acquisition and the QATs acquisition to start to build a more comprehensive educational assessment portfolio. And we've asked Amy Barouch, our Group Executive for Educational Assessments, to really introduce that end-to-end portfolio and the way we're going to unlock value for schools. And now we'll be talking about how we're going to open up the parent market. So first to a brief business overview. Janison is a market leader in digital assessments. And we operate in a very large and growing market, which is the schools assessment marketplace. We also have a secondary focus on the accreditation market because our platform and our capabilities are extremely strong in that space. Our core IP is our standardized assessment platform that's been built in partnership with major jurisdictions such as the Commonwealth of Australia, the New South Wales Department of Education, the Singapore government and many other jurisdictions over 10 years. And we delivered 2.1 million digital assessments in the first half on the way to what we expect to be more than 7 million digital assessments for the full year, impacting 1.3 million students through tests on the way to 5 million, obviously with NAPLAN being a very significant driver for that in the second half. We've seen a continued, very strong step change into the remote proctored exams space. And as a product line, it's extremely high growing for Janison, and we'll talk about it some more. In addition to our assessment platform, our assessment products in the educational assessment portfolios are flagships in the market. They sit on our assessment platform, and we deliver those directly to schools. And as we announced today, we'll be starting to unlock the parent market. It's now a very strong and very comprehensive portfolio that covers the vast majority of schools' needs and over an emerging parent's needs. COVID, and we'll talk a little bit about that, while being a short-term headwind in the first half, undoubtedly has accelerated the permanent adoption of digital assessments. And as Mike said, we are seeing that ray of sunshine with schools being, it seems at this stage, less impacted in term 1 than some had predicted, and universities definitely coming back as best they can to in-person exams. Janison, as we said, operates in the global EdTech market. And in particular, we operate in the schools and the workforce markets, which is, as you look on the top left-hand side of this slide, represents 58% of the total education market. Even though EdTech is still a small percentage of total education, you can see that percentage continues to grow. And you can see COVID in the teal line has started to really shift the size of the market and will continue to do so. Our assessment platform, it really plays in that digital infrastructure catch-up part of the marketplace, as you can see in the top center of this diagram. But the work we've been doing over the last 12 to 18 months has positioned us to really take a leadership role in the B2C model, particularly focused now on parents and students. And we'll be providing greater insight and announcement of that over the course of this session. So at this point, what we'd like to take you through is our clear path to $80 million to $100 million of annualized recurring revenue with significant gross margin expansions, which will bring us to a very cash-generative position in the medium term. Stu?

Thanks, David. Yes, thank you, and welcome, everyone. I think this is a slide we've taken the most people through before. It's something new, but it's just a good reminder that we are still very much confident around our horizon to FY '25, reaching $80 million to $100 million in revenue. The 3 key growth drivers we see to get us there is the Educational Assessments. This is the school assessment products that sits on the Janison platform. The second one is PISA for Schools, which I'll talk to a second. And the third one is the assessment platform itself, which is that very resilient, very secure high-stakes platform that we sell into large enterprises and educational departments. PISA for Schools is something that really straddles both the first and the third driver on this chart. It's a business that is a partnership with the OECD, and we've talked about it again a number of times, but it's a fantastic opportunity. It sees us in the currently 17 countries delivering a test exclusively on our platforms with the OECD's test content in an addressable market of potentially 90 countries. So there's still a long way to go, a lot of opportunity there and a very exciting rollout coming in this calendar year. And really, PISA for Schools is enabled by 1 and 3 here. And that's the -- it sits on the Janison platform, and we sell this in a number of -- in 2 different particular ways. One is direct-to-school, which is very similar to our Educational Assessments business. And one is direct-to-country level, federal education department, so more of an enterprise proposition there. So much more like the third driver on this chart. And those are the 3 key growth drivers that we see us getting to $80 million to $100 million, in addition to our other noncore areas of Janison plus acquisitions, which we'll talk a bit about more about later on, and we've done 2 in the first half. So moving through. So similar to the horizon target, horizon time frame, this time looking at gross margin. So again, the real opportunity here is for us to get to a place where we see ourselves delivering around about mid-70% GP, maybe higher in FY '25. Really pleasing to see in the first half of this year, we grew gross margin from 55% to 66%, in fact, about a 12-point increase, not through any particular sort of excessive price or cost reduction but more just the natural improvement in our revenue mix. We came from a place a few years ago where Janison was a producer of bespoke assessment platforms and found ourselves in a position where we were maintaining multiple versions or multiple co-bases of a similar platform. We've since standardized and consolidated our functionality, and we now only sell a standard assessment platform called Janison Insights. And by virtue of having all customers on that same platform, much more efficient, much more scalable, and it's delivering gross margin improvement. The second driver of our gross margin is the volume. So on the assessment product side of the business, which is the Educational Assessments side, where you put content -- test content onto our platform, the nature of these products is that they cost. They have a fixed cost to produce, and then every dollar above that cost to produce sold is almost entirely profit. So just by increasing volume, that will deliver and continue to deliver more and more gross margin improvement. Just going quickly to PISA. So I did mention this briefly on the previous slide. This is that second growth driver of the 3. It's a partnership that was won a few years back with the OECD, phenomenal partnership we have, which sees us go around the world and be introduced to the federal education ministries of many, many countries by the OECD as a reference and as an exclusive provider of the platform, which powers the content or the test content that the OECD has developed. So again, phenomenal product, sells itself. We've since managed to issue 17 countries now sitting the test on Janison's platform, and we'll go through a bit more of an update in a moment. But yes, we'll talk about that later on in more detail. Just now moving on to Educational Assessments. So we have Amy Barouch on the line, who's our group executive for this division. And she will take us through a bit more about what this division is all about and I guess the opportunity we see ahead for this business unit. Amy, we will try and...

