3P Learning

The Business

3P Learning sells subscription-based literacy and numeracy software to schools (the B2B segment) and directly to families (B2C), built around curriculum alignment across Australia, New Zealand and several other English-speaking markets. Its products are embedded in more than 15,000 schools' lesson plans, which historically created switching costs that supported renewal rates. The company also collects a government research and development tax offset (DGTO) tied to its product development spend, which has grown from a minor addition to a structural pillar of reported profit. Unlike venture-funded EdTech peers, 3PL is profitable and debt-free, but its growth has gone into reverse.

Recent Performance

Revenue fell 4.4% in FY26 to $104.1 million, following a 1% decline the year before, and B2C subscriber counts dropped 7.7% even as pricing held flat. Reported EBITDA margin looked strong at 17.3%, but that figure was inflated by an $8.6 million DGTO receipt that included a one-off prior-year catch-up; the underlying, ongoing run-rate is closer to $4 million a year. Management delivered $4.7 million in annualised cost cuts, a credible execution outcome, but then paid out 97% of net profit as an inaugural dividend, a payout ratio it cannot repeat.

Outlook

We expect revenue to keep declining through FY27 and into FY29, as B2B retention (currently 85%) offsets modest gains from a New Zealand Ministry of Education contract and US homeschool demand. EBITDA margin is likely to compress from the FY26 level as the DGTO catch-up unwinds and the current round of cost savings is exhausted. Net profit is on track to fall materially over the next few years, and the dividend is set to reset sharply lower from the unsustainable level paid in FY26.

Key Risks

B2B retention could deteriorate further as anti-screen-time policies in schools and AI-based alternatives erode the curriculum-alignment advantage that has historically supported renewals. AI content tools such as Khanmigo can already replicate curriculum-aligned material at near-zero cost, and the gap between what these tools can do and what 3PL's product roadmap can defend against is closing. The DGTO offset itself is legislated but politically exposed, and its removal or reduction would strip out a meaningful share of reported profit given how central it has become to the earnings base.

What to Watch

The thesis-defining event is the FY27 first-half result in February 2027, which will show whether B2B retention has stabilised or continued its slide.

• Feb 2027 FY27 H1 results, B2B retention data — a print materially above current levels would support a cyclical trough thesis; a further decline would point to structural erosion.
• Sept 2026 NZ Ministry of Education school orders — meaningful order volume would validate the contract as a genuine growth lever rather than a marginal offset.

Company Description

3P Learning operates two core divisions. The B2B segment sells subscriptions to schools across Australia, New Zealand and several international markets, built around curriculum-aligned literacy and numeracy content; this remains the larger of the two divisions by revenue, at roughly $60.7 million in FY26. The B2C segment sells directly to families, generating around $43.6 million, with growth concentrated in the US homeschool market where Education Savings Account funding is expanding the addressable pool. Layered across both is the DGTO government research and development offset, which has shifted from a minor addition to a material contributor to reported earnings.

Where the Growth Is

The one genuine growth lever is a New Zealand Ministry of Education vendor approval running through 2027-29, alongside steady US homeschool demand. AMER billings grew 6% in FY26 even as the group's total revenue fell, evidence that this pocket of demand is real. Combined, we estimate these two drivers can add a few million dollars of incremental revenue over three years, a contribution that offsets but does not reverse the broader B2B decline.

Competitive Position

3PL's advantage rests on more than 20 regional curriculum approvals and the fact that its products are embedded in schools' existing lesson plans, which historically discouraged switching. That advantage is narrowing. B2B retention has slipped from around 88% to 85% over two years, and AI-generated content tools now threaten to replicate curriculum-aligned material far faster than 3PL can defend it through incremental product updates. We see the current competitive position holding for perhaps another three to five years before the moat erodes further, not the decade-plus durability associated with genuinely defensible franchises.

Management & Capital Discipline

Management delivered $4.7 million of annualised cost savings in FY26, a credible execution outcome that shows discipline on the expense line. Capital allocation elsewhere has been less consistent: the board paid out 97% of net profit as an inaugural dividend in FY26, a level that cannot be sustained once the one-off DGTO catch-up unwinds. The company's own auditor has flagged that management has a history of not meeting prior revenue forecasts, a fact investors should weigh against the more optimistic "stronger H2" language management has used for FY27.

Financial Position

3PL carries net cash of $15.7 million against zero debt, with a further $10 million undrawn facility available. This balance sheet removes any near-term solvency risk and provides a buffer through a prolonged period of declining revenue. It does not, however, offset the fact that returns on capital sit well below the cost of capital, meaning the cash buffer protects against capital loss but does not itself create value.