Fnce90062 Rdy Report

Capstone Studies in Finance
FNCE90062
Target company : Readytech Holdings Limited (ASX:RDY)
Group name : RDY Group – UniMelb Investment Research (UMIR)
Coordinator : Dr Zhen Shi

Tutor : Averina
Leader
Amirali Ahmadzadeh Namdar 1292316 aahmadzadehn@student.unimelb.edu.au
Members
Dustin Hefford 1032265 dhefford@student.unimelb.edu.au
Octave Cassand 1294218 ocassand@student.unimelb.edu.au
Jo-Yu Kao 1230460 kaojoyu@student.unimelb.edu.au
Harpreet Gumber 1277127 gumberh@student.unimelb.edu.au
Hamish Reddy 1326664 bgade@student.unimelb.edu.au
Date : 12-Oct-2023
TRBC Sector: Technology
12th October 2023 TRBC Industry: Software and IT Services
Readytech Holdings Limited (ASX:RDY) Australian Securities Exchange (ASX)
RECOMMENDATION: BUY EXECUTIVE SUMMARY

Exhibit 1: RDY.AX Overview We initiate coverage on Readytech Holdings Limited (ASX: RDY) with a
IPO Date 17-Apr-2019
BUY recommendation and a 12-month target price of $5.14, implying a
FY End 30-Jun-2024
Target Price A$5.14
remarkable 42.00% upside from the closing price of $3.62 as of 12 Oct.
Current Price* A$3.62 2023. RDY’s investment opportunity extends far beyond merely
Upside 42.00% identifying undervaluation, rather an opportunity for investors to
Dividend Yield 0.00% contribute to the next wave of software evolution.
Market Capitalisation* (A$m) 435.06
Our buy recommendation is grounded in the following key theses:
Shares outstanding* (m) 116.77
• Thesis 1: Industry transitions not reflected in RDY’s share price
Free Float 50%
1 Month VWAP* A$3.63
ReadyTech is strategically positioning itself to harness the expansive
52 Week High A$4.28 potential of the software publishing market, with a keen focus on cloud
52 Week Low A$2.71 computing and the transition from legacy systems. RDY looks to scale
*All prices as of close 12 Oct 2023 through incentivized channels, collaborations, and potential merger and
Source: Refinitiv Eikon, UMIR Analysis
Exhibit 2: 5-Year Share Price Rebased acquisition pipelines. Partnerships with enterprise entities further
$4.50 150% facilitate smoother customer integration. Additionally, to maintain
$4.00 107.87% market leadership and outpace competitors, ReadyTech significantly
$3.50 100%
$3.00
invests in Research and Development. Their focus is on innovating based
50%
$2.50 on enterprise cloud system needs, with features like interoperability
$2.00 10.64%
0% distinguishing them from others. RDY is looking to capture up to 25% of
$1.50
$1.00 -50% its serviceable market in the long run. Further growth is expected to be
$0.50
driven by the Government and Justice segment.
$0.00 -100%
Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 • Thesis 2: RDY has a very high-quality tech stack, and its open
RDY ASX200 Rebased ecosystem represents a major point of competitive difference.
Source: Refinitiv Eikon Addressing the generational shift and increased demand, ReadyTech
Exhibit 3: Financial Ratios
Ratios FY23 offers innovative solutions to drive digital transformations in businesses.
Net Debt/EBITDA 2.0x With market trends favoring customizable software, ReadyTech ensures
Interest Coverage Ratio 3.65x their platforms are both scalable and adjustable to varied business
EBITDA Margin 14.1%
requirements. Leveraging the SaaS model, ReadyTech anticipates a
NPAT Margin 4.82%
consistent revenue stream with high potential margins, with its
ROE 4.4%
Source: Refinitiv Eikon capitalised development costs has increasing from $3m (or 11% of sales)
in 2019 to $16m (or 16% of sales) in 2023. Management have provided
clear guidance for capitalised cost to reduce as % of revenue starting
2024 . This should see cash margins lift from 16% in 2023 towards 24-
25% by 2026.
Table of Contents
EXECUTIVE SUMMARY .................................................................................................................... 1
INTRODUCTION .............................................................................................................................. 1
BUSINESS DESCRIPTION .................................................................................................................. 2
Overview ................................................................................................................................................. 2
ReadyTech’s business model ..................................................................................................................... 2
ReadyTech’s revenue and drivers .............................................................................................................. 3
ReadyTech’s underlying corporate strategy for revenue generation ............................................................ 4
INDUSTRY LANDSCAPE ................................................................................................................... 4
Industry performance as an external driver for ReadyTech’s revenue ......................................................... 4
How has ReadyTech aligned itself with the industry? ................................................................................ 6
ReadyTech’s comparative advantage .........................................................................................................8
FINANCIAL ANALYSIS .................................................................................................................... 11
Revenue Analysis ................................................................................................................................... 11
Acquisitions: The Catalyst for ReadyTech’s Revenue Growth .................................................................... 12
Margin Analysis ..................................................................................................................................... 14
Profit and Return Analysis ...................................................................................................................... 19
Capital Structure Analysis ....................................................................................................................... 22
Payout Policy Analysis ............................................................................................................................ 27
RISK ASSESSMENT ........................................................................................................................ 28
Business risk .......................................................................................................................................... 28
Main challenges faced by RDY? ............................................................................................................... 29
Corporate governance risk ...................................................................................................................... 29
Financial risk .......................................................................................................................................... 30
VALUATION .................................................................................................................................. 30
Comparable Company Analysis ............................................................................................................... 30
Discounted Cash Flows (DCF) Analysis ..................................................................................................... 33
Precedent Transactions Analysis ............................................................................................................. 34
LBO Analysis .......................................................................................................................................... 35
Conclusion and Recommendation ................................................................................................. 36
APPENDIX .................................................................................................................................... 37
Appendix 1: ReadyTech’s open ecosystem .................................................................................................................... 37
Appendix 2: Where ReadyTech and TechnolgyOne spend their revenue ..................................................................... 37
Appendix 3: Firm ownership summary ......................................................................................................................... 37
Appendix 4: Optimal capital structure calculation and comparison to current financing mix ..................................... 39
REFERENCES ................................................................................................................................. 40
INTRODUCTION
Our analysis begins by examining Readytech Holding's business model and revenue
segments. We'll explore how the company has adapted to the ever-changing software
industry and strengthened its economic position. Our findings indicate that RDY's success
is largely attributed to its corporate strategy of attracting high-value enterprise
customers and creating market momentum. Next, we'll delve into RDY's financial
analysis, covering everything from revenue growth and prospects to margins and the
impact of acquisitions on their AI capabilities. We discovered that RDY invested
significantly in R&D from FY19 to 1H23, resulting in a decline in cash EBITDA margins.
This investment was focused on expanding enterprise-level capability into the platform,
and while R&D spending peaked in 1H23, RDY is now poised for top-line growth and
operating leverage. Our profit analysis and comparison to TechnologyOne, RDY's closest
peer, confirms the company's ability to navigate financial challenges effectively. By
balancing investment and operational efficiency, RDY is well-positioned to capitalize on
future growth opportunities.
We finally finalise our report with valuation, using three approaches with the following
results and sensitivities:
• Comparable (trading Multiples): $3.70 with 4.22x EV/Sales. Price Range of 2.90 to
7.82
• DCF: $5.14 at 12.66% WACC. Price Range of $4.42 to $6.48
• Precedent Transactions: $5.98 with 43.22% premium. Price Range of $4.17 to
$6.31
• LBO analysis: Enterprise value of $355 million, at 37.4% IRR
1
BUSINESS DESCRIPTION
Overview
Exhibit 5: RDY IPO Details
ReadyTech Holdings Limited provides technology-based Offer Open Date: 8-Apr-19
solutions, founded in 1998 and is headquartered in Sydney, Offer Close Date: 12-Apr-19
Australia. The company was listed on the Australian Stock Listing Date: 17-Apr-19
Exchange (ASX) in April 2019 with the ticker RDY.AX, raised Issue Price: $1.51
capital of $50 million at $1.51 per share via IPO with Amount Raised: $50,000,000
Macquarie Capital as the underwriter. [Exhibit 5] Shares Issued: 33,112,583
Underwriter: Macquarie Capital
(Australia) Limited,
Wilsons Corp.
Auditor: Deloitte Touche Tohmatsu
Return (Since listing date): 136%
Source: Intelligent Investor

ReadyTech is a founder-led, Software as a Service (SaaS) company offering mission-centric,
comprehensive people management solutions for educators, employers and facilitators of career
transitions. RDY introduces an innovative approach to navigating the intricate path from education,
through employment, to career shifts. It integrates aspects of student and apprenticeship management,
along with payroll, HR tasks, workplace safety, employment services, and behavioral tech, making it a
notable software choice in Australia for supporting the evolving workforce.
ReadyTech’s business model
Segments: RDY operates in three segments:
1. Education and Work pathways
2. Workforce solutions
3. Government and Justice
Education and Work pathways: offers cloud-based student and learning management systems (LMS)
for education and training providers to manage the student lifecycle from student enrolment to course
completion. This segment also provides platforms to help state governments to manage vocational
education and training programs, software platforms for the pathways and back-to-work sector to
manage apprentices and job seekers, and a competency assessment and skills profiling tools to track
on-the-job training through a qualification.
Workforce solutions: provides payroll software, outsourced payroll services, human resource
management, and recruitment software solutions to employers to assist with payroll and management
of their employees. This segment also provides human resource (HR) administration services, such as
employee records, workplace health and safety, and organizational structure, as well as talent
management services.
Government and Justice: offers government and justice case management Software as a Service (SaaS)
solutions to local and state governments, and justice departments. It provides asset management,
property, licensing and compliance, finance, HR and payroll, customer management, and courts and
justice products.
2
Core products:
1. Cloud-based student management system (LMS)
2. Payroll and HRM software
3. Service solutions to local, state governments and Justice department
ReadyTech’s revenue and drivers
ReadyTech’s Revenue Generation:
ReadyTech Holdings Limited consistently generates Exhibit 6: RDY Revenue more than tripled
since first disclosure.
revenue through its three distinct operational 120,000 103,306
segments. Since 2018, the segment encompassing 100,000
Education and Work pathways has steadfastly been the 80,000
principal revenue stream, accounting for an average of
$k
60,000
51% of the company's total revenue. The contribution 40,000 23,472
from the Workforce Solutions segment has witnessed 20,000
a compound annual growth rate (CAGR) of 27.8%, 0
escalating from $8.3 million to an impressive $28.5
million. Notably, in alignment with ReadyTech's
strategic vision to augment its market share, the Source: Company filings FY23
company introduced the Government and Justice

segment to its operational portfolio in 2021. This segment rapidly gained traction, matching the revenue
contribution of Workforce Solutions in 2022 at 30.5%. Remarkably, by 2023, the Government and Justice
segment emerged as the most significant contributor, constituting 37.4% of the total revenue,
showcasing a staggering CAGR of 182.76% since its establishment.
Exhibit 7: Revenue Segments

