Welcome to the investor presentation of 3PL's results for the 2021 financial year. I'm Matthew Sandblom. I'm the new Chairman of 3PL as of the merger with Blake eLearning about three months ago. I'll also be joined on this presentation by Jose Palmero, the Chief Executive Officer, as well as Dimitri Aroney, the CFO. We have a lot to cover because of the combination of the two companies. There's a bit more than normal to get through. I would also like to thank Sam Weiss for his great job of being Chairman for the last seven years. I'm really excited to be back involved with 3P Learning. Tim Power, Shane Hill, and myself founded 3P Learning back in the early 2000s, and it was one of the early ed tech success stories, growing very rapidly and then eventually doing an IPO in 2014.
At which time I also left the company. Tim stayed on as CEO for a bit longer. Shane had already left the company by that point. Now that I'm back involved in 3P Learning, with the other company I founded in the meantime, Blake eLearning, I'm very excited now by this combination because I think it brings together the strong points that both companies have. Obviously, with 3P Learning having a great sales organization in multiple countries and Blake eLearning having a great product development team, and also a very fast-growing consumer-facing market. There's a lot of positives. There's also a lot of changes. There's also some accounting changes which come about due to the merger of the companies that I think you need to understand to understand the dynamics going forward for the company. I will move on to the next slide.
What I'm doing in the first part of the presentation is mainly looking to the future. Dimitri will talk more about the year just gone, but the company has been transformed by this merger, and it's a much different looking company than it was before. It's a much bigger company. It's got a much better growth prospects. It should generate more cash. I thought we better to really understand how the company's going to look going forward is the key part of any investor proposition involved in 3PL. Obviously it's now with me back in charge, at least as being chairman. A significant shareholder, I think that's a positive as I think tech companies led by founders have a very good track record overall. There's a lot of synergies we've realized between the two companies, over AUD 9 million worth so far, with some more to come.
For the year just passed, revenue was up marginally at 4%. EBITDA was all right at up about 11%. Going forward, I think we'll be generating much better cash flow than 3PL has had in the past. As it should with a business that bills in advance generally of when it provides services. There will be some lag in recognizing this revenue, certainly we should be generating good cash flow before any investment activities. We're looking at revenue, in the AUD 92.3 million-AUD 97.3 million range for the current financial year. Long term, we think we have a lot of growth in this, and we want to eventually become several times bigger than we are. We also have now got good balance between both the direct-to-school market, the B2B market, and the B2C market, where we sell directly to parents to help their kids to learn.
In the 2 biggest spend areas in school spending, which are literacy and numeracy. These are the two key areas, and in particular, we're going to focus on English-speaking markets, but we will eventually do material for other markets as well. We also now own all the IP, the key IP, including Mathletics, Reading Eggs, and Mathseeds. Previously, 3PL only really owned the IP to Mathletics, and we have well over 5 million users and 17,000 schools across the world.
Thank you, Matthew, and good morning, everyone. Very happy to be part of 3P Learning once again, this time as the company's newly appointed CEO. I've worked with Matthew for a long time, and together with the board and our management team, I look forward to leading the group in this new and exciting chapter. Before I share the financial results, I wanted to comment on a few key items. Firstly, the results for FY 2021 include only about five weeks of trading from Blake, so they are not an informative guide to the future prospects of the combined business.
I'll detail Blake's contribution to revenue and EBITDA when I share the results, as will Dimitri in his section a bit later. Next, the company has significant corporate advisory fees and costs of AUD 5.5 million relating to the Blake transaction and two takeover approaches from IXL and BYJU'S in FY 2021.