Here you go.

There you go, Amy. We had a problem with the mic. Over to you.

Thank you very much. Thanks, Stu. Thanks, David. Hi, everybody. Our Educational Assessments business is the B2C side of Janison, and we offer a suite of assessment products direct to schools. We also commercialize the capabilities we rely on to develop and operate our own proprietary products, for example, item writing, psychometrics, results analysis and marking by offering them as a service to third parties. Notably, our team is presently writing NAPLAN, a contract for which we've run one for the 12th year in a row. Since the inception of this business 2 years ago when we acquired UNSW Global's educational assessment business, we've since acquired 2 more test content businesses, both of which have high-quality banks of test questions, strong brands with loyal customer bases and also excellent underlying assessment development capabilities. So for each of these acquisitions, we are remaining focused on operational synergies from integrations, cross-sell across our direct-to-school base, digitizing the tests and the test delivery on Janison's core platform and also driving international expansion. In parallel with the synergy and growth opportunities, we are also leveraging the aggregation of all of these underlying assets and capabilities from these 3 direct-to-school businesses to create new propositions, including for the direct-to-parent market. In the 2 years since we've owned ICAS Assessments, the ICAS competition has gone from being purchased 40% from parents relative to schools to 70%. Not only will serving the parent market for educational assessments capitalize on a large, active and much less price-sensitive segment for our products, it also has the ability to derisk us from ongoing impact of COVID-related school lockdowns, whether that's locally in Australia or internationally. And we look forward to sharing a little bit more about that later on. Stu, if you don't mind going to the next slide. So as you can see here, our school assessment product portfolio is now extremely comprehensive, covering a wide range of test type, subjects and year levels. We have everything from benchmarking progression, class placement, scholarship entrance tests to year 11 and 12 trial exams and academic competitions. We now cover all year levels from K-12 and a very large variety of subjects, maths, reading, writing, general ability, digital technology, all the way through a comprehensive range of HSC, VCE and QCE or curricula-linked subjects. What this means across our portfolio of now 3 direct-to-school brands is we are in a position to offer very much a one-stop shop to any given school, whether locally or internationally, given our range of assessment products. Thanks, Stu.

Thank you, Amy. And we'll now move into a summary of our first half results, and I'm delighted by the performance of the business on an overall basis. As I said before, approaching $20 million in year-on-year operating revenue is a highlight. So that's a record half on the back of a record year last year. Very pleasingly, we are delivering on gross margin expansion, which is exactly what we said we were going to do and, in fact, a deliberate result that I think is above what a lot of people have expected. And that really demonstrates the underlying strength of our growth drivers in terms of the margin mix. We've delivered $23 million of group ARR, up 35%. But I really want to focus in on the assessment ARR, which is what we really orient our discussions about as an indicator of the progress of our strategy and execution. And very pleasingly, 47% growth of assessment ARR and growth in every single line of our growth engines of assessment platform, clients of our educational assessment portfolio, which is where the ICAS competition now lies, and our PISA for Schools exclusive partnership with the OECD.