120,000 120,000
100,000 100,000
18%
80,000 37.4% 80,000
16%
30.5%
$k
60,000
$k
60,000
9.7% 27.7% 13%
40,000 30.0% 40,000 82%
40.6% 11% 84%
10%
39.7% 45.7% 12% 87%
20,000 32.7% 20,000 89%
39.6% 34.9% 90%
67.3% 60.3% 54.3% 49.8% 88%
0 0
FY18A FY19A FY20A FY21A FY22A FY23A FY18A FY19A FY20A FY21A FY22A FY23A
Government and Justice

Workforce Solutions Implementation, training, consultancy and other
Education and Work Pathways Subscription, licence and hosting
Source: Company Filings FY23
3
In the fiscal year of 2023, ReadyTech Holdings Limited reported a total revenue of approximately $103
million. In particular, $84 million of this revenue is characterized by its recurring nature, encompassing
Subscription, License, and Hosting revenues, each with distinct revenue proportions. Serving as the
foundational component across all three operational segments, this subscription-based Software-as-a-
Service (SaaS) model has consistently been responsible for an average contribution of 87% to the
company's annual revenue. This model has not only facilitated robust and sustainable growth across all
segments but has also historically and foreseeably been the primary engine propelling the company's
overarching revenue generation. [Exhibit 7]
ReadyTech’s underlying corporate strategy for revenue generation

ReadyTech's recent achievements underscore its strong positioning in the enterprise market. They've
secured significant enterprise contracts, totalling $12.4 million across 11 landmark deals, and
successfully broadened their customer base with 48 high-value acquisitions amounting to $16.4 million.
Notably, their revenue per customer has surged by 74%, escalating from $54.8 thousand in 2022 to
$95.6 thousand in 2023. This rise suggests an effective strategy, possibly involving upselling or providing
additional value to their clientele. ReadyTech's growth trajectory emphasizes its ability to challenge
established enterprise players, leverage an open ecosystem that resonates with customers, and seize
larger market opportunities through a robust merger and acquisition strategy. The focus on securing
SaaS contracts in the range of $500 thousand to over $5 million indicates their intent to tap into larger
clients with significant technology budgets, presenting substantial expansion possibilities.
Exhibit 8: FY23's $12.4m new enterprise contracts.
Source: Company MD&A FY23
INDUSTRY LANDSCAPE
Industry performance as an external driver for ReadyTech’s revenue
The software publishing industry in Australia has witnessed a transformative shift towards cloud
computing, with both individual consumers and businesses driving this change. Software publishers
have reaped the benefits of an enlarged user base. The onset of the COVID-19 pandemic provided a
unique opportunity for this sector to flourish due to the heightened demand for software tailored to
4
facilitate remote work. As a result, the industry has seen a commendable 7.7% growth in revenue since
2018, reaching to $5.4 billion in 2023. [Exhibit 9]
Exhibit 9: Software publishing industry revenue in Australia (Historical and Forecast)
12
10
8
$Billion
5.4
6
3.7
4
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
Actual Projected
Source: Refinitv, Ibis (2023)
A significant chunk of this revenue, amounting to $2.9 billion, is attributed to enterprise software, which
is ReadyTech's primary area of focus [Exhibit 10]. Another noteworthy trend in the industry is the
growing preference for the Software as a Service (SaaS) distribution model. This model offers a more
consistent revenue stream compared to conventional business models, which rely on customers making
singular purchases for software updates.
Exhibit 10: Products segments in the Software Publishing industry
14.9%
54.2%
30.8%
Enterprise software Accounting software Smartphone and tablet apps
Source: Ibis (2023)
5
In the software publishing industry, several key drivers have catalysed its growth and shaped its
trajectory. Here's a succinct breakdown:
1. Cloud Computing Surge: The increasing adoption of cloud computing by consumers and
businesses has amplified the demand for software. This adoption has broadened the user base,
enabling software publishers to develop applications for diverse platforms, including mobile
operating systems. This shift to the cloud has significantly benefited software publishers,
resulting in growth in both enterprise numbers and overall establishment.
2. Competition from Global Tech Giants: International software publishers, with their vast
resources and global recognition, overshadow the local software publishing landscape. To
remain competitive, local software publishers have carved out niches by catering to specific
business needs and tailoring their software to adhere to local regulations, such as tax laws. The
accounting software segment is predominantly dominated by local publishers due to the
specificity required for local compliance. Growth in this segment has also witnessed increased
profit margins, especially when local publishers go on to expand their global footprint through
acquisitions.
3. COVID-19 as a Double-Edged Sword: The pandemic led to an unprecedented demand for
remote working solutions. While the pandemic disrupted many sectors, software publishing
stood resilient. The demand for software facilitating remote work, especially cloud-based
solutions, saw a significant upswing. Although businesses grappling with the pandemic's
financial implications scaled down software subscription sizes to cut costs, the explosive demand
for remote work software offset these losses, ensuring industry growth.
4. Technological Advancements Open New Revenue Streams: The rollout of advanced network
infrastructures like NBN and 5G has improved high-speed internet access. This technological
advancement stimulates consumer and business spending on software. Enhanced storage
capacities in PCs and cloud servers enable easy software upgrade downloads and better online
data processing capabilities. Consequently, publishers are now able to produce more
sophisticated software. The SaaS distribution model further bolsters this trend, allowing
publishers to reap consistent revenues from subscriptions. This model has spurred growth,
leading to the introduction of innovative software types, including music streaming applications
and online productivity tools. Furthermore, the app segment has emerged as a lucrative avenue
for software publishers.
The primary message here is the consensus that the industry revenue will rise at an annualised 15.2%
to $10.9 billion over the five years to 2027-28, with greater online connectivity and cloud computing
uptake have boosted revenue. (MarketLine, 2023)
How has ReadyTech aligned itself with the industry?
Executing well on enterprise strategic pillars:
ReadyTech, as outlined in their management discussion and analysis in August 2023, recognizes the vast
potential presented by the burgeoning software market and the overarching movement to cloud
technologies. A consolidated breakdown of their strategic approach is as followed:
1. Approaching a Large Addressable Market: ReadyTech recognizes the expansive potential of the
software publishing market, particularly in the realm of cloud computing. Their strategy focuses
6
on tapping into this vast market by aligning their offerings with the industry's prevailing trends
and demands.
2. Capitalizing on Cloud Disruption: Despite cloud technology reshaping various industries, its
penetration, especially in the enterprise sector, is still at a nascent stage. ReadyTech sees this as
an immense disruption opportunity, positioning themselves as frontrunners in facilitating the
shift to cloud-based solutions.
3. Replacing Legacy Systems: Legacy technologies, often rigid and outdated, are prevalent in many
industries. ReadyTech identifies a significant opportunity in assisting businesses transition away
from these clunky systems. Their strategy leans towards introducing more agile, efficient, and
user-friendly solutions, tailored for modern business needs.
4. Accelerating Digital Transformation: With a generational shift in the workforce and the broader
societal approach towards technology, there's an increasing demand for digital transformation.
ReadyTech aims to spearhead this movement, offering solutions that not only modernize
business operations but also make them more efficient and adaptable.
5. Scalable and Configurable Platforms: ReadyTech's emphasis on scalable platforms stems from a
market trend leaning towards customizable vertical software. By ensuring their software
solutions are both scalable and configurable, they aim to cater to a diverse range of business
needs.
6. Vertical SaaS Revenue Model: The SaaS (Software as a Service) model is renowned for its
consistent revenue stream and potential for high margins. ReadyTech, leveraging this model,
expects not only a steady flow of income but also an operating model with robust margins in the
long run.
7. Investment in R&D: To ensure they stay ahead of the curve and build strong competitive
barriers, ReadyTech is heavily investing in Research and Development. By consistently innovating
and enhancing their product offerings, they aim to solidify their position in the market and fend
off competition. ReadyTech understands that achieving a product-market fit, especially in the
enterprise segment, requires substantial upfront R&D expenditures in order to build strong
economic moats. RDY has been prioritizing R&D based on the needs of enterprise clients on
cloud systems. Their open ecosystem is a major differentiator. Features like interoperability, a
modular ‘land and expand’ approach, and the simplicity of upsell and cross-sell enhances their
customer choices.
8. Scaling via strategic partnerships: An incentivised channel promotes referrals and establishes a
reseller network. Collaborations with ecosystem partners accelerate market entry and widen the
range of products, along with potential revenue-sharing prospects. This also aids in the
development of a merger and acquisition pipeline. Additionally, collaboration with enterprise
partners streamlines the customer integration process.
As a result, RDY has set long-term revenue growth target of $970m.