Finally, we have reviewed our product strategy and written down AUD 4.8 million that is impaired for Writing Legends. As you know, Blake already has developed Reading Eggs, we decided it was better to focus on our hero products, being Mathletics, Reading Eggs, and Mathseeds, and discontinue Writing Legends. To the financial results for FY 2021. Revenue for the year was AUD 57.4 million, which was up 4% year-on-year. Underlying EBITDA was AUD 10.4 million, which was up 9% year-on-year, and underlying EBIT AUD 1.1 million. This was before applying extraordinary items that totaled AUD 11.6 million after tax, which resulted in a net loss after tax of AUD 9.4 million. As I mentioned, Blake contributed about five weeks of trading to these results. The Blake contribution was AUD 3.4 million in licensed revenue and AUD 1.1 million in underlying EBITDA from completion date, which was 28th May.
The FY 2021 results are, of course, important, but in essence, the merger with Blake is a transformative deal for 3P Learning. We have put together a longer investor presentation than we normally would to try and better explain the revenue and profit drivers of the combined business. I'll start with the two important changes that the merger of 3P Learning and Blake brings about. The first one is IP ownership. 3P Learning now owns the IP in Reading Eggs and Mathseeds, and therefore accounts for 100% of the income as principal, whereas previously, we were recognizing only the portion, which is about 60%, of the revenue as the distributor. Mathletics revenue, of course, continues to be recognized at 100%.
The second important change is that going forward, 3PL will make at least 30% of its billings from the direct-to-consumer space, compared to 3% previously, as it was then predominantly a B2B business. While the consumer market has different attributes to B2B, including shorter subscription times, we strongly believe this is a fast-growing market that benefits from economies of scale. I'll now hand over to Matthew so he can cover B2B, but also B2C in more detail. As I mentioned, B2C is a significant addition to the business and likely to become an even bigger contributor to the company's growth in years to come. This is Matthew's area of expertise, so it's good that we hear directly from him.
This slide talks about the schools market, the B2B market. It shows the amount of invoicing we do for each product, we've done for each product, and we're expecting to do for each product in both the current financial year and previous years. The trends here are fairly clear, with Reading Eggs growing quite nicely over the last four years, Mathseeds growing quite strongly off a lower base, and Mathletics sort of stable with a slight amount of decline over the last few years. We expect these trends to continue, although we also, in the next year or two, expect Mathletics to grow again once we have done some work on fixing a few things we think the product needs, where it needs to improve a little bit.
Some of the key growth drivers in the school market for us, beyond the normal sales growth that we expect in different markets selling directly to schools, is that we're also working on some enterprise-level deals in different parts of the world. We haven't included revenue for these deals in our projections because they're quite lumpy and hard to predict the timing. We are focused on recording these deals when we actually get paid for them rather than when we have signed a contract, because we find based on previous experience, that's a more reliable guide. We have quite a pipeline there. We can't really talk about any of those deals at the moment, but we would hope to close some of those deals in this financial year. We also are building out Mathseeds to cover grades 3 to 6.
This is alongside what we're doing to improve Mathletics because a lot of people do like the approach of Mathseeds, and it is an alternative to Mathletics, and we also hope to win back some of the people we've lost who've used Mathletics in the past. As I mentioned before, we are doing some work to improve the Mathletics offering. We just think there's a number of areas which were part of the original appeal of Mathletics, which maybe have been diluted in the meantime, and we want to bring those back, as well as adding some new features. This is not a quick process. It'll probably take us 18 to 24 months to fully implement the changes we want. In the meantime, there are some small things we can do to improve the user experience.
That will provide the long-term basis for further growth for what it has been and always. It's still a good, strong program in Mathletics. I spent a bit of time in this investor presentation talking about the direct-to-consumer market because I'm sure most people are familiar with the selling directly to schools' edtech products, but not as familiar sometimes with the dynamics of the direct-to-consumer market for edtech products. This is a skill set that we've built up. Actually, when we first published Reading Eggs, it actually started as a consumer-facing program and did quite well right from the beginning, back in 2009, as a consumer-based program. Only then, after we had some success in the consumer market, did we switch and also do a school-based version of it.