Thanks, David. So I'll take you through the financial statements. Now I won't dwell too long, but a lot of the underlying drivers we've talked about already, so not a lot more to go through. I mean, revenue, I think the key point here is that we are growing our platform revenues side of the business versus the services side more at 28% year-on-year, which is great to see because of that differential in margin. We've seen not only an improvement in gross margin but a cost reduction in cost of sales, where we're getting more efficient in our test development and use of test items that we have rather than rebuilding new ones from scratch and also some price negotiations with some of our larger third-party contracts. Operating expenses have stepped up by $5 million, very much in line with what we set out to do. I think what we're seeing now is really just the annualization of what we did in FY '21. We raised capital in 2020, and we put that to work by investing in our sort of head count and our expertise across the business in many, many areas. Go-to-market has been substantially lifted in its capability and expertise. Our global service event delivery team has also been established and consolidated under one roof, and what that does is it really gives us the ability to service and go hard into our international markets. We have a growing business over cities now, particularly with PISA in 17 countries, with ICAS expanding more and more overseas, competition that can cross borders, noncurriculum-linked. And so therefore, we needed to have a 24/7 event team to not only help us expand into those regions but also support our assessment platform clients, those large enterprise businesses that run very, very large high-stakes exams with large candidate numbers. And so really, we have seen a step up here. And I think what you're seeing there is that sort of annualization had sort of flattened off now. The only really increase from here on in OpEx is going to be around our acquisitions. So we acquired AAS and QATs in the final months of first half '22, and you'll see the full 6 months of their OpEx coming into the second half. But other than that, it's really just incremental OpEx increases now in the organic business. D&A stepped up a little bit as well. We have been on a path more recently in the last couple of years to invest in our products. We spend a reasonable amount of money every year as a percentage of revenue on new functionalities for our assessment platform, Janison Insights, as well as new security features. It's very important that our platform is highly secure and highly resilient. And so that's where we tend to focus most of our investment. We've also invested in our new products, which we will talk about in a moment. Amy alluded to the educational assessments moving more into a direct-to-parent model, and there's a SaaS product there we'll talk about later on, which requires some investment in the first half. And then other than that, the only other increase in amortization has been the expensing of the value of AAS, the intangible value of the business that we acquired in the first half, which we'll see coming through. And so we expect this to be sitting at around $1.1 million per month on average now for the remainder of FY '22 and sort of incremental thereafter. Gross margin. So we -- again, we've talked at length about the drivers of gross margin being that sort of revenue mix improvement and also the volume of sales improvement on the product side. What you can see is really just the effect of that now and the impressive growth that we've seen over the last couple of years from half -- the first half FY '19 of $2.43 million to $10 million more in gross profit and much, much higher percentage margins. And we expect to see this continue on as we continue to add more volume to our assessment products. They are fixed cost in nature. And therefore, more volume creates a very, very high EBITDA conversion and more customers coming on to the standardized assessment platform on the assessment and platform side of the business. Just moving through then to the cash flow, and then we'll move off to the sort of true financials and a bit more into the business update. Highlights here, sitting on a very strong cash balance. We have $15 million of cash in the bank as at 31 December. We expect that to remain relatively strong throughout the remainder of this year, through to 30 June. Other than the sort of the major sort of takeouts, we invested in the acquisition of AAS and QATs, the 2 inorganic businesses that we bought this year. And that required a gross cash outlay of $7 million for acq fees and net of cash acquired of $6.3 million, so a reasonable expense. And again, that was very much in line with the raise that we did in June, which was a private placement to institutional investors that was purely designed to help us invest in M&A but also invest in working capital in our core business. And then following on from that placement we did in June, we did an SPP in July, which raised just over $3 million before fees. So moving through now into the sort of business update side of the presentation. And take -- I hand over to you, David, for PISA.