A pipeline that is growing across multiple enterprise vertical opportunities, augmented by customer
upgrade growth opportunity:
1. Education and work pathways: Focusing on TAFE possibilities, advanced education, and a
growing stream of universities and colleges. Expansion is fueled by state governmental shifts
regarding outdated technology, and the corresponding upgrade and training needs. The
platform's global outreach is broadening, marked by its recent introduction in the Nordic
regions.
7
2. Government and justice: Recent achievements in attracting medium to expansive councils.
There's a potential to transition 176 local governmental entities to cloud-based services. A
significant worldwide prospect lies in catering to courts, tribunals, and prosecutors through
public-oriented judicial case management tools.
3. Workforce solutions: Achievements in procuring 900 exclusive payroll clientele from local
governments for comprehensive cloud solutions. Additionally, there's a focus on businesses
ranging from 250 to 5,000 staff members.
Exhibit 11: $970 million pipeline as maintained by RDY’s management in earnings release day
(August 2023)
FY23 ($ Million) Target ($ Million) CAGR (10-Year)
Education and work pathways 36.05 335 25%
Government and justice 38.68 485 29%
Workforce solutions 28.57 150 18%
Total Revenue 103.31 970 25%
Source: Company MD&A FY23

ReadyTech’s comparative advantage
Direct access to high quality data and a culture of innovation position it to capitalise on the AI
revolution:
ReadyTech benefits from immediate access to superior data quality, complemented by its intrinsic
commitment to innovation. This potent amalgamation uniquely situates the company to leverage the
transformative potential of the Artificial Intelligence revolution.
A very high-quality tech stack, and its open ecosystem represents a major point of competitive
difference:
The reference to an "Open Ecosystem" as illustrated in [Appendix 1], provides further testament to
ReadyTech's visionary ethos.
Exhibit 12: Summary of ReadyTech’s comparative advantages
Natrual Open Eco- Culture of Focus on AI

"Ready AI"
Advantages system Innovation Opportunities
Source: Company Filings, UMIR Analysis
8
Importantly, ReadyTech boasts a state-of-the-art technological framework. Its distinctive open
ecosystem accentuates its unparalleled standing in the competitive landscape, providing a marked
advantage over its contemporaries:
1. Natural advantages: ReadyTech possesses direct access to an extensive array of data, both in
structured and unstructured forms. This data-driven capability is pivotal for addressing high-
value challenges that are deemed mission-critical. The company has garnered significant trust
from its clientele, who rely on its expertise to navigate and resolve multifaceted issues.
Furthermore, ReadyTech's technological infrastructure offers a distinct distribution advantage,
setting it ahead of potential disruptors in the industry. This vantage point, combined with the
company's agility, allows it to rapidly adapt and solidify its position as an innovative challenger
within the enterprise markets.
2. Open eco-system: The open architecture model adopted by ReadyTech serves as a beacon of
adaptability and choice in comparison to the conventional platform monoliths. This approach
provides clients with unparalleled flexibility, ensuring they are empowered with a spectrum of
choices tailored to their needs. Not only does this model epitomize the pinnacle of functionality,
but it also ensures that clients are not confined to a single method of operation. Its inherent
adaptability underscores its commitment to quality, ensuring clients don't have to compromise
on excellence. Additionally, the ease with which clients can transition from outdated systems
highlights the platform's user-centric design, standing in stark contrast to other systems that trap
users with vendor lock-ins or captivities.
3. Culture of innovation: Approximately 30% of ReadyTech’s revenue is diligently reinvested in
research and development (R&D) as well as fostering innovation. The company places a
significant emphasis on nurturing a culture of experimentation, supported by initiatives like
Innovation days and the integration of agile practices. Such a proactive approach aids in the
seamless assimilation of emerging technologies. ReadyTech has already embraced artificial
intelligence and machine learning (AI/ML) technologies in its offerings. Taking its commitment
to cutting-edge solutions a step further, the company is now venturing into the next era by
incorporating large language models (LLMs) and generative AI into its arsenal.
4. Building on wins with “Ready AI”: In the fiscal year 2023, ReadyTech introduced "Ready AI," an
advanced artificial intelligence and machine learning tool designed to predict the likelihood of
students and apprentices discontinuing their programs. This innovative solution offers
customers the capability to pinpoint potential risks early on. By identifying these at-risk
individuals, institutions can devise targeted and automated support plans to mitigate drop-out
rates, thereby enhancing retention and reducing churn. The launch of Ready AI not only
underscores ReadyTech's commitment to leveraging cutting-edge technology but also its
dedication to providing value-added solutions for its clientele.
5. Focus of AI opportunities: ReadyTech is embracing the future by enhancing its products with a
range of cutting-edge features. These features aim to bring automation and efficiency to the
forefront, allowing for a more streamlined and effective user experience. The inclusion of
9
personalization ensures that every user's experience is tailored to their unique needs and
preferences.
Moreover, the introduction of co-pilots takes augmentation to the next level by enhancing the
roles of various professionals. Whether it's a student or job seeker support officer, a payroll or
HR worker, or a courts scheduling officer, these co-pilots are designed to complement and
support human tasks, thereby optimizing their productivity and ensuring more accurate
outcomes.
Furthermore, ReadyTech has a clear strategy for revenue generation. This is achieved through
the integration of a traditional module-based approach, combined with advanced product tiers,
catering to various customer needs and budgets. This not only provides diverse solutions for
clients but also ensures a steady revenue stream for the company.
Lastly, with these advancements, ReadyTech is in a strong position to accelerate various facets
of its operations. This includes faster software development releases, aiding customers in their
digital transformation journeys, especially those migrating from legacy systems, and expediting
the implementation process for new clients. Through these initiatives, ReadyTech is poised to
deliver unparalleled value to its clientele while staying ahead of the curve in technological
innovations.
10
FINANCIAL ANALYSIS
Revenue Analysis
As observed in [Exhibit 12], RDY’s revenue growth has outperformed its peer group. This is due to their
strategy of increasing market share, as we pointed out in their business strategy analysis. For instance,
the closest peer, TechnologyOne (TNE), has recognized the majority of its revenue from SaaS licensing
fees from its software segment ($229 Million total Software revenue, 62% of total revenue in FY23), and
significantly less from its other two segments (18% in Consulting and 20% in Corporate segments of
total FY23 revenue). The same less-diversified revenue strategy could be observed in TNE’s prior fiscal
years. Whereas RDY’s diversification, mainly focusing on Government and Justice and not only on SaaS
licensing but also by applying the Education and Work pathways recipe for training the workforce to
convert from legacy systems, has significantly earned RDY their staggering revenue growth, from $50
million in FY21 to $103 million in FY23.
Exhibit 12: Revenue growth comparison, RDY outperforming
50%
Revenue Log Growth (p.a)
40%
30%
20%
10%
0%
FY19 FY20 FY21 FY22 FY23
average RDY TNE
Source: Refinitv, UMIR Analysis

RDY's revenue structure paints a promising picture of both stability and sustainability. With a whopping
82% of its revenues registering as recurring, it underscores the company's consistent ability to retain its
customers and ensure a predictable cash flow. This consistency is further illuminated by their
commendable churn metrics: a gross retention rate at a robust 97% and a net retention rate that
surpasses the 100% mark.
Delving into the SME (Small and Medium Enterprises) facet of RDY's business landscape, the numbers
continue to evoke optimism. Over 4,000 customers have rolling 12-month contracts with an auto-opt-
in mechanism. This system not only streamlines the renewal process but also eliminates potential
friction points, contributing to the stickiness of the revenue. Furthermore, the risk of revenue
concentration is low, as evidenced by the fact that their largest customer contributes to merely 1.5% of
the revenue. Such a dispersion ensures that the company's revenue isn't disproportionately reliant on
a single client, safeguarding against potential volatility. In essence, RDY's financial blueprint, marked by
its recurring revenue, formidable retention rates, and dispersed customer base, is symbolic of a business
model that is not only resilient but also primed for growth and sustainability in the long run.
11
The underlying strategy for RDY’s revenue growth and diversification becomes more apparent when
looking at their revenue-generating assets, primarily their acquisitions, providing significant revenue
synergies. In terms of their strategy and acquisitions, RDY’s share of goodwill and software has increased
its intangibles on the balance sheet, which is a pretty extensive line item relatively, 81% of total assets
($172.12 million of $212.5 million total assets) in FY23 [Exhibit 13]. This means acquiring customers
with an expanded product set through an M&A strategy and increasing the serviceable market,
underpinning a long-term growth to $970m total revenue, about eight times the last financial year’s
generated revenue.
Exhibit 13: Increase in goodwill, the primary driver of RDY’s revenue growth
Goodwill Patent Customer Relationships Software Intangibles
250 250
200 200
55.6
150 150
29.9
in $m
in $m
37.1 1.7
100 24.3 100
0.5
125.4
50 88.8 50
0 0
2022 2023 FY19 FY19 FY20 FY21 FY22 FY23
Source: Company Filings
ReadyTech, as indicated by its name, is primed and “Ready” to undergo transformative shifts to amplify
its footprint in the market. Actively expanding, the company is leveraging collaborations with strategic
partners and extensive networks. RDY’s distinct edge in the market arises from its proactive approach
to mergers and acquisitions (M&A) with partners in their ecosystem. This strategy not only accelerates
their market entry but also broadens their range of products. Additionally, they are exploring revenue-
sharing prospects and establishing a robust network for referrals and resales. Let's delve deeper into
their most recent business acquisitions.
Acquisitions: The Catalyst for ReadyTech’s Revenue Growth