Right from the beginning, we were a very consumer-focused company. As we've gone along, we've got better and better at this market, and we think we can still get a lot better again. In the consumer space, it's about monthly renewal rates, not yearly renewal rates, because ultimately, the end users of our products are quite young children. Yes, the parent is the customer, but you've got to keep the child engaged. That is a challenge. We're also working within a parameter of a lifetime value per customer of under AUD 100. You've got to really be good at this digital marketing to make those numbers work. It's also a market which does respond to scale, as I'll talk about in the next slide.
The 3 key things you need to be good at direct-to-consumer marketing in the edtech space is you need data. The more data, the better. That means, the more customers, the more even people who free trial a product, the better. Obviously, we have reached a decent size now where we're dealing with several thousand people signing up most days for at least a free trial. Our data has built over the years and only continues to get bigger. You need to be able to afford to have a decent-size direct marketing or digital marketing team. You can have specialists in different areas. You can have a Facebook specialist, you can have content producers, video producers, someone who focuses on SEO, data scientists. All these roles are key to getting better and better at digital marketing.
We're continuing to build our team and skill sets, and of course, we can afford to with our bigger revenue base. The more you spend with online spaces, be it Google AdWords or Facebook advertising or Instagram, the quicker the results. You find out what's working and what's not working, the more A/B testing you can do, and the more you can optimize and further refine your digital marketing efforts. They're all three things which are all very scale-based, and we've got a nice scale. We're expecting over AUD 34 million in revenue with a growth of close to 25% happening in the current financial year. This slide gives you a good idea of where we're generating the revenue.
In terms of the major platforms, we've got both our web platform, which is where people go to our website directly. We've got the major sort of mobile platforms, which is iOS and the Android platform. It gives you a good idea. Obviously, we've had a lot of growth in the iOS platform over the last four years, and we're expecting continual growth there. We're also now getting good growth out of our web platform due to some of our changes we've made in how we give out free trials with credit card instead of without credit card as we did before. Android is beginning to grow steadily as well. That's also the next graph you see the share of revenue by the major geographic areas.
Australia has been growing at a steady rate, but the biggest growth has been overseas in the U.K. or say North America, the U.K., Europe. Those markets there are the ones which are growing at quite a fast rate, and we expect to continue growing at good rates in the future. These are some of the areas we're going to get growth from in the consumer space in the future. These are the drivers. We used to just give people a free trial without having to provide a credit card. Now, on all our web-based trials, you do need to supply a credit card. It just has increased our conversion to paid customers quite significantly, at least 50% and sometimes quite a bit more in all our key markets.
This is similar to what Apple App Store and Google Play Store already do, where you basically have a credit card lodged. It just does tend to make a higher conversion rate. Obviously, as I mentioned also, U.S. and U.K., we have that strong growth there. Although we're still only at 25 in America in terms of top educational apps. We're not even quite there yet. We've got plenty of growth potential there. We also do a lot of work with homeschoolers. It's quite a big market in America. Previously, before COVID, at least 3 million children were being homeschooled. Now maybe it might be quite a bit more than that because we're hearing even now a lot of people are not willing to send their kids to school because of COVID. There are also some people who like some of the advantages of homeschooling.
We're also working on quite a lot of other markets like Canada, Ireland, South Africa, and as well as New Zealand, which are also growing quite well. Collectively, we'll probably be about similar size in the next few years as the big three markets we're already in.
Thank you, Matthew. We are, of course, focused on business drivers. We are equally committed to making our accounts as simple to understand as possible. In our line of business, payment is made in advance of delivery of services. You can expect the level of cash flow to be higher than that reported EBITDA unless the company is making large investments to grow the business. In the past, 3PL has capitalized a lot of its product development costs on the basis that these assets would generate future economic benefit and would deliver significant revenue growth. It is the assessment of the current board and management, however, that historical investment in Writing Legends has not delivered new sales and therefore has been retired and fully impaired.
