Even after its cost-cutting initiatives proved helpful, tutoring firm Cluey (ASX: CLU) has been dealing with setbacks in the face of reduced household budgets. The Company reported a 17% decline in revenue, with earnings taking a hit.
In Q1 FY24, the EdTech company made notable improvements in its financial performance in other areas. The Company revealed a 42% improvement in its Q1 FY24 underlying EBITDA loss, which decreased to $2 million from the PCP’s $3.4 million. This figure represented a 21% improvement compared to the preceding quarter, Q4 FY23, where the loss stood at $2.5 million.
Cluey also saw a 3% increase in its gross profit margin during Q1 FY24, reaching 57.5%. Its subsidiary, Cluey Learning, experienced even more substantial growth, with a 3.4% improvement in its gross profit margin, now at 58.6%. Code Camp, the Company’s eight-week afterschool program, achieved a 1.7% increase in its gross profit margin, now at 54.6%.
Joint CEO of Cluey, Matteo Trinca, shared, “We are seeing the benefits flowing from the initiatives implemented to reduce cash burn, decrease costs, and drive to profitability. These cost-saving initiatives are expected to continue delivering operating improvements in FY24. While reducing expenditure on customer acquisition has resulted in lower revenues, EBITDA in Q1 FY24 improved by 42% when compared to the previous year.”
Cluey implemented various cost-saving initiatives in FY23, primarily focusing on Cluey Learning. In Q1 FY24, these efforts led to a $2.8 million reduction in Cluey Learning’s operating costs (excluding $200k in one-off restructuring costs). The impact of these initiatives is expected to continue to be realised throughout FY24.
It also replaced some teachers with artificial intelligence to save tutor costs. Though it helped reduce operating costs, there’s little data to understand what this meant for its overall offering.
In Q1 FY24, Cluey’s revenue fell by 17% to $9.9 million. The Company’s gross profit also took a hit, decreasing by 15% to $5.7 million. This decline can be attributed to an 11% decrease in new student enrollments and fewer student sessions.
Cluey attributed the decline in Cluey Learning’s revenue and student sessions to several factors, including management’s decision to reduce spending on customer acquisition to preserve cash, a shift in post-COVID behaviour with longer pauses during school holidays, and a challenging macroeconomic environment marked by increasing pressure on household budgets and reduced discretionary spending.
Despite these setbacks, Cluey continued to offer personalised online tutoring and educational support to students in Australia and New Zealand. Cluey also reported a 25% improvement in total cash burn, amounting to $3.3 million, or $3.1 million, when adjusted for $0.2 million in one-off restructuring costs, reflecting a 29% improvement compared to Q1 FY23.
At the year’s close, Cluey held $11.4 million in cash.
Alinda is a Business Reporter for The Sentiment
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