Some of Readytech’s significant acquisitions since 2018 are shown in [Exhibit 14]. Averaging a revenue
contribution of 63% of goodwill recognized, not including the latest acquisition of IT Vision in June 2023,
is evidence that RDY's enterprise strategy is gaining momentum. RDY's early progress on securing new
high-value and enterprise customers shows traction, with an aggregate deal value of $16.4m secured
12
from this customer segment. Additionally, RDY signed 48 new high-value customers (Greater than
$50,000 deal value per contract) with an aggregate deal value of $16.4 million. This is significant at
about 20% of RDY's FY23 recurring revenue. It includes 11 enterprise-level contact wins (Including
Auckland Council, UNSW Global, and Glenorchy City Council with an annual deal value of $12.4m) in
FY23 as early evidence that RDY is successfully executing its buy-and-build strategy, adding value
through M&A in addition to organic growth and recent R&D investment has supported the integration
of acquired businesses.
Exhibit 14: ReadyTech’s business combinations since 2018,

and their revenue contributions as %goodwill recognised.
Figures in (AUD) Thousands:
Acquisition Revenue Acquisition Revenue Contribution /
Business Combinations Date contribution Goodwill cost Goodwill
eLearning Australia Pty Ltd Sep-18 959 1,517 2,828 63%
Pentagon HoldCo Pty Ltd Mar-21 4,838 49,842 82,919 10%
PhoenixATS Australia Pty Ltd Jun-22 322 2,247 3,266 14%
Avaxa Pty Ltd Jun-22 1,727 1,010 2,039 171%
Open Windows Software Pty
Jun-22 2,292 4,094 14,001 56%
Ltd
IT Vision Pty Ltd 23-Jun ND 36,447 53,102 N/A
Average 63%
ND: Not Disclosed
Source: Company Filings (Note 36, Interests in Subsidiaries in FY23), UMIR Analysis
By IT Vision’s acquisition in 2023, RDY has now gained an advantage by tapping into the ERP technology
software market, which built up their local government segment revenue. One of their most significant
acquisitions was Avaxa in 2022, which is a specialist enterprise student management software business
for education and work pathways. Its revenue contributions as a percentage of goodwill recognized is
171%. Additionally, Government and Justice, which is now a key revenue driver, was implemented by
Pentagon Holdings acquisition in 2021. Although its revenue contribution percentage of goodwill in
2021 is not as staggering as IT Vision’s (at 10%), but it has represented ReadyTech’s current and
continuous long-term growth future and business diversification embedded in RDY’s business.
In 2020, RDY secured a significant contract with Bendigo Kangan Institute (BKI) through a competitive
tender process, with a contract value of $7m on an initial 5-year contract. RDY has invested to evolve
the educational landscape for TAFE and VET via their partnership with BKI which will revamp their
enrolment process to digital and improve student conversions, for instance.
Readytech’s large TAM (Total Addressable Market) introduces great revenue opportunities. At its target
$160 million in Revenue by 2026, RDY will only be servicing about 15% of its serviceable market
opportunity (that is, the long-term growth target of $970 million) which continues to grow gradually.
Over the longer term, RDY is looking to capture up to 25% of its serviceable market. To date, RDY’s
Workforce Solutions segment has been the primary driver of organic growth since 2018, and we
13
acknowledge that the Payroll / Human Resource admin space has become increasingly competitive. In
the long term, we expect growth to be primarily driven by the Government and justice (primarily local
Government) and Education segments, as we’ve shown their significance since 2021.
RDY is now also targeting larger enterprise customers with greater than $0.5 million in revenue within
the Workforce segment and over $1 million in other segments, setting a long-term growth in revenue
of $970 million (Exhibit: Breakdown segment CAGR) and $160 million target for FY26, delivering “mid-
teens” organic revenue growth.
Margin Analysis
Gross margin:
Looking at RDY’s margins and comparison to the peer group average and TNE as its closest comparable,
RDY seemingly has been experiencing a continuous decline in its gross profit margin. A 32.7% decrease
in gross margins since FY19 (from 51.1% to 34.4%), while TNE had an increase of 2.03% in its gross
margin (from 46.4% to 47.3%) during the same period. [Exhibit 15]
Exhibit 15: ReadyTech’s declining gross margin

60%
50%
Gross Profit margin
40%
30%
20%
10%
0%
FY18 FY19 FY20 FY21 FY22 FY23
RDY TNE average
Source: Company Filings, Refinitiv

Despite this, RDY has managed to outperform its peers in terms of margin performance, leading by an
impressive average of 10.6%. The dip can largely be attributed to their Cost of Goods Sold (COGS). When
contrasting RDY's revenue growth with that of TNE, it's evident that RDY has shown a remarkable
increase, as detailed in the revenue analysis and as shown in [Exhibit 12].
Not only Readytech’s momentum buy-and-build strategy through M&As has been costly, but also the
cost of sales recognized for their expanded business operations has been 65.6% ($67.72 million) of total
revenue in FY23. In 2019, with only Education and Work pathways and Workforce Solution revenue
segments, ReadyTech only had $16.03 million (47.3% of total revenue) as cost of sales. This increase in
COGS started from 2021’s expansion and raised the expenditure level to $31.96 million, double the
amount in 2019 and beyond. Meanwhile, TechnologyOne has maintained its expenditure with an
average of $159.36 million per year while increasing its revenue more slowly than RDY’s [Appendix 2:
14
Where ReadyTech and TechnologyOne spend their revenue]. From a common-size income statement
standpoint, Employee costs (Employee benefits expense) contribute to about 87% of the cost of sales
per year.
Exhibit 16: Gross Margin Comparisons
Company Comp Set
Company Name FY18 FY19 FY20 FY21 FY22 FY23
BGE - (37.5%) 49.5% 19.1% 15.1% (56.1%)
FCL 73.4% 70.1% 66.6% 66.5% 65.3% 68.5%
IFM 100.0% 100.0% 100.0% 86.9% 95.6% 95.3%
TNE 31.8% 46.4% 49.1% 53.7% 55.7% 47.3%
IOD (48.1%) (50.8%) (42.8%) (35.3%) (34.7%) (30.1%)
Target Name
RDY 39.2% 51.1% 48.6% 45.7% 40.4% 34.4%
Summary Statistics
High 100.0% 100.0% 100.0% 86.9% 95.6% 95.3%
Low (48.1%) (50.8%) (42.8%) (35.3%) (34.7%) (56.1%)
average 39.3% 25.6% 44.5% 38.2% 39.4% 19.4%
Median 52.6% 46.4% 49.5% 53.7% 55.7% 19.2%
Source: Refinitiv
SG&A margin:
Readytech’s SG&A margin has also declined to Exhibit 17: SG&A Margin
7.48% from its peak in 2019 at 26.98% [Exhibit
50%
17], which indicates its revenue growth and
40%
also the change in its operating expenses. After
SG&A margin
a peak of operating expenses in 2019 of about 30%
$9.3 million, RDY made great effort to lower its 20%

“Consultancy and Professional Expenses” cost,
10%
that comprises a third of 2023’s operating
0%
expenses. FY18 FY19 FY20 FY21 FY22 FY23
Revenue that was previously designated for
RDY TNE average
Consultancy and professional expenses has
Source: Company Filings, Refintiv
now been shifted to Communication and IT
expenses. These now account for a notable 25% of the total sales, general, and administrative costs, a
significant rise from their 8% share in 2019, as illustrated in [Exhibit 18]. This shift is rooted in RDY's
strategic approach to pursuing enterprise acquisitions. A primary synergy achieved from this strategy
has been the enhancement in cost efficiencies.
15
Exhibit 18: RDY’s primary compositions of its SG&A expenses
8,000
7,000 7.6%
6,000
5,000
in $k
4,000 22.7%
21.7%
69.3%
3,000 24.9%
2,000 13.6%
25.4% 45.1% 32.4%
1,000 32.0%
32.6%
19.4%
0
FY18A FY19A FY20A FY21A FY22A FY23A
Consultancy and professional expenses Communication and IT expenses
Source: S&P Capital IQ
Exhibit 19: SG&A Margin Comparisons

Company Comp Set
BGE - 0.69% 0.78% 2.57% 4.08% 16.06%
FCL 21.57% 18.84% 18.01% 22.13% 18.94% 21.03%
IFM 58.84% 57.32% 50.16% 37.25% 62.15% 59.45%
TNE 16.98% 15.22% 11.70% 10.24% 11.42% 13.11%
IOD 68.81% 56.30% 134.93% 110.30% 96.65% 81.99%
Target Name
RDY 14.94% 26.98% 8.33% 11.44% 7.10% 7.48%
Summary Statistics
High 68.81% 57.32% 134.93% 110.30% 96.65% 81.99%
Low 16.98% 0.69% 0.78% 2.57% 4.08% 16.06%
average 41.55% 29.67% 43.12% 36.50% 38.65% 44.63%
Median 40.20% 18.84% 18.01% 22.13% 18.94% 40.24%
Source: Refinitiv
EBITDA margin:
The combined impact of a declining gross margin and improved SG&A margin manifests in RDY’s EBITDA
margin. It has consistently stayed above 20%, even as the average EBITDA margin among its peers saw
a significant drop. Both ReadyTech and TechnologyOne have managed to generate revenue more
efficiently than the average of their competitors. Remarkably, while ReadyTech operates at just 9% of
the size of TechnologyOne, with a market capitalization of $419.2 million and a more diverse revenue
stream, it has managed to keep its margin nearly on par with TNE’s (RDY's margin stands at 25.8% while
TNE's is at 26.5% for FY23). This is impressive, especially considering ReadyTech's status as an emerging
company in its growth phase. As highlighted in the [Exhibit 20], it's notable that RDY significantly
16
ramped up its R&D investments from FY20 to the first half of FY23, which led to a drop in cash EBITDA
margins from 38.1% to 25.8%.
Exhibit 20: EBITDA Margin

60%
40%
EBITDA margin 20%
0%
-20%FY18 FY19 FY20 FY21 FY22 FY23
-40%
-60%
-80%
-100%
-120%
RDY TNE average