Additionally, the accounting policy to account for customization costs incurred in relation to third-party SaaS arrangements has been changed retrospectively to now be fully expensed. This includes AUD 6.5 million investment in Writing Legends, which to date has only delivered about half a million in sales and AUD 7.2 million other programs over the past three years. In future, we will clearly identify any new programs or substantial additions to existing programs and the amount of that investment. Under IFRIC guidance, the cost of any new programs released to the market will be amortized over their useful life, which 3P Learning currently assesses over three years. In terms of revenue recognition, as I mentioned earlier, prior to the merger, 3P Learning as the distributor of Blake products recognized only its share of sales to schools, which was about 60% at the time of invoice.
Blake in turn recognized the remaining 40% when 3P Learning supplied a monthly sales statement. Subsequent to the merger, 3PL will recognize 100% of the revenue from Blake product to schools and spread it evenly over the length of the contract. Effectively, because the majority of school sales happen in the second half of the year, only 40% of Blake school billings will be recognized as revenue in the FY 2022 year, with the remainder to be recognized in financial year 2023 and beyond. This will have the effect of reducing recognized net revenue by approximately AUD 13 million in financial year 2022, compared to what the standalone businesses would have otherwise recorded. The impact on the EBIT line is the same amount as the cost base does not change. These changes will wash out from financial year 2023.
Another significant accounting change that boosts top-line revenue but has no positive impact on EBIT is that Blake sales made through the distributors like Apple or Edmentum now have to be grossed up to include the fees retained by the distributors. Previously, Blake only accounted for the net sales after distribution fees. We estimate this will have the effect of increasing top-line revenue by AUD 5 million in financial year 2022. This takes us to the FY 2022 guidance. Although the performance in FY 2022 may be impacted by the transitioning accounting, we believe the FY 2022 revenue range of AUD 92.3 million-AUD 97.2 million, and EBITDA range of AUD 12.1 million-AUD 15.4 million is achievable based on the key drivers detailed before and the assumptions we've outlined in the appendix to this presentation. I will now hand over to Dimitri for his comments on the FY 2021 results.
Thanks, Jose. I'll now turn to the FY 2021 results summary. License revenue was up AUD 2.3 million -AUD 53.8 million. Blake contributed AUD 3.4 million to license revenue. This was offset by AUD 1.2 million due to the B2B revenue on Reading Eggs and Mathseeds post-acquisition being recognized on a straight line basis, and not at the point of sale. Gross margin percentage is 86% and indicates that as the business scales up, incremental revenue will generate significant EBIT growth. Sales and marketing have declined AUD 2.2 million due to the revised strategy, which has meant a partial reduction in headcount, particularly in the Americas region, combined with savings on sales-related travel. Product and technology is consistent with the prior year and is yet to reflect the revised hero product strategy, which will see a reduction in product development costs next year.
General and administration costs have increased due to the adverse foreign exchange movements. Adjustments have been made for significant one-off items during the year. An adjustment after tax of AUD 5.1 million has been made for corporate advisory costs relating to corporate activity experienced during the year from offers received from IXL and BYJU'S, culminating in the acquisition of Blake. Integration and restructure costs relate to the cost of incorporating Blake into the group, and impairment charges have been recorded against product development assets due to the revised hero product strategy. License revenue on an ex-acquisition basis was down 2%. This was impacted by AUD 1.2 million by the B2B revenue on Reading Eggs and Mathseeds post-acquisition being recognized on a straight line basis and not at the point of sale. Blake eLearning contributed AUD 1.1 million of revenue generated from sales made to third-party distributors.
Sales and marketing costs have declined AUD 2.3 million due to the revised strategy, which has meant a partial reduction in headcount, particularly in the Americas, combined with savings on sales-related travel. This reduction in expenses, combined with a slight improvement to gross profit, has led to an increase in underlying EBITDA of 14%. License revenue is down AUD 0.1 million on a like-for-like ex acquisition basis. Blake eLearning contributed AUD 2.3 million of revenue to performance, generating gross margins of 87% and EBIT margin of 39%. With Blake's contribution, EBITDA has grown 78%. Cash flow conversion before capital expenditure is 79% and was impacted adversely by a decline in working capital. This decline in working capital was due to the timing of large vendor payments in June 2021.