Yes. Thank you, Stu. And as Stu explained, we have a 5-year exclusive relationship with the OECD to roll out the PISA for Schools program in all OECD countries over time. We've now achieved 17 countries. And through the pandemic with rolling school closures, we're delighted to be able to continue to deliver this program across the globe with highlights including large-scale events in the first half in Russia, China, Brazil. 6 of the 17 countries we've been appointed the national service provider, which unlocks significant additional addressable market, and it's where we take greater responsibility for the in-country rollout of the full suite of capabilities that enable the delivery of this program. In Australia, we successfully completed the validation survey, which is the underpinning of the accelerated rollout of the program. And we expect significant delivery in the second half, including successful pilots with large systems that will see us expand that business in Australia. In the U.S. and the U.K., we will start to -- in fact, we're delivering PISA for schools right now. And certainly, after main PISA, which occurs imminently, we expect to see significant scaling against our aspirations in those markets. On the international platform provider, where we are the technology stack as opposed to the technology plus the services component, once again introduced 2 new IPP markets, including the European schools, which is important because it spans 6 countries and necessitates us having got the governing board approval to enter those countries. That creates and unlocks a significant addressable market. We did see disruptions through COVID in the first half. We saw a very, very strong growth in the first half in spite of that, and we estimate the disruption in the first half is in the order of $2 million. So it gives you a good sense of the underlying performance, including the contracted revenue on an underlying basis.

David, just moving now to our second revenue growth driver, so ICAS. Similar to PISA, we saw a disruption. We saw schools closed around the world, particularly in Australia where we saw eastern seaboard schools in New South Wales, Victoria really locked down from beginning of our -- or at the end of our sales campaign and the beginning of our testing event window. So for those of you who aren't as familiar, we sell all this product into schools and parents throughout sort of the course of Q4 every year, and then we deliver the event in Q1. And what happened this year was as we were tracking revenue and volume sales of this product in Q4, which was the end of our sales campaign, which is normally the point where the sales really sort of ramp up, we basically experienced school closures across the eastern seaboard, as I mentioned. And that really put a dent in our sales trajectory, which was on track for around about 50% growth in revenue. We know that 20% of that was going to price. 20% sounds like a lot, but it was only around about $2 a test. And the remainder of that 50%, 30%, coming from volume. And so despite that, we still managed to achieve some pretty good results, although what it does do is it gives us a lot more confidence for next year as well as we go into the selling window in Q4 of this year. The other thing it did was it accelerated our direct-to-parent proposition. Again, we'll talk a bit more about that in a moment with Amy when she leads into our new parent SaaS proposition. But COVID really accelerated this delivery, direct-to-parent style and direct-at-home delivery of the exam, which really helps mitigate any impact of COVID going forward. And similar to -- again, similar to PISA, we believe -- sort of management expectations are around about $2-plus million of revenues foregone in the end of the sales campaign when sales really were turned off through school closures. And again, that margin -- that revenue would be -- would have been a very, very high-margin revenue given the nature -- the fixed cost nature of these products. And so again, it gives us greater confidence of growth into the following year. And now I'll just hand over to David to talk about the third revenue driver.

The assessment platform business exceeded management expectations very pleasingly as opposed to the effects of the school lockdowns on the other 2 growth engines, where the underlying business is far stronger than what we've posted in growth in the first half. COVID accelerated the need for the assessment platform as schools needed to do assessments, particularly as schools locked down on a remote basis. We're proud to have supported universities, government, schools and educators through this critical period. I want to highlight a few particular items. Firstly, the partnership with the Department of Education in New South Wales, where our assessment platform assisted schools to identify the amount of learning loss through COVID. That program and that product we've cocreated with them is called Check-In. We delivered 785,000 tests for almost 400,000 students, significant growth. And Check-In is now -- has been stated by the minister and the secretary -- Check-In is now an ongoing standard component of the assessment environment for the Department of Education. Chartered Accountants significantly grew, and we delivered the Chartered Accountants ANZ accreditations in a remote proctored environment, which is from home or from another COVID-safe space. And on that point, we've seen a very strong acceleration of the remote proctoring line of business that sits inside assessment platform. We've seen this environment and this market move to a new norm where it's very clear that on an ongoing basis, organizations and jurisdictions need to be able to deliver assessments either in person, online or at home online. And that's a driver of the significant growth of the remote proctoring business. We also helped schools and departments navigate COVID. We helped the New South Wales Department of Education with their selective school entrance exam, again, remote proctored from home. And we helped the likes of HSC and VCE trial examinations through lockdown.

