Ai-Media Technologies Limited (AIM) Earnings Call Transcript & Summary

Before we begin formally, I would like to respectfully acknowledge we're meeting today on the lands of the Gadigal people of the Eora Nation, and I pay my respects to the elders past, present and emerging. Now let me start by introducing the members of the Board who are with us today and our Company Secretary. Joining us in person here in Sydney, Board members, John Martin and Cheryl Hayman; and also our Company Secretary, Lisa Jones. Our Director, Alison Loat, is joining us via telephone from Canada and our Managing Director, Co-founder and CEO, Tony Abrahams, joined by the phone from New York, where he is doing some exciting things. And if I may, I would like to just acknowledge that we are also joined in the room here by [indiscernible] Co-Founder, Alex Jones. And it's wonderful to see you here, Alex. Thank you for joining us. We also have members of our executive team present here in the room. We have our fabulous CFO, Mr. John Bird; and our COO, Donna Reid, lovely to see you both here. And on the line, we also have our Chief Sales Officer, James Ward; and Chief Product Officer, Bill McLaughlin, who are also joining us from New York with Tony. The company's lead audit partner, Harsh Shah and his colleague, [indiscernible] from Deloitte. They are also in attendance and will be available to address any questions that you may have about the audit of the financial statements later in the meeting. I also welcome Glenn Rogers and his colleagues from Computershare, who are Ai-Media's share registry provider. Glenn is with us in the room and will conduct the final voting poll. Now the purpose of today's meeting is to deal with the formal business as set out in the Notice of Annual General Meeting. I will deliver my Chair's report and then Tony will present a report on the financial year of 2023 and also give an update on our broad strategic intent around future growth and where we are to date. We will then consider the resolutions set out in the notice of meeting, and I will outline the voting arrangements ahead of that section. There will be an opportunity for shareholders to ask questions during the formal items of business as they relate to the resolution being considered. So let me move to my Chairman's address. So again, I welcome you all, and thank you for joining our 2023 Annual General Meeting. Ai-Media experienced another significant year of transformation in the financial year FY '23. At our AGM last year, I highlighted that following some strategic M&A activity, in particular, the acquisition of EEG, we have emerged as a stronger company poised for sustained earnings growth. Now FY '23 affirmed this statement as our transformation into high-margin SaaS products, the ongoing refinement of our product solutions and further technology enhancements all underpinned our financial performance. FY '23 delivered revenue of $61.8 million and gross profit of $36.9 million, a 12% increase on FY '22. With over 54% of our gross profit now coming from recurring revenues. Bottom line growth was a primary driver in our strategy, and importantly, we delivered $3.3 million of EBITDA, a 201% increase on FY '22. So further highlighting the increased operating leverage in the business. As we reflect upon the year, the effective execution of our high-margin transition strategy emphasizes that Ai-Media is well positioned to drive increased growth in an expanding global captioning, translation and transcription market. We have established a market-leading ecosystem with high-quality and scalable suite of solutions and technology that is absolutely designed to meet the growing and varying quality, security, and accuracy needs of our customers. Development of our technology-driven solutions allows us to be at the very forefront of captioning and translation and building upon our reputation for delivering extremely accurate, low-cost captioning, transcription and translation services. There is indeed a growing demand for language services across entertainment, government and corporates. And our engagement with both new and existing customers across the globe was rewarded with new premium contract signings in FY '23 from customers, including Google and [ SBS ] in addition to renewed agreements with Foxtel and Al Jazeera. And pleasingly, we've maintained our momentum into the first quarter of this year with the onboarding of new customers and renewals of key existing ones, and Tony will provide greater details of these wins during his presentation. We believe our ability to deliver real customer value by leveraging our improved products and solutions means that we're really well placed to take advantage of the mandated spending across transcription -- sorry, across captioning and translation services that is coming across the world, and that will allow us to deliver further growth and profitability. Towards the end of FY '23, we broadened our offerings through LEXI 3.0 and LEXI Toolkit. And this allows us to attract and retain customers by better meeting their needs, and through modifying their service mix, including by the substitution of human delivered services for technology-led captions. We see a real opportunity to upsell LEXI products to existing customers. So through FY '24, we will keep our focus on the transition to a greater proportion of higher-margin SaaS products in our service mix. We will also be very focused on identifying potential growth opportunities. At the end of September 2023, having paid out the final M&A-related vendor debt, Ai-Media has a -- had a cash position -- of a net cash position, sorry, of $10.4 million. And this gives us real optionality to explore opportunities in new territories and adjacent markets with that emerging demand for our services. So with some very strong foundations and with our technology investment is clearly paying off, we're now really well positioned to strengthen our sales pipeline and deliver the profitable growth that we've all anticipated. I'd like to give my sincere thanks to all of you, our shareholders, for your continued support. The Board and management are committed to driving growth and results in the business, and this would not be possible without your endorsement. We are all working very hard to reward your patience with an increase in shareholder value in the months ahead. And I'd now like to pass to Tony to comment you with rest.