This heightened R&D expenditure was aimed at incorporating enterprise-level capabilities into their
platform. However, this surge in R&D expenses reached its zenith in the first half of FY23. Currently, RDY
stands at a pivotal moment, poised for significant revenue growth and increased operating leverage.
The prevailing market sentiment seems to be one of skepticism—doubting whether RDY has maxed out
its R&D expenditures or if it can effectively execute its enterprise strategy—leading to a decrease in its
valuation.
As for margin expansion, based on RDY’s historical performance and its operational leverage, combined
with insights from management discussions in August 2023, we forecast a margin growth of 1.5%
(compared to a historical average of 1.23%). This growth projection aligns with the transitional
trajectory we foresee for the company in the upcoming period.
Exhibit 20: EBITDA Margin Comparisons
Company Comp Set
BGE - (65.6%) 29.8% (4.5%) (52.5%) (234.9%)
FCL 8.3% 2.2% 3.3% (9.6%) (11.2%) (18.2%)
IFM 22.3% 22.0% 27.1% 26.9% 8.6% 13.1%
TNE 11.1% 27.7% 29.3% 32.9% 31.7% 26.5%
IOD (139.0%) (134.8%) (295.0%) (187.7%) (183.7%) (144.7%)
Target Name
RDY 19.6% 22.5% 38.1% 33.3% 32.1% 25.8%
Summary Statistics
High 22.3% 27.7% 29.8% 32.9% 31.7% 13.1%
Low (139.0%) (134.8%) (295.0%) (187.7%) (183.7%) (234.9%)
average (24.4%) (29.7%) (41.1%) (28.4%) (41.4%) (96.2%)
Median 9.7% 2.2% 27.1% (4.5%) (11.2%) (81.4%)
Source: Refinitiv
17
CapEx margin:
RDY's strategic decisions in recent years are evident through their increased capital expenditures,
particularly on intangibles. The hike in spending on intangibles to $18.2 million in FY23, a leap from $3.6
million in FY19, underscores a considerable shift in their investment strategy. This is further highlighted
by their growth in PPE spending, which rose to $1.4 million in FY23 from $0.5 million the previous year.
Notably, these investments make RDY the highest spender on capital expenditures among its
competitors in FY23 and has maintained this distinction since 2018, as illustrated in [Exhibit 21].
Exhibit 21: CapEx Margin
250%
200%
CapEx margin
150%
100%
50%
0%
RDY TNE average
Yet, it's crucial to address the elephant in the room - the capitalization of R&D costs. This aspect has
historically been a point of contention for investors in the software and technology sectors. RDY's
capitalised development cost witnessed a surge from $3 million in FY19 (representing 11% of revenue)
to an impressive $16 million (or 16% of sales) in FY23. Nevertheless, the management has offered a
transparent outlook on the future trajectory of these costs. They anticipate a decline in the proportion
of capitalized costs to revenue starting from FY24, eventually settling at around 13% of the total revenue
by FY26. This is attributed to an expected slowdown in development spending growth.
With the anticipated decline in the growth rate of capitalized R&D costs, EBITDA margin is projected to
rise from its current 25.8% in FY23 to a range between 28% and 30% by FY26, aligning with the
management's recent guidance from the FY23 results. Delving deeper, margins for IT Visions, a recently
acquired entity, are forecasted to see a jump from the lower 20% range to mid-30% by FY26. This upward
trajectory is not just a management aspiration but is also tied to their incentives and earnouts,
emphasizing their confidence in this projection.
In sum, even though R&D spending is likely to continue its upward trend in absolute terms, its growth
rate is expected to temper down significantly in comparison to past trends. This more moderate growth,
coupled with strategic investment choices, bodes well for RDY's future profitability and operational
efficiency.
18
Exhibit 21: CapEx Margin Comparisons (As % of Total Revenue)
Company Comp Set
BGE - - 0.1 0.2 0.1 0.4
FCL 0.7 1.4 1.5 0.9 0.7 0.3
IFM 0.2 0.4 0.9 1.9 0.3 0.3
TNE 1.3 0.8 0.7 0.5 1.0 0.9
IOD - - - - - -
Target Name
RDY 2.2 1.0 1.6 0.8 0.7 1.4
Summary Statistics
High 1.3 1.4 1.5 1.9 1.0 0.4
Low 0.2 - 0.1 0.2 0.1 0.3
average 0.7 0.6 0.8 0.9 0.5 0.3
Median 0.7 0.6 0.8 0.7 0.5 0.3
Source: Refinitiv
Profit and Return Analysis

Net Profit Margin:
RDY's financial trajectory as depicted in the [Exhibit 22] tells an intriguing tale of resilience and strategic
growth. Starting from a net profit margin of -20.10% in FY18, the company managed to turn the tide
significantly, achieving a 4.82% margin in FY23. This positive transition is even more commendable when
contrasted against the backdrop of the waning profit margins within its peer group.
Exhibit 22: Net Profit Margin

30%
20%
10%
Net Profit margin
0%
-10%FY18 FY19 FY20 FY21 FY22 FY23
-20%
-30%
-40%
-50%
-60%
RDY TNE average
Two pivotal factors contributed to this upswing:

1. Enhanced EBITDA Margin: As delineated in the Margin Analysis, RDY's focus on maintaining and
enhancing its EBITDA margin played a crucial role in driving its net profit margin upwards.
2. Tax Shield Effect of Leverage: RDY's strategic leveraging proved to be financially beneficial. With an
interest expense of $2.56 million in FY23, the highest since 2018, RDY was able to leverage the
associated tax benefits. Consequently, this manoeuvre led to a 35% reduction in income tax expense in
19
FY23 compared to the preceding year, with the figures being $1.8 million in 2023 as opposed to $2.8
million in 2022.
A deep dive into the financials reveals additional nuances. RDY's recognition of marketing expenses and
depreciation both peaked in 2023. Additionally, employee benefits consistently emerge as a substantial
expense annually. While these underline the increased operational costs the company incurred, RDY's
robust revenue growth ensured that these surging expenses did not stunt its profit margin growth.
However, the slight decline in profit margin in 2023 demands attention. This can be predominantly
attributed to the surge in capital expenditures, as elaborated in the CapEx margin analysis.
In conclusion, RDY's journey over these years is a testament to its ability to effectively navigate financial
challenges. By striking a balance between investment and operational efficiency, the company has
positioned itself well to capitalize on future growth opportunities.
Exhibit 23: Net Profit Margin Comparisons

Company Comp Set
BGE - (37.79%) 33.66% (1.21%) (58.40%) -
FCL 2.54% (2.82%) (0.26%) (11.52%) (20.43%) (17.13%)
IFM 17.68% 19.06% 19.61% 16.39% 6.85% 7.38%
TNE 8.57% 20.51% 21.10% 23.35% 24.13% 19.53%
IOD (136.93%) (136.50%) (286.21%) (196.41%) (198.24%) (155.89%)
Target Name
RDY (20.10%) (4.56%) 10.04% 4.31% 11.23% 4.82%
Summary Statistics
High 17.68% 20.51% 33.66% 23.35% 24.13% 7.38%
Low (136.93%) (136.50%) (286.21%) (196.41%) (198.24%) (155.89%)
average (27.03%) (27.51%) (42.42%) (33.88%) (49.22%) (55.21%)
Median 5.56% (2.82%) 19.61% (1.21%) (20.43%) (17.13%)
Source: Refinitiv
DuPont Breakdown:
ReadyTech's financial performance, when examined through the lens of the ROE (Return on Equity)
metric, provides an insightful understanding of
the company's growth dynamics over the Exhibit 24 - ROE
years. The ROE metric, grounded in its three
100%
core components — net profit margin, asset
50%
turnover, and financial leverage — is an
effective gauge to discern the company's 0%
capability to generate returns for its equity -50%
ROE
shareholders.
-100%
From [Exhibit 24], it's evident that ReadyTech's
-150%
ROE experienced a substantial decline of 57%
in the recent fiscal year, landing at 4.4%. -200%
However, juxtaposing this with the [Exhibit: -250% RDY TNE average
ROE with TNE and peers], the decline doesn't
Source: Company Filings, Refinitv
20
paint as bleak a picture. Rather, it indicates a middling return performance in the context of its industry
peers.
Exhibit 24: ROE Comparisons
Company Comp Set
Company Name FY19 FY20 FY21 FY22 FY23
BGE - 49.9% (1.1%) (53.5%) (288.9%)
FCL (7.7%) (0.4%) (11.4%) (17.0%) (13.5%)
IFM 27.3% 17.0% 10.4% 5.5% 6.7%
TNE 63.4% 50.6% 43.7% 41.4% 43.5%
IOD - (1,150.5%) (461.9%) (387.7%) (223.7%)
Target Name
RDY (7.2%) 12.7% 4.0% 10.2% 4.4%
Summary Statistics
High 63.4% 50.6% 43.7% 41.4% 6.7%
Low (7.7%) (1,150.5%) (461.9%) (387.7%) (288.9%)
average 27.7% (206.7%) (84.1%) (82.3%) (129.9%)
Median 27.3% 17.0% (1.1%) (17.0%) (118.6%)
Source:Refinitiv
Breaking down the ROE components:
1. Net Profit Margin: As detailed in [Exhibit 22: net profit margin chart], this has been the primary
culprit for the declining ROE. Despite the growth journey ReadyTech embarked on, the margin
figures indicate that the company has struggled to maintain its profitability effectively.
2. Asset Turnover: On a brighter note, ReadyTech's asset turnover has displayed a commendable
recovery. Since hitting its nadir in FY21, it has surged by 17%, stabilizing around 0.46 times of
total revenue. This indicates an improvement in the company's efficiency in generating revenue
from its assets, especially when compared to the metrics from [Exhibit 25].
Exhibit 25: Asset Turnover
1.60x
1.40x
1.20x
Asset Turnover
1.00x
0.80x
0.60x
0.40x
0.20x
0.00x
RDY TNE average
Source: Refinitiv
3. Financial Leverage: A deeper dive into ReadyTech's financial structure from [Exhibit 26] shows
a significant plunge in the Debt to Equity ratio — from 2.45 in 2018 to 0.4 in the recent fiscal
year. Even though there was a minor uptick in FY23, it hasn't substantially boosted the ROE. The
tapering financial leverage can be attributed to the amplification of equity, with the figure
21
reaching $194m in common shares. This, combined with a reduced debt in the capital structure
[hyperlink to capital structure], underscores ReadyTech's strategic shift towards a more equity-
centric financing mix. In comparison to its peers, ReadyTech lies at the tail end with a Debt to
Equity mix of 40%.
Exhibit 26: Debt to Equity Ratio
300.0%
Debt to Equity 250.0%
200.0%
150.0%
100.0%
50.0%
0.0%
RDY TNE average
Source:Refinitiv
In summation, while ReadyTech's ROE figures in isolation might seem disheartening, a comparative
analysis within its industry context provides a more balanced view. The company has evidently made
strides in optimizing asset efficiency, but the challenges in profit margins and a conscious shift towards
an equity-rich capital structure have weighed down on its ROE. The task ahead for ReadyTech is to strike
a harmony among these components to ensure sustainable and healthy returns for its shareholders.
Capital Structure Analysis
ReadyTech's financing strategy has prominently favored equity over debt, as elucidated in [Exhibit 27].
The overwhelming reliance on issued capital, which constitutes more than 80% of its total capital
raisings over time, offers a glimpse into the company's conservative approach to leverage.
Exhibit 27: ReadyTech’s borrowings and issued capital over the years
300
250
200
$m
150 81%
84% 84%
100
85% 83%
50 49%
51% 17% 16% 16% 19%
0 15%
Total borrowings Issued capital
22
This means that instead of accumulating debt, ReadyTech has predominantly sought funds from
shareholders, be it through initial public offerings or further equity issuances. The link to the DuPont
analysis, further amplifies this narrative. A declining Debt to Equity ratio doesn't necessarily depict a
concerted effort by ReadyTech to repay its debt (deleveraging) [Exhibit 28]. Instead, the company has
expanded its equity base, leading to a dilution of the debt component in its capital structure.
This approach has its merits. By leaning heavily on equity, ReadyTech reduces the financial risk
associated with debt, such as interest payments and the risk of default. Furthermore, it signals to
investors and stakeholders that the company is less reliant on external borrowings, which can be
particularly appealing during uncertain economic conditions.
However, the strategy is not devoid of downsides. Excessive reliance on equity can lead to ownership
dilution for existing shareholders. Additionally, given the cost of equity is typically higher than the cost
of debt (owing to the residual claim nature of equity), it might indicate a potentially higher cost of capital
for RDY. ReadyTech's capital structure underscores a deliberate choice to favor equity financing, thereby
signaling a risk-averse approach. This strategic decision has implications for both the company's risk
profile and its cost of capital. As ReadyTech progresses, it would be pivotal to strike an optimal balance
between debt and equity to ensure both financial stability and value maximization for its shareholders.
Exhibit 28: Total Debt to Equity (%) Comparisons