And so finally, moving to the sort of fourth revenue driver, which is our acquisitions and noncore. Pleasing to see we completed 2 deals this first half, relatively smaller businesses, QATs and AAS. Both very well-regarded businesses that have been around for several decades with extremely good penetration of the Australian schools market but also very highly regarded brand names as well and some very good underlying test content as well, which we've -- are indeed in the process of integrating and aggregating into our overall educational assessments business unit. And we expect to start to see some synergies arise from those 2 businesses in the second half. Looking ahead, we do have a really good pipeline of other acquisition targets. The market and especially through COVID has flushed out some new opportunities as well, some good value opportunities. In our educational assessments side of the business, we are looking towards generally analog school assessment businesses, those that produce nondigital, so pen and paper or sort of static exam, content throughout Australia and overseas, which has the opportunity to be digitized into the Janison assessments platform and scale and obviously the cross-sell between the customer groups. And on the assessment platform side of the business, we see the opportunity for potential technology acquisitions, where we can really expedite investment that we would have made in our own product development to build out that functionality, whereas we see an opportunity to acquire businesses in that space. So yes, very exciting. I can say a lot of pipeline, some really good opportunities not just in Australia but internationally and expect to see more to come from there in the very near future. I'm handing over back now to David, who will you give a bit of overview of the outlook for this year and beyond.

Yes. We're very confident about the full year. In the second half of this financial year, revenue growth is expected to be 45% versus the same time last year, which is an acceleration of the momentum on a year-on-year basis. On top of that, we have a strong pipeline, and we're going to look to try and convert that additional pipeline in upside, which will drop to the EBITDA line at very, very high margin. We do see -- as you try and unpack the underlying performance of the business, as we've highlighted before, we do see that through the PISA for Schools business and the ICAS competition, approximately $5 million of high-margin revenue was lost in the first half. And that gives you an indication of the really strong momentum of this business. And as you start to think about what that translates to in what we hope is going to be a FY '23 with very different trading conditions, you can see that there's real potential to sustain that momentum into the next financial year. In terms of our seasonality, as you saw last year and also the year before, the second half is -- the weighting is seasonally typically weighted towards the first half, given a number of our very large events occur in the first half. Gross margin, we should expect to remain strong in the order of the 65% gross margin we delivered in the first half. And OpEx is going to be flat on an organic basis. But obviously, you'll see the flowing of AAS and QATs, and you'll also see some of the early cost synergies from the postmerger integration of that business.

Thanks, David. And then we'll hand back over to Amy. Amy is going to take us through an exciting part of our business, a new part of the business, which is a direct-to-parent proposition. Over to you, Amy.

Thanks, Stu. So in parallel with completing the acquisition of 2 additional direct-to-school businesses, over the first half, we began to develop a new product designed specifically for the direct-to-parent market. Leveraging the underlying assets and capabilities of our ICAS Assessments, AAS and QATs, namely our bank of 40,000 test items as well as Janison's digital assessment platform, we are building a SaaS subscription-based educational assessment proposition for parents to purchase on behalf of their school-aged children. This offering will enable students to not only practice the content that's analogous to common standardized tests, NAPLAN, ICAS, selective schools, opportunity class tests, but also to practice the experience, given that these tests are also delivered on the Janison platform. And this is something that can't be replicated by any of our competitors. We anticipate that over time, this proposition will expand to cover a very comprehensive range of types of tests, subjects and year levels, which are accessible to students throughout the year. We are also anticipating a tiered subscription model, enabling parents to purchase a single subject for a single learner, all the way up to all subjects for all school-aged children in the family. And we are particularly excited about this new product for a few different reasons. First of all, demand is already extremely well validated. Our flagship ICAS competition continues to experience significant growth in the percentage of purchases made directly by parents versus the school. And in both 2020 and 2021, since we've owned the ICAS competition, we had to leverage the in-person exam management capabilities at Janison simply to be able to meet the demand for ICAS from parents whose schools didn't offer the product. Also last year, we were able to digitize what was previously paper-based ICAS past papers and sold them direct to the parents via our online shop. And demand materially outstripped our expectations. Second, this direct-to-parent proposition opens up this very large market that's not only less price sensitive than schools but also less adversely impacted by ongoing COVID-related school lockdowns, both locally and internationally. And finally, this direct-to-parent market is accessed by a cost-effective digital marketing go-to-market model, which also offers a promising avenue for international expansion. Thanks, David. Back to you.