The cash flows presented exclude AUD 3.6 million of cash acquired on the Blake acquisition and AUD 5.9 million paid in relation to the corporate advisory, employee restructure, and integration costs in FY 2021. Net assets have increased from AUD 21.7 million -AUD 194.8 million at 30th June 2021. This was largely due to the acquisition of balances from the Blake merger. Let's take a closer look at those individual balances on the balance sheet. As at 30th June 2021, cash was AUD 24.9 million and the company had no bank debt. Moving on to accounts receivable, which has increased. AUD 1.7 million of this was from the Blake acquisition, with the remainder due to an increase in sales. Inventories have now been recognized on the balance sheet, and this represents workbook inventory that was acquired as part of the Blake acquisition.
Lease receivable, right of use assets, and lease liabilities predominantly relate to office premises and is unwinding with time. Intangibles have increased significantly due to the Blake acquisition. Within this balance is goodwill of AUD 167.5 million and other finite intangible assets acquired, including products of AUD 26.5 million, customer relationships of AUD 2.7 million, and distributor relationships of AUD 2.7 million. Deferred tax assets have decreased, again predominantly due to the impacts of the changes to the intangibles excluding goodwill. Income tax payable increase represents AUD 1.8 million tax payable by Blake brought in as part of the acquisition. Contract liabilities have increased as a result of the Blake acquisition. Current contract liabilities will flow through to revenue in FY 2022 with no future cash outflows. Provisions have increased through the acquisition of annual leave and long service leave balances for Blake employees. Now, looking at equity.
137 million shares were issued for the Blake acquisition, resulting in contributed equity increasing by AUD 182 million. No dividend was declared during the year, and cash is being retained to support working capital and growth opportunities.
Your first question comes from Shuo Yang of Microequities. Please go ahead.
Hi. Good morning. Thanks for the question. Just want to clarify my understanding of the R&D capitalization policy going forward. I'm just not quite clear. Are you saying there will be components that will be expensed, but certain specific programs will still be capitalized and amortized over three years?
Hi. Thanks, Shuo. It's Dimitri here, the CFO. What I'd say is that the accounting standards don't provide the company technically with a choice, and eligible costs would be capitalized if we thought there was future economic benefit coming through that. Having said that, going forward, we do expect that the capitalization may come down as we believe that those future economic benefits will come from products that are newly created products with new revenue streams.
Right. Okay. The product enhancement work you're doing on Mathletics, that will be mostly capitalized?
In terms of that work, and it's obviously a future project, so no decision has been made. The expectation would be that potentially might not meet that test that we've suggested and therefore would be expensed.
On the B2C product, obviously, during the initial COVID period, you had a surge in new customers, and I think some of those customers are coming up to their sort of annual renewals. Just want to understand some of the churn experience you've noticed as those customers have come up to renewal time.
Yeah, I'll take that one. It's Matthew. Over COVID years, we certainly had some big bumps there. Generally speaking, it did bring down the average length of subscription quite a bit over that time as people just came on sometimes for their lockout period. It has also just raised the base level of subscription substantially as well, and we do get a lot of word of mouth and everything. Yes, there was greater churn during that year, at the same time, it also raised the level of the water, raising the boats to some degree as well in terms of it's just a greater prominence and knowledge about online learning, and that continues on into the new year.
Yeah. Okay. Understood. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause for a moment to allow for question registration. There are no further questions at this time. I'll now hand back to Mr. Palmero for closing remarks.
Thanks very much, Bernadette. Thanks everyone for attending. As we said at the beginning, this is a transformative deal for 3PL. As a management team, board, and people coming back to the company after many years, we're all very excited about the prospects. We look forward to sharing those details with you in our investor calls and presentations over the next few days. Please feel free to ask any questions at the time. We've allowed plenty of time for questions and interaction then. We look forward to seeing you then, yeah. Thanks very much.