Company Comp Set
BGE - - - - - -
FCL 81.7% 97.4% 9.3% 5.4% 3.5% 3.8%
IFM - - 3.8% 5.6% 4.3% 8.8%
TNE 0.0% 0.0% 20.6% 17.6% 14.8% 10.6%
IOD - - 20.9% 2.2% 90.9% 42.6%
Target Name
RDY 245.7% 81.1% 85.1% 44.7% 38.1% 40.6%
Summary Statistics
High 81.7% 97.4% 20.9% 17.6% 90.9% 42.6%
Low 0.0% 0.0% 3.8% 2.2% 3.5% 3.8%
average 40.8% 48.7% 13.7% 7.7% 28.4% 18.4%
Median 40.8% 48.7% 15.0% 5.5% 9.5% 8.8%
Source: Refinitiv
Interestingly, a drastic policy change could be observed when comparing the composition trend to FY18
alone. It could be interpreted that RDY’s market expansion strategy through M&A and partnerships, is
financed by equity rather than debt, as the weightings suggest. From the corporate finance perspective,
equity is more costly than debt with relatively higher risk, which has implications for its valuation by
increasing the discount rate (WACC) and decreasing the valuation, assuming the same capital mix is
maintained for the forecast horizon. In addition, the reliance on equity financing, indicates a
conservative approach to debt management, which might be seen positively by certain stakeholders
who are risk-averse. But more importantly, with respect to Readytech’s enterprise market strategy, the
choice of financing might also provide hints about the nature of the acquisitions. It could be interpreted
23
that RDY’s management believes that the nature of these acquisitions (both previously and
prospectively), will provide significant cashflows and synergies not yet realized in the long run but
might not be immediately accretive to earnings. Thus, they might opt for equity to avoid the fixed
payment obligations associated with debt, a prudent approach with the level of uncertainty in a fast-
growing software publishing industry.
Readytech, with a market capitalization of $265 million and 116.84 million shares in circulation, sees
institutional investors holding 46.5% of these shares. Additionally, strategic entities control 19.66%.
Notably, a significant chunk of these investors, about 31.34% representing $36.59m, consists of venture
capitalists (VCs) and private equity firms. These entities predominantly adhere to a core value
investment approach, as gleaned from the latest Refinitiv filings [Appendix3]. This institutional stake
signifies trust in Readytech's leadership and its prospective growth. Furthermore, the very nature of
their strategic investment might indicate potential collaborations or synergistic opportunities. The
primary investment inclination of these VCs and private equity entities towards core value investment
sheds light on their perception: they possibly see the company as fundamentally robust, yet
undervalued, and view their stake in Readytech as a long-term value proposition.
Boasting a significant stake in Readytech are two key players. As of October 2023, Pemba Capital
Partners [Hyperlink] is the predominant shareholder, holding 31.34% of Readytech's shares, which
equates to a $36 million position. Following Pemba, Microequities Asset Management has also made a
substantial investment, owning 14.91% of the shares with a $17.42 million position [Appendix3]. These
dominant shareholdings underscore the confidence and strategic interest these entities have in
Readytech's potential and trajectory.
Turning our attention to Readytech’s financial structure, while the company hasn't leaned heavily on
debt for funding, the nature of its debt is intriguing. As indicated in [Exhibit 29], since 2018, about 70%
of Readytech's borrowings have been term loans, specifically Facility A.
Exhibit 29: ReadyTech’s types of debt financing.