Thank you, Amy. That's great. And that sort of brings us to the end of our presentation or the formal part of the presentation. So at this point, we'll hand over to the floor to see if there's any questions. Don't think there's any at the moment. [Operator Instructions]

While people are thinking about their questions, I do want to reinforce that while we won't see material revenue flow from the introduction and the unlock of the parent market in the second half of this financial year, it represents an extremely significant unlock of the addressable market, very significant market for aspirational parents and families who want to be able to help their children prepare, compete, participate and so on and so forth. Even our conservative modeling and assumptions gives us enormous confidence that this will become over an appropriate period a very significant growth, additional growth engine. So we have a question from [ John Brennan ]. "Great set of results, growth in gross profit percent, bit surprised on OpEx. Can you talk about this going forward?" Stu?

Yes. Absolutely. Yes, look, I think it has taken some people by surprise. And to be fair, we prepared for a year where we were expecting much more significant growth in our 2 revenue growth drivers, ICAS and PISA. So I think if you have those come off and we haven't had the disruption, it would have been such an impact on the P&L. But that's what it is. And as I say, it's really just that annualization of prior year investment in head count, where we've really got ourselves established. Janison was a very mature business. It was a very small corporate business, and it really wasn't set up for growth. And I think that the investments we've made have really got us set up now to take the business a lot more internationally and in a much more professional way. And then so, as I say, it's bolstering our go-to-market team in most of the key areas where we've invested. Going forward, look, we do expect to see, as I mentioned, we -- it's sort of flattening off now. And really, it's just incremental from here with the exception of the acquisitions which was made and bringing those costs into the P&L, but from then on, largely incremental. And you'll see improvements to operating leverage coming through year-on-year sort of since -- of revenue will continue to reduce. And yes, really, a lot of -- only the sort of major element of OpEx, I think, that will pick up is just around our marketing expense as we continue to support now more of a B2C model. And under no illusion, that requires expense to help acquire and retain customers in that space and also to help us, yes, grow our other products internationally as well and grow brand awareness.

Thanks, Stu. Look, I'll take the next question. But before that, [ John ], I think it is very prudent as you unpack OpEx to normalize it for the revenue impact that we called out for the first half. We are taking a very forward focused view of our business. We see extraordinary growth potential. The expectation is we'll be able to sustain growth on an ongoing basis, and what we didn't want to do was to take -- make short-term decisions that undermined the potential of this business on a sustainable basis. On an underlying basis, we see no structural challenges with our core growth drivers. A question from [ Stephen ]. "Other than PISA, can you talk to other global expansion aspirations?" [ Stephen ], really good question. And we have a very targeted focus on our global expansion aspirations. We have been very prudent in our approach. We see significant opportunity in certain market segments. In particular, we like the publisher marketplace, and you can look at the likes of Cambridge Assessment as an example of that. They're very large impactful organizations. They have a suite of assessment products in their own right that need to transition online and digital, and many of those organizations already operate in dozens of countries. And so partnerships with those kind of organization is something you can expect to see us be able to talk more about. We also have some strong customers historically, particularly in our European basin. We do see Europe and -- on the platform side as an important market. We also see the reestablishment of our historical position in Asia for our ICAS competition. It's been a challenging time in Asia for the last 12 months with school closures. But once again, for the ICAS 2022 competition, which starts midyear, we're really looking to invigorate those Asian international markets.

I think, if anything, I'd add to that is when we look at the assessment platform side of the business, there are very few competitors out there who can offer a similar level of functionality, capability, security and resilience. And we'd referenced sort of the past experience with the likes of NAPLAN Australia and Department of Education and the OECD. And our platform is -- it does -- it is sort of sellable into intermediate jurisdictions. So it's not limited to the Australian geography.

