Why fund managers think ReadyTech's cost base needs a reset
ReadyTech Holdings keeps missing earnings guidance despite sticky government and education customers, with fund managers pushing for cost cuts or a sale.
1 Jul 2026 · 6 min read
In short
ReadyTech Holdings fell around 54% after its third consecutive earnings miss at its February 2026 interim result.
DMX Asset Management notes more than 70% of ReadyTech's revenue goes toward employee costs, leaving material room for margin improvement if costs are cut.
Based on then-current guidance, the stock traded on just 1.2 times annual recurring revenue and 12 times cash EBITDA, according to Tamim Funds Management.
Government and education software provider ReadyTech Holdings fell around 54% after its third consecutive earnings miss at its February 2026 interim result, according to Investors Mutual Limited's March 2026 Quarterly Report, which described the share price reaction as extreme even while acknowledging the pattern of repeated guidance misses warranted engagement with the company and board to secure improved financial results.
A cost base too high for its revenue base
DMX Asset Management's February 2026 Monthly Report was blunt about the core problem: with more than 70% of revenue going toward employee costs for a SaaS business with a highly valuable base of users, there is material upside potential to earnings and valuation if management can cut costs, even though executives have suggested such cuts would come at the expense of already anaemic growth that the manager argues isn't worth what the company is currently spending to achieve. Tamim Funds Management's February 2026 Monthly Report went further, arguing the CEO needs to be replaced and the company should cut costs and put itself up for sale, having originally taken a position at $2.25 believing either a re-rate on contract wins or a takeover approach would materialise, with neither occurring by early 2026.
We think the business in the right hands can be extremely profitable.
— Tamim Funds Management, Monthly Report, February 2026
Tamim's report detailed the resulting valuation: based on then-current guidance the stock traded on just 1.2 times annual recurring revenue and 12 times cash EBITDA, a level the manager considered extremely cheap for a business with sticky, mission-critical customers across education, local government, workforce solutions and justice segments. Forager Funds' March 2026 Quarterly Report confirmed the specific drivers behind the disappointing half: slower-than-expected group revenue growth, elevated churn in mature products, and delays in converting council customers, leading the company to lower full-year profitability expectations and withdraw its FY2027 earnings guidance altogether.
What managers are watching next
DMX Asset Management's March 2026 report detailed adding incrementally to the position at what it considers very much distressed pricing, viewing the majority private equity ownership under Pemba as a factor likely to force a more meaningful reset of the business, whether through cost cuts or a sale to a third party able to achieve significant value uplift through cost-out. With DMX's earlier November 2025 report noting the company had managed through a recent cyber incident and appointed a new CFO, the key question for remaining holders is whether new leadership can finally deliver the cost discipline several managers believe the underlying customer base and recurring revenue model deserve.
Questions
Why has ReadyTech Holdings' share price fallen so sharply?
ReadyTech Holdings fell around 54% after its third consecutive earnings miss at its February 2026 interim result, which included a material reduction in FY2026 guidance and the withdrawal of FY2027 earnings guidance.
Why do fund managers say ReadyTech Holdings needs to cut costs?
DMX Asset Management notes more than 70% of ReadyTech Holdings' revenue goes toward employee costs, arguing this is too high for a SaaS business of its nature and that significant earnings upside exists if management can cut costs without sacrificing its sticky customer base.
Is ReadyTech Holdings considered a takeover target?
Yes. Tamim Funds Management argues the stock, trading on just 1.2 times annual recurring revenue and 12 times cash EBITDA, could be extremely profitable in the right hands, and believes majority private equity owner Pemba may ultimately force a sale or cost-driven reset.
7 managers, 27 comments, with each manager's latest recorded position.
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