100%
9.30% 11.20% 7.90% 9.10% 9.90%
80%
52.10%
60% 68.50% 61.60%

67.20%
76.40%
90.70%
40%
47.90%
20%
23.80% 29.40%
23.00%
12.40%
0%
Total Revolving Credit Total Term Loans Total Lease Liabilities
Source: SnP Capital IQ
24
Term loans, often chosen for their favorable interest rates and terms—especially for companies boasting
a commendable credit history—seem to be the go-to for Readytech. Coinciding with the substantial
surge in R&D expenditures, peaking in the first half of 2023, these term loans offer Readytech a
substantial immediate financial boost, aligning with the span of their investments. Presently, Readytech
has outstanding senior term loans amounting to $35 million. These come with a floating interest rate
(BBSY + 2.75%) and have a two-year tenure. It's noteworthy that since FY20, there's been a visible shift
in the company's debt strategy, as portrayed in [Exhibit 29]. Readytech has incorporated revolving
credit, addressing short-term capital requirements and ensuring liquidity.
Our analysis of Readytech's capital structure, indicates that it aligns closely with the optimal mix
[Exhibit 30]. Currently, with a debt contributing to 10.93% of its total capital, amounting to $453.92
million, Readytech is nearly matching the optimal funding balance where debt makes up 10% of the
capital. This balance theoretically places the enterprise value at its peak of $455.48 million, assuming
the continuation of its current financial position and performance trajectory. Essentially, reaching this
optimal point means that the company has finely balanced the costs of both debt and equity, ensuring
the most cost-efficient capital structure. This sweet spot minimizes financial distress risks tied to high
debt while preventing excessive shareholder dilution from an equity-heavy balance. The notion that
management might issue more shares as a signal of over-valued shares debunked by this analysis.
Coupled with the profile of its shareholders, this suggests that RDY could be an undervalued asset.
Furthermore, given that Readytech is closely aligned with its optimal capital structure, it's plausible to
expect future acquisitions. This not only enables the company to obtain more capital without straying
far from the ideal balance but is also hinted at by the company's management. The intricate details of
our calculations can be found in [Appendix 4].
Exhibit 30: ReadyTech’s capital structure is almost at the optimal mix
Source: UMIR Analysis
25
To calculate the optimal capital structure, we took the Trade-Off Theory (TOT) approach in relation to
Modigliani and Miller’s capital structure propositions. According to Trade-Off Theory, there's an optimal
balance between the tax advantages of debt and the financial distress costs it can bring. When these
two forces equate, we reach the optimal debt level. The goal is to ensure the firm maximizes its
enterprise value.
Several key metrics are pivotal in these calculations:
1. Debt to Capital Ratio: It reflects the proportion of the company's capital financed by debt.
Changes in this ratio influence both the cost of equity and cost of debt.
2. Cost of Debt (Kd): The interest coverage ratio, derived from EBIT (earnings before interest and
taxes), serves as the primary basis for the cost of debt. If the firm's actual bond rating isn't
available, a synthetic bond rating, aligned with the interest coverage ratio, can help determine
the appropriate cost of debt.
3. Cost of Equity (Ke): The cost of equity factors in the business risk, as represented by the
unlevered beta, which adjusts for the financial risk undertaken due to leverage. As the company
increases its leverage (or debt), the cost of equity rises due to the increased risk borne by equity
holders.
4. Weighted Average Cost of Capital (WACC): This metric is central to the analysis. WACC
amalgamates both the cost of debt and equity, each weighted by its proportion in the overall
capital structure. A lower WACC generally signifies a higher firm valuation.
5. Enterprise Value (EV): The firm's value is computed at each possible debt-to-capital ratio,
leveraging the expected operating income and the correlated WACC. The highest computed EV
denotes the optimal capital structure.
The analysis offers a comprehensive view into RDY's present cost of capital and its debt ratio, juxtaposed
against its ideal debt ratio and corresponding cost of capital. This assessment derives the company's
value at varying debt ratios, using anticipated operating income and the respective cost of capital. The
overarching goal is to enhance enterprise value by optimizing the Weighted Average Cost of Capital
(WACC).
Several assumptions underpin this analysis:
1. RDY's prevailing credit rating and associated cost of debt remains constant and isn't adjusted to
any synthetic rating.
2. Indirect bankruptcy expenses are anticipated to be minimal or nonexistent. Given RDY's strong
financial position, the company isn't prone to such risks.
3. We hold no reservations about the company's creditworthiness, as its costs don't seem to be
influenced by any external perception of financial instability.
4. As the debt ratio and bond rating evolve, the operating income remains consistent.
Thus, the analysis emphasizes RDY's financial robustness and the stability of its operating income, even
as its capital structure experiences shifts. Through this analytical framework, the optimal capital
structure is ascertained, providing valuable insights for management and stakeholders alike. The
ultimate aim is to harness the benefits of debt (like tax shields) while mitigating potential pitfalls (like
financial distress), thus safeguarding and augmenting the firm's value.
26
Payout Policy Analysis
As it is commonly observed in the software and technology sectors, Readytech follows a trend of not
disbursing any dividends to its shareholders. Instead of distributing profits, the company opts to retain
all its earnings. This strategy is employed to reinvest these funds back into the business. As illustrated,
[Exhibit 31], RDY’s retention of earnings started in FY22, and increased by 65% in FY23.
Exhibit 31: ReadyTech’s payout policy toward earnings retention
15
10
5
$m
0
-5
-10
Retained Profits Accumulated Losses
Source: Company Filings, S&P Capital IQ
Such reinvestment can be directed towards research and development, acquisitions and expansion, or
other areas that support and propel the company's organic growth ambitions. By prioritizing internal
growth, RDY aims to increase its market share, improve its products or services, and potentially enhance
its long-term value proposition for shareholders. This approach is not unique to RDY but mirrors the
financial strategies of many players in the tech world, where the fast pace of innovation and intense
competition often necessitate continual investments in business expansion and product advancement.
As discussed in Capital Structure Analysis, 66.16% of RDY investors are institutions and strategic entities.
The clientele effect of this holding concentration and investor growth orientation does not exert a shift
in payout policy. RDY also is followed closely by numerous analysts [Appendix 5] and information
asymmetry is lower regarding its prospects, for it to signal investors with a change in policy in this
manner. Nevertheless, the signal of retaining earnings is also verifiable by RDY future earning capacity
and FY26’s earnings guidance (28-30% EBITDA margin growth).
Additionally, Comparing RDY’s levered free cash flows (FCFE) in [Exhibit 32] retention amounts and
Capital Expenditures, indicates RDY’s retention of earnings is a necessity at its current life cycle. For a
growing company like RDY, retaining a substantial portion of its earnings is crucial. This retained amount
can be utilized to finance CapEx or to reinvest in growth opportunities, ensuring the company can
sustain its growth trajectory without excessively relying on external funding.
27
Exhibit 32: ReadyTech’s levered free cashflows and capacity for cash distributions
25
20
$m 15
10
0
FY19 FY20 FY21 FY22 FY23
-5
Source: Company Filings, UMIR Analysis
A higher retention rate, especially when compared with its FCFE and CapEx, suggests that RDY is likely
reinvesting a significant portion of its earnings back into the business. This is a common strategy for
growth-stage companies as they prioritize expansion, market penetration, and the development of new
products or services over short-term shareholder distributions. Furthermore, the fact that RDY retains
a significant portion of its earnings underscores the importance of internal funding as a primary source
of finance for its capital projects and growth initiatives. This strategy can serve to reduce financial risk,
as the company doesn't become overly reliant on debt or external equity financing.
In summary, RDY's financial strategy, as evident from its capital expenditure patterns and the retention
of earnings, seems to be geared towards sustainable growth and long-term value creation for its
shareholders.
RISK ASSESSMENT
Business risk
The software industry is not traditionally viewed as cyclical in the same way that certain industries like
automobile manufacturing, housing construction, or luxury goods are. However, there are nuances to
consider.
Capital Expenditure as a Barometer for Industry Performance
The software industry's vitality is closely intertwined with trends in capital expenditure on software by
businesses. Capital expenditure, often referred to as CapEx, is the funds a company allocates to acquire
or upgrade physical assets. In the realm of software, it pertains to spending on new software solutions
or significant software upgrades. As businesses evolve, expand, and face new challenges, their software
needs concurrently shift. Thus, when they allocate more funds to software, it directly impacts the
revenue of software companies. A surge in such expenditure can indicate a thriving business
28
environment, technological advancements, or a recognition of the increasing indispensability of
software in modern business operations.
A Promising Outlook for 2022-23
Looking ahead to the fiscal years 2022-23, there's an air of optimism enveloping the software industry.
Capital expenditure on computer software is projected to witness an upswing. This rise suggests that
businesses are gearing up to invest more heavily in updating or acquiring new software solutions. Such
a trend might be propelled by several factors: innovations in technology, an increased emphasis on
digital transformation, or even a macroeconomic recovery stimulating business confidence. For the
software industry, this anticipated growth is not just a signal of potential higher revenues. It represents
a golden opportunity for expansion and evolution. Software companies, from fledgling startups to
established giants, can seize this moment to innovate, penetrate new markets, enhance existing
solutions, and solidify their positions as indispensable partners for businesses worldwide.
Main challenges faced by RDY?
Future: An expanding financial services sector is set to enhance operations like trade finance. This will
generate interest from major banks and financial services institutions.
External risks: The General Data Protection Regulation (GDPR) regulates consumers’ control over use of
their personal data. The GDPR applies to any companies that operate or have customers in the European
Union. Addtionally, regulatory or policy changes in Gov or Education that could impact customer / IT
budgets. (Eg PWC fall-out is seeing Govt. consulting work reduce at present.)
Also, tighter budgets could see IT spend (which can be discretionary) reduce in weaker economic
conditions.
Demand for software published in Australia will continue growing as markets' reliance on cloud
computing and a range of connected devices surges. However, legislation passed in 2018-19 allowing
law enforcement agencies to request publishers' access to encrypted communications channels may
potentially limit some publishers' growth. Smaller publishers will be squeezed out of the industry
because of greater regulatory compliance, encouraging consolidation.
Corporate governance risk
For Pemba, we identified a governance concern, as is some history of related party transactions such as
Open Office which was owned by Pemba and sold to RDY in 2021. Pemba had combined a few
acquisitions together before RDY’s listing, which the pre-existing business the current CEO, Mark
Washbourne, had founded / managed for some time. But, the stock has now been listed for over 3 years
and these concerns at time of IPO (and post) have now been somewhat diluted – given RDY has been
operating for some time under the current structure / team and operating results have been reasonable,
with outlook improving.
• Overhang of Pemba selling stock in future: Pemba have not sold any shares since the IPO (noting
escrow ended in Dec-20) but have been diluted from 43% to 32% via capital raising and script
acquisitions. Given liquidity is very low, we see upside benefits to Pemba selling down. We
understand Pemba rejected the bid at $4.50 from PEP in Dec-22 and stock has never traded over
$4.20. So we accept there may be selling into prices above this.
29
Financial risk
Company Comp Set - Liquidity

LTM Current LTM Basic LTM (FFO +
Company Name Ratio Defense Cash) to Short
Interval Term Debt
BGE 2.9x 150.8 -
FCL 1.1x 114.6 36.8
IFM 3.4x 252.7 42.1
TNE 1.1x 255.1 35.7
IOD 2.5x 172.4 (1.8)
Target Name
RDY 0.8x 129.0 39.5
0.8x 129.0 39.5
Summary Statistics
High 3.4x 255.1 42.1
Low 1.1x 114.6 (1.8)
average 2.2x 189.1 28.2
Median 2.5x 172.4 36.3
Company Comp Set - Liquidity

FY Total FY Cash from LTM EBIT / LTM Altman Z
Company Name Debt/Capital % Ops. to Curr. Interest Exp. Score
Liab.
BGE - -4.07x NM ( 1.95)
FCL 3.65% 0.24x NM 3.59
IFM 8.10% 1.60x 48.62x 8.14
TNE 12.87% 0.53x 56.04x 11.47
IOD 29.86% -2.76x NM 85.06
Target Name
RDY 0.8x 129.0 39.5
28.89% 0.56x 3.65x 2.22
Summary Statistics
High 29.86% 1.60x 56.04x 85.06
Low 3.65% -4.07x 48.62x ( 1.95)
average 13.62% -0.89x 52.33x 21.26
Median 10.48% 0.24x 52.33x 8.14
Source: Refinitiv
VALUATION
Comparable Company Analysis
In order to select a suitable set of comparables for ReadyTech Holdings, a thorough study of their
business operations and focus across the education, workforce solutions, and government and justice
sectors is necessary. We have carefully chosen comparables within the same realm of business and
software industry. Beginning with an analysis of their business profile, we examined key characteristics
such as their primary offerings of cloud and software as service solutions, customer demographics,
distribution channels, and geographical reach. Simultaneously, we evaluated their financial profile and
30
characteristics including market cap, profitability, growth, returns, and credit profile, in order to
compare these with the identified comparables.
Selection Criteria
1. Operational Similarities
Throughout the selection process, we placed a high priority on evaluating the operational landscape.
ReadyTech stands out with its presence in SaaS and cloud-based open eco-system busienssesm,
prompting us to narrow our focus to companies operating in these same sectors. By honing in on
businesses that primarily generate revenue from these areas, we increase the probability of identifying
shared operational challenges and opportunities.
2. Business Model and end markets
The evolution of the digital age has led to a surge in companies adopting the cloud and SaaS-based
models. However, not all of these companies would serve as accurate comparables for ReadyTech.
Filtering out companies that resonate with ReadyTech's core offering of cloud solutions ensures
similarities in revenue streams, challenges in scaling, and costs associated with acquiring customers.
3. Geographical Presence
The region or country a company operates in can dictate several aspects of its business – from regulatory
challenges to market saturation points. ReadyTech's geographical footprint in Australia became our map
in identifying companies that operate in similar market dynamics.
4. Financial Metrics
Beyond operational similarities, the financial health and scale of a company play a pivotal role in its
comparability. Companies of a similar size, reflected in their market capitalization, often face similar
challenges in terms of scalability and market penetration. Key financial indicators further fine-tuned our
selection, ensuring the comparables mirror ReadyTech not just in operations but in financial robustness.
5. Customer Base
A company's clientele can reveal a lot about its market position, service quality, and value proposition.
By focusing on companies that cater to a similar clientele as ReadyTech, we ensure that key aspects like
customer retention, sales cycles, and pricing strategies are aligned.
6. Growth Trajectory
Future potential is as crucial as present performance. Identifying companies on a growth trajectory akin
to ReadyTech's helps in drawing parallels in their expansion strategies, innovation pipelines, and market
penetration plans.
7. Credit Profile: Lastly, the ability of a company to maintain financial stability and raise capital can be a
testament to its operational efficiency and strategic planning. Potential comparables were thus
screened based on their credit health, ensuring they are on par with ReadyTech's financial prudence.
31
32
Discounted Cash Flows (DCF) Analysis
33
Precedent Transactions Analysis
34
LBO Analysis
35
Conclusion and Recommendation
We are issuing a Buy recommendation, with $355m pruchase financied with $106 million senior debt
and $53 million from Junior debt (4 and 2 times of RDY’s underlying EBITDA) as the optimal strucutre,
provididing 37.4% IRR (Above the 20% threshold). Our analysis suggested a buy recommendation across
all models, with DCF having the least price range difference at $5.14 per share. We recommend a cash
for stock prucahse, as it has both been the typical purchase in similar scale and type of tanscations
within the software industry in the previosu 5 years (Precedent trasnaction analysis). This purchase will
benefigt BX capital as not only RDY is been staggeringly proftable due it its acquisitons and the measn
to finacne it has been robust 9capital strucutre and imprived liquidity), but also is strongly capitalizing
in AI landscape with stong growth potentials, as evident by RDY’s extensive R&D investment that created
the current momentum for them.
36
APPENDIX
Appendix 1: ReadyTech’s open ecosystem
Source: Company Filings
Appendix 2: Where ReadyTech and TechnolgyOne spend their revenue