We'll go next to a question. Amy, we'll pass it to you, from [ Raymond ] around the direct-to-parent model.

Yes. Absolutely. So one of the things we're very excited about with the direct-to-parent model is it does not require any increase in sales force, whether that's own proprietary, boots on the ground or distribution partnerships for sales force direct-to-parent. It's very much a digital marketing-led model. Do we anticipate investing more in that marketing model? Yes. However, it's one that we already have, complementing our direct-to-school sales capability across Australia, New Zealand and beyond. We already have a strong digital marketing play, including social media, which we will be leveraging very much for the direct-to-parent model.

Thanks, Amy. And I might take the next question from [ Michael ]. Now the U.K. and the U.S. schools are back open. Can you please talk through the approach to accelerating PISA for Schools in those markets? It's a really good question. And as we've always said, our medium-term aspiration is in the order of 1,000 schools in each of those 2 markets at $7,000 a school. So our aspiration, our stake in the brand in the medium term is $7 million per market. That represents a much more conservative target than the Australian market because those markets are both much larger. To contextualize a couple of points, [ Michael ], the first is that both the U.K. and the U.S. have historically run PISA for Schools on a paper-based model. Both of those markets had in the order of 400 existing schools that have run PISA for Schools. So just firstly, bringing those schools back to the product that they know and love after having lost access to them in the transition and through COVID is an absolute priority, and we obviously have existing relationships and partnerships with those. Those schools come in clusters, for example, charter schools in the U.S., which are clusters of 30 to 40. It doesn't require us to go school to school. But on top of that, there is significant opportunity to bring additional clusters on and departments on. In Wales, we're in the process of working with them, and we envisage 2 dozen to 3 dozen schools as a cluster. It's very important to engage with government to bring in large jurisdictions. And in both of those areas, we are and have good -- made good progress in identifying key influences that could help open doors in a very targeted way to allow us to unlock real systemic moves. But I will say that we are taking a conservative and prudent approach to our investments in those markets. We want to make sure that we really understand the go-to-market before we pull the lever on the step-change investments.

I might take... [Audio Gap] Next question, I think I'll take as well, from Paul. I think...

Sorry. We -- it looks like we had -- no, it looks like we have a technical glitch.

Yes. For the last question, you guys were just on mute.

Can you repeat that? I don't know what happened.

It was a fantastic answer, I'm pretty sure.

And you're going to have a chance to...

Yes. Yes. No, I was just telling -- a question from [ Jitendra ] was given the focus on acquiring analog businesses, when will we raise capital again? Apologies, we are on mute. But as I say, there are a range of different businesses out there, more now through COVID, that have come about. There's an opportunity for us to acquire in both sides of the business units, the educational assessments as well as in the platform and sometimes across both. And we have cash on hand. We have good cash on hand. We have enough reserves to make acquisitions of a smaller size, similar to the ones we've done with AAS and QATs. But I think if some of those larger deals would come off, then when we're ready to push the button, we would go back to market to do a raise at that point in time for those larger acquisitions, but nothing immediate. So yes, watch this space.

Stu, you might want to continue on to [ Paul's ] question.

Yes. So a question from [ Paul ]. "I appreciate the transparency on the OpEx. Would you please comment on how you see the other traditional OpEx trading over the next couple of years -- sorry, trending over the next couple of years?" Yes. I think largely incremental growth from here on in, marginal uplift in sort of inflationary levels, with the exception of some of the marketing expense that we talked about around new products. Launch in the parent SaaS will require a bit of an investment in PR and digital marketing to really help establish this product in the market, give it a good shot at success and so obviously, to continue that customer acquisition that we need to do for that program.

A question again from [ Jitendra ] around for institutional school markets in the OECD countries, how are you planning to reach out to wider school audiences? It's a really good question. And one of the things we really are starting to see traction is, is what we always saw as the potential of the OECD partnership to introduce us into large jurisdictions and enable us to start to present other parts of our product portfolio. That is really now starting to become evident in our pipeline. And for example, without specifying a particular market, a market entry into a particular market with OECD has resulted in us having adjacent conversations where that same country or jurisdiction or system is looking for an assessment platform and even assessment content. And we're in a position where we can start to have those conversations build a pipeline. For direct to schools, with our schools product, our immediate focus is the Australian market and the secondary focus in the New Zealand market as we really start to strengthen and bring that comprehensive portfolio together. It is a very strong Australian-focused market. That said, looking a little bit further afar, we do have an eye in the next phase on English-speaking markets, where a lot of our assessment products are noncurriculum-linked. And so they are relevant and attractive to other English-speaking markets.