Thank you very much, Deanne. And a very warm welcome to everyone, and thank you very much for joining Ai-Media's 2023 AGM. I am joining you today online from our New York offices. And indeed, today was the Annual National Association of Broadcasters trade show here in Manhattan. We're getting increasing excitement, I think, for the products that Deanne has just highlighted. And this really does represent a significant shift in the business towards technology. For 20 years, Ai-Media has been developing into a global market leader. Delivering high-quality live and reported captioning, transcription and translation solutions. In FY '23, we kept a tight focus on transformation. And as a result, we saw continued growth in our higher-margin SaaS revenues. As Deanne touched on, we continued our intention of delivering bottom line growth. Since integrating our '21 acquisition of EEG, we have made strategic investments in our technology products, while transitioning the business away from legacy services requiring humans towards higher-margin SaaS revenues. It is this shift which successfully underpinned our growth in FY '23. The team delivered a 33% increase in technology revenues in the last financial year with now over half of our gross profit coming from the technology side of the business. As our business transitions further towards SaaS revenues, we anticipate further improvements in operating leverage. FY '23 delivered a 201% increase in EBITDA to $3.3 million and an EBITDA margin of 5%, rest -- reflecting the scalability of our business model. Our best-in-class technology provides the only end-to-end captioning solution in market from encrypted source data to encoding, captioning, transcription and translation. It is the intellectual property embedded in this end-to-end ecosystem that drives our leading position in the market. This ecosystem begins with a video stream that connects to one of our family of technology encoders. The next area of our IP is the ability to network all of these devices to our iCap cloud service, where we host various AI engines to undertake the translation in real time. The third and final pillar of the IP relates to the data interchange of LEXI, comprehending the context in which it is transcribing, ensuring the application of subject to appropriate dictionaries, delivering, capturing accuracy, driven by secure access to customer data systems behind firewall. We remain focused on extending our offerings and strengthening our market position. Our slated technology updates will further strengthen our competitive moat as we focus on each of the 3 areas of our unique IP being encoders, iCap and Lexi. One of the growth priorities we flagged at our FY '23 results in August was growing our iCap network. Significant investment has been made in the iCap network in recent years. And continued investment in security, reliability and uptime based on customer feedback will drive global iCap growth. Over the last few years, we have witnessed significant growth in the network with over 80% of U.S. broadcasters and the vast majority of our captioning industry competitors utilizing our iCap network to deliver captioning on air. A main priority for this year is to introduce per hour charges on the network while transitioning legacy users to new monetized agreements. A long tail of over 40 captioning organizations have committed to utilizing iCap already as their preferred method of captioning delivery. The transition will ensure that for the very first time, we are monetizing one of our core IP products that previously been provided for free. We've already secured agreement from most competitors covering the majority of third-party content with negotiations continuing with the remainder of the industry. Our AI-powered LEXI Toolkit was successfully launched in the first quarter of FY '24. The LEXI Toolkit offers a comprehensive collection of automated captioning solutions that mark a new era in the industry, combining the cutting-edge AI technologies to meet the needs of content creators worldwide. The LEXI Toolkit features solutions to empower data optimization, enhanced security, reduce costs, streamline workflows and expand global rate. Continued enhancement of our automatic captioning solutions delivers significant commercialization benefit and accelerate growth in our technology revenues. Early feedback from customers has been extremely positive with customers valuing the ability to mix and match our solutions to suit their specific requirements and providing the opportunity for the company to cross-sell to its existing customer base. Significantly, the introduction of LEXI 3.0, which we launched only in April this year, combined with the LEXI Toolkit further enhances Ai-Media's value proposition, resulting in a much larger addressable market. As Deanne noted, FY '24 has started positively with Q1 revenues up 10% on the PCP and up 7% in constant currency terms. Our ability to attract new customers for our technology products has underpinned this total revenue growth for the quarter of $15.7 million, notwithstanding a continuing single-digit decline in our legacy services business. Key customer wins. On the technology side, includes major U.S. sporting organization including the National Basketball Association, the NBA, the National Football League, the NFL, technology platforms, Netflix, Apple and Amazon continue to place their trust in Ai-Media with increased volumes of encoders and LEXI captioning being purchased at the start of FY '24. Really significantly in the Middle East, Al Jazeera becomes the first Middle East broadcaster to convert to automatic captioning with LEXI. Ai-Media's technology sales pipeline continues to strengthen. Our debt free cash position of $10.4 million as at 30th of September 2023, provides flexibility for management to continue to execute on growth opportunities in new territories and adjacent markets with emerging demand for accurate captioning, transcription and translation solutions. And to confirm all final vendor payments have now been completed. The success we have achieved in our transformation over the last few years would not have been possible without the efforts of our customers, dedicated employees and the leadership of the Board and management team. Thank you to you, our shareholders, for your patience and support during difficult market conditions. I look forward to updating you further on our first half results next February. I'll now hand back to Deanne to continue with the formalities of the meeting. Thank you, Deanne.

Many thanks, Tony, and I hope everyone can see why we remain incredibly excited about the opportunities ahead in the next couple of years. We will now welcome questions or comments from shareholders holding a blue card or yellow card in relation to my report or Tony's report. Before asking your question, please state your name whether you are a shareholder in your own right or if you're attending as a proxy for one or more shareholders. And if you are attending as an attorney of a shareholder or proxy, please state your name and the name of the shareholder or proxy that you represent. Are there any questions from the floor? No, well, I think very comprehensive presentation is this. So obviously, answering any questions. So thank you very much. If there are no further questions or comments, we will move on to the formal items of business. As set out in the notice of meeting and the explanatory statement, there are 3 items of business today that are displayed on the screens behind me. Item 1 is for consideration only with no vote required. The other 2 items are ordinary resolutions, which do require a shareholder vote. Now in regard to voting upon registering at the meeting this morning, you will have received either a blue, yellow or white colored admission card. Those who received a blue or yellow admission card can speak and ask questions. The persons entitled to vote are all shareholders, representatives and attorneys of shareholders and proxy holders who hold blue voting admission cards, which will also be used as poll voting cards. If you are attending in more than one of those capacities, you will have been issued with as many blue voting admission cards for which you have separate capacities. If anyone believes that you're entitled to vote in any capacity and you don't have a blue card, please raise your hand now and a member of the Computershare team will assist you. If you are a proxy holder, a summary of the votes by which you are entitled to -- has been attached to the blue voting admission voting card. White cards have been assigned to visitors other than shareholders and do not carry rights to speak and ask questions when the business of the meeting is being conducted nor the right to vote. Yellow cards indicate you've already voted, but you can ask questions. Pretty complicated, isn't it? If you have a question, please hold up your blue or yellow admission card, state your name prior to question being asked. Please direct any questions you have to me as Chairman, and I'll either deal with that question personally, or find someone who is much better place to respond. And we will obviously do our best to answer all relevant questions raised. Now as Chairman of the meeting, it's my intention to cast any undirected proxy votes in favor of all resolutions. I have blue voting card over there. I will declare the proxies held by me at the start of each resolution by showing them on the screen. As you will see from the notice of meeting, the board recommended voting by direct vote for all resolutions. Direct voting enables shareholders to vote without attending the meeting or appointing a proxy. Voting on all items of business will be conducted by a poll. The vote by poll will be conducted by Computershare, and again, the poll is open for each of the resolutions in the notice of meeting. Glenn Rogers of Computershare will conduct the poll as returning officer. Your voting cards will be collected by Glenn before the poll is closed. And if you need to leave early, please complete your voting card and present it to Glenn. As Chairman of the meeting, I'll ensure that there are opportunities for separate discussion concerning the items of the business at today's meeting. Discussion will be invited on each of all -- each of the items. Please hold questions on executive remuneration until we get to the remuneration report resolution. I encourage debate and area of any issues. It is important, however, that the comments and questions are succeed, and restricted to the subject matter of the business and the resolution set out in the notice of meeting. Details of proxy and direct votes for each resolution will be shown on the screens at the conclusion of the discussion. So, let us move to the start of formal business. So a copy of the notice of meeting and explanatory statement containing the resolutions to be considered today were provided to shareholders last month. So I will take the notice of meeting as read. I'll now move to the formal agenda, to item