ReadyTech’s revenue spend TechnologyOne’s revenue spend
Source: Simply Wall St.
Appendix 3: Firm ownership summary
ReadyTech Holdings
Free Float Free Float Strategic Entities Market
Primary Exchange Shares Outstanding (M)
(M) % Ownership % Capitalization ($, M)
Australian Stock Exchange
116.84 57.22 49.00% 50.97% 264.99
Ltd
37
As of October 2023:
Top Investors
Position
Investor Rank Investor Name % O/S Position Change (M) Value ($, M)
(M)
Pemba Capital Partners Pty
1 31.34% 36.59 0 85.64
Ltd
Microequities Asset
2 14.91% 17.42 0 40.76
Management Pty Ltd.
3 Open Office Pty. Ltd. 4.73% 5.53 +0.52 12.94
4 Washbourne (Marc) 3.68% 4.29 +0.15 10.20
5 SynergySoft Pty. Ltd. 2.86% 3.34 +0.52 7.83
Asia Pacific Investment
6 1.72% 2.00 +0.12 4.69
Company Pty. Ltd.
7 Shah (Nimesh) 1.25% 1.46 +0.08 3.22
Sycamore Management
8 0.93% 1.08 0 2.53
Pty. Ltd.
Malvern Avenue
9 0.83% 0.97 -0.04 2.27
Management Pty. Ltd.
10 Marish Pty. Ltd. 0.75% 0.88 0 2.06
11 Anksh Pty. Ltd. 0.74% 0.86 0 2.01
12 Summerhayes (Mark) 0.48% 0.56 0 1.22
13 Faure (Tony) 0.32% 0.38 0 0.83
Dimensional Fund Advisors,
14 0.31% 0.36 +0.01 0.86
L.P.
15 Advisory Invest GmbH 0.23% 0.27 0 0.62
16 Matthews (Thomas James) 0.04% 0.05 0 0.11
17 Crouch (Elizabeth Anne) 0.04% 0.04 0 0.09
Ebbeck (Timothy Charles
18 0.03% 0.03 +0.01 0.07
William)
Dimensional Fund Advisors,
19 0.02% 0.02 0 0.05
Ltd.
Allspring Global
20 0.01% 0.01 +0.01 0.03
Investments, LLC
Investment Style
Institutions - 7 Managers - 7
30% 30%
Individual
Investor - 8
35% Hedge Fund - 1
Value - 5
Strategic Corporation - 8
Entities - 16 35%
70% Other - 1
Source: Refinitv
38
Appendix 4: Optimal capital structure calculation and comparison to current financing mix
Capital Structure Financial Market Income Statement

Current MV of Equity $422,726 Current Beta for Stock 1.70 Current EBITDA $26,617
Market Value of interest-bearing
$51,892 Current Bond Rating B2/B Current Depreciation $17,272
debt
# of Shares Outstanding $116,775.00 Current Tax Rate 30.00%
Debt Value of Operating leases $0 Risk free Rate 4.00% Current Capital Spending $19,702
Equity Risk Premium 5.69% Pre-tax cost of debt 6.10% Current Interest Expense $2,563
RESULTS FROM ANALYSIS Drivers of the optimal debt ratio

Marginal tax
Current Optimal Change 30.00%
rate
EBITDA/
D/(D+E) Ratio 10.93% 10.00% -0.93% Enterprise 5.86%
value
EBIT/
Total Debt $51,892 $47,462 -$4,430 Enterprise 2.06%
value
Unlevered
Beta for the Stock 1.696 1.68 -0.01 1.5618
beta
Cost of Equity 13.65% 13.58% -0.07%
Rating on Debt B2/B
After-tax cost of Debt 4.27% 3.75% -0.52%
Implied Growth Rate Calculation

Enterprise
WACC 12.62% 12.60% -0.03% $453,926
value
Current
Implied Growth Rate 4.00% 12.62%
WACC
Enterprise value $453,926 $455,480 $1,555 Current FCFF $4,112
Implied
Value/share (Perpetual Growth) $3.62 $3.63 $0.01 11.61%
Growth Rate
Source: UMIR Analysis

*Note: To ensure the calculations function correctly, activate the “iterative calculation” setting in Excel's
calculation options.
39
REFERENCES
ReadyTech Holdings Pty Ltd Investor Relations

Investor centre. (n.d.). Investor Centre - ReadyTech. https://investors.readytech.com.au/investor-
centre/
Refinitv Eikon
Rdy.ax codes. (n.d.). Landing page.
https://go.refinitiv.com/?u=Y3B1cmw6Ly9hcHBzLmNwLi9BcHBzL0NvcnAvP3M9UkRZLkFYJnN0PVJJQy
MvY21zL2NvbXBhbnktY29kZXMtc2NoZW1lcw%3D%3D&title=RDY.AX%20CODES&key=faN5FYKcw4aod
7U4CYpQJRrgNofWdowUccI9rX5Xi2s%3D
SnP Capital IQ
https://www.capitaliq.com/CIQDotNet/company.aspx?companyId=608330503
Australian Securities Exchange (ASX)

RDY share price and company information for ASX:RDY. (2023, April 6). Australian Securities Exchange.
https://www.asx.com.au/markets/company/RDY
IbisWorld
Log in to IBISWorld. (n.d.). https://my.ibisworld.com/au/en/industry/j5420/at-a-glance
MarketLine Intelligence
MarketLine intelligence center. (n.d.).
https://advantage.marketline.com/Analysis/ViewasPDF/australia-software-178664
Investment banking: Valuation, leveraged buyouts, and mergers and acquisitions

Pearl, J., & Rosenbaum, J. (2013). Investment banking: Valuation, leveraged buyouts, and mergers and
acquisitions. John Wiley & Sons.
Australian Financial Review

Thompson, S., & Macdonald, A. (2019, March 28). ReadyTech IPO re-priced, downsized. Australian
Financial Review. https://www.afr.com/technology/readytech-ipo-re-priced-downsized-20190327-
p517yx
Intelligent Investor
ReadyTech holdings limited (ASX:RDY). (n.d.). Intelligent Investor.
https://www.intelligentinvestor.com.au/shares/asx-rdy/readytech-holdings-limited/float
40

Fnce90062 Rdy Report

Uploaded by

Copyright:

Available Formats

You might also like

Fnce90062 Rdy Report

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fnce90062 Rdy Report

Uploaded by

Copyright:

Available Formats

Capstone Studies in Finance

Target company : Readytech Holdings Limited (ASX:RDY)

Group name : RDY Group – UniMelb Investment Research (UMIR)

Coordinator : Dr Zhen Shi

Octave Cassand 1294218 ocassand@student.unimelb.edu.au

Jo-Yu Kao 1230460 kaojoyu@student.unimelb.edu.au

Harpreet Gumber 1277127 gumberh@student.unimelb.edu.au

Hamish Reddy 1326664 bgade@student.unimelb.edu.au

RECOMMENDATION: BUY EXECUTIVE SUMMARY

Source: Intelligent Investor

company introduced the Government and Justice

Exhibit 7: Revenue Segments

Government and Justice

Source: Company Filings FY23

ReadyTech’s underlying corporate strategy for revenue generation

Exhibit 8: FY23's $12.4m new enterprise contracts.

Source: Company MD&A FY23

Source: Refinitv, Ibis (2023)

Enterprise software Accounting software Smartphone and tablet apps

Source: Ibis (2023)

As a result, RDY has set long-term revenue growth target of $970m.

Source: Company MD&A FY23

Exhibit 12: Summary of ReadyTech’s comparative advantages

Natrual Open Eco- Culture of Focus on AI

Source: Company Filings, UMIR Analysis

average RDY TNE

Source: Refinitv, UMIR Analysis

Goodwill Patent Customer Relationships Software Intangibles

Source: Company Filings

Acquisitions: The Catalyst for ReadyTech’s Revenue Growth

Exhibit 14: ReadyTech’s business combinations since 2018,

Exhibit 15: ReadyTech’s declining gross margin

RDY TNE average

Source: Company Filings, Refinitiv

a peak of operating expenses in 2019 of about 30%

$9.3 million, RDY made great effort to lower its 20%

Consultancy and professional expenses Communication and IT expenses

Source: S&P Capital IQ

Exhibit 19: SG&A Margin Comparisons

Exhibit 20: EBITDA Margin

RDY TNE average

Source: Company Filings, Refinitiv

RDY TNE average

Source: Company Filings, Refinitiv

Profit and Return Analysis

Exhibit 22: Net Profit Margin

RDY TNE average

Source: Company Filings, Refinitiv

Two pivotal factors contributed to this upswing:

Exhibit 23: Net Profit Margin Comparisons

RDY TNE average

Debt to Equity 250.0%

RDY TNE average

Total borrowings Issued capital

Exhibit 28: Total Debt to Equity (%) Comparisons

Exhibit 29: ReadyTech’s types of debt financing.

60% 68.50% 61.60%

Total Revolving Credit Total Term Loans Total Lease Liabilities

Source: SnP Capital IQ