Thanks, David. So I might take the next one from [ Jay ]. Great question here around inflation. How do we see this impacting revenue and cost? Look, I mean, I think the thing to remember with inflation is that the -- we have sort of very strong underlying fundamentals of the business that sort of we aren't reliant on inflationary expense of revenue. And I don't think it's going to have a huge impact on costs. We've got -- most of our expenses are internal labor, and I think that is probably the one area where less around inflation and more around sort of the war per [ tonne ]. There's a lot of -- there's been a lot of attrition in -- within the industry and movement amongst companies, and we're seeing that come through in salary pressure rather than -- not so much the inflation, but more general sort of demand for talent, particularly in the technology space. I think we've seen some pressure there, and that's probably one of the things that we are battling with because that is one of our largest expenses is, is in labor. But in terms of the fundamentals, we operate sometimes with exclusivity, with the OECD. So price is within our control. We have products that are -- don't have substitutes, the likes of ICAS, for example. Again, we've seen 20% price with this year -- at 20%, it's still only $2.50 a parent -- per subject. So not immensely large in terms of the price increase to swallow but substantial in terms of percentage for us. So I think there's fundamentals there that help support us going forward regardless of strong inflation numbers that are starting to come through around the world.

You might want to cover the QATs question and the AAS question from [ Raymond ].

Yes. Good question from [ Raymond ]. So QATs earned $1million in revenue last year. AAS earned $5 million in the same year. Do we envisage similar figures in FY '22? Absolutely. Both of them are on a target that see them growing the revenue in this year and the next year. AAS has a 2-year ramp. But I think that for us, it's the sort of baseline we expect growth in those 2 businesses organically, plus what we can deliver by bringing them together, cross-selling, utilizing combined sales force, customer crossover and really sort of digitizing their offering and reusing their products in item bank in other ways. But that's -- yes, those businesses were on track for sort of 10% to 30% organic growth themselves. But yes, we'd expect to see a lot more than that.

We have about 2 or 3 minutes' worth of questions. So I might just pause to see whether anyone else wants to pose maybe a final question. There's another question, [ Raymond ]. "I know you've developed a 24/7 global support team for PBTS. What are the key challenges and issues your clients are seeking support for?" It's a really good question, and it's an area where we realized we have very strong differentiation. The world of delivering, in particular, high stakes assessment is a world that we understand deeply. And one of the things that's become very, very clear versus the competitors that sometimes will really turn up in the marketplace is we do not just hand an assessment platform over to a customer with a bit of training and let them run it alone. The reality of running a high-stakes assessment is a very specialized area, and we have more than 15 years of experience in running that in-person. We understand what kind of preparation is required. We understand the candidate experience is something that is very nuanced. The high-stakes assessments are high-anxiety assessments. And one of the things that we've learned and we know is that for a remote proctored assessment, actually, 70% of the work needs to be done before the event in candidate preparation, in education. That's a fluke from in-person. And so rather than being a challenge, our key source of differentiation is our deep understanding, is our knowledge of what it takes to run an assessment of this size and our very expansive capability that we've developed and now pivoted online and digitally. So it's turned out to be a great source of differentiation. And what I would say is even as it is a source of differentiation, we still see that it might be only 10% or 15% of the revenue, which -- but what that does in services is drive the platform ARR. So it's 2 minutes to the hour. I might wrap it up there. Thank you very much for everyone joining. It's been an exciting time for Janison. We're very pleased with the strong financial results, and we've made the investments and got the settings right. So coming out of this latest wave of the pandemic with schools back, with universities back, with the demand we're seeing in the second half and ongoing, with the acquisitions that we've made and the relationships and customer experience we've delivered, we're very optimistic both on the second half where 45% year-on-year growth is where we anchor our self but also for the underlying business into next year. Thank you very much for joining. And should there be any follow-up questions, please don't hesitate to reach out on [email protected].