Durrant Pate/Contributor

Digital learning and creative company Edufocal Limited is reporting a weak 2024 performance in which its cash position remains pressured but is being actively managed through an ongoing refinancing process, among other conservation efforts.

As a result of declining revenue and increased impairment losses, Edufocal has been facing substantial liquidity pressures, which affected its ability to fund operations and invest in growth initiatives. However, despite these challenges, the Gordon Swaby-led and Peter Levy-chaired management has disclosed that the company made key strides in optimising cash flow and managing working capital.

However, revenue for 2024 suffered a big decline to J$97.17 million coming from J$263.54 million in 2023. This contraction is primarily due to the shift towards a more predictable and resilient revenue model, which has temporarily impacted our topline performance

At the same time, Edufocal’s ‘earnings before interest, taxes, and amortisation’ (EBITA)—a measure of company profitability used by investors—remained negative in 2024, reflecting the continued challenges with declining revenue. However, adjusted EBITDA showed improvement thanks to the cost optimisation measures that were implemented. 

Net profit slightly improved but the company is still in the red, recording a loss of J$57.96 million in 2024, which represents an improvement from the previous year’s loss of J$79.48 million.

2024 fraught with challenges

Messrs. Swaby and Levy have characterised 2024 as “a year of significant challenges for EduFocal Limited, as we continued to navigate a difficult operating environment characterised by declines in revenue and profitability”.

“Despite these setbacks, we remain committed to executing our strategic plan, which is focused on restructuring operations, diversifying revenue streams, and building a more resilient business model for sustainable growth,” the pair added. 

The financial results for 2024, they contend reflect the ongoing transformation process, with early signs of recovery emerging in key areas such as operational efficiency, cash flow management, and technology-driven growth. The company expects that the cost optimisation efforts implemented in 2024, along with a more predictable revenue model and improved working capital management, will result in gradual improvement in cash flow in 2025. 

Edufocal’s cash flow from operating activities in 2024 was positive but significantly less than the prior year, primarily driven by the significant decline in revenue and the increased bad debt write-offs and impairment losses. To mitigate these issues, the management worked diligently to improve its working capital management by tightening controls on receivables and focusing on enhancing our cash collection processes. While there was a marginal improvement in cash collections from customers, the overall impact on cash flow remained constrained due to the significant impairments and write-offs. 

Addressing liquidity concerns

In response to liquidity concerns, EduFocal undertook several measures to stabilize cash flow from financing activities. This included initiating discussions with financial institutions to refinance existing debt under more favorable terms.

The goal was to reduce interest costs, extend repayment terms, and improve the company’s overall capital structure. While refinancing efforts are still ongoing, the management has seen early success in securing improved terms for certain debt facilities. These refinanced agreements are expected to reduce the immediate cash burden with interest payments, allowing for greater flexibility in the near term. 

Additionally, EduFocal considered equity financing options during 2024, though no new equity was raised. Messrs. Swaby and Levy, in their just-released December 2024 fourth quarter report to shareholders, hinted that equity financing might remain an option for the future, contingent on market conditions and the company’s growth trajectory. 

They reiterate that refinancing existing debt and exploring equity financing options remain priorities, as a stronger capital structure will provide flexibility for growth and help navigate potential market uncertainties. To strengthen liquidity, EduFocal implemented several cash conservation measures, including deferring non-essential capital expenditures and closely monitoring cash outflows as well as reducing discretionary spending and renegotiating vendor contracts to better align with the company’s reduced revenue base. 

In addition, the management is moving to a diversified revenue base while recurring income streams are expected to stabilise revenue in the long term. 

Looking ahead

The outlook is that  EduFocal’s cash flow is expected to improve as the digital and creative company begins to see the results of its strategic initiatives, particularly the ongoing diversification of revenue streams and the expansion of its technology offerings. The shift to a recurring revenue model, as well as the completion of strategic partnerships, should provide more consistent and predictable cash inflows. 

This will be supported by the continued prioritisation of cash flow management in 2025, focusing on reducing working capital requirements, optimising operating expenses, and strengthening its cash position. Also, the expanded “Quizzitive” platform along with strategic partnerships and market expansion initiatives, is expected to generate incremental revenue growth. 

Edufocal is exploring the use of data analytics to better understand user behavior and refine its offerings, maximising customer lifetime value.

“These efforts will be critical in providing the necessary liquidity to support ongoing investments in technology and market expansion,” the management advised. 

The cost reductions and efficiency improvements made in 2024 are part of a long-term strategy to build a more resilient operational model.

Moreover, EduFocal has begun monetising its proprietary technology platforms, exploring licensing agreements that can unlock new revenue channels. This expansion into technology-driven services aligns with Edufocal’s focus on building a diversified, long-term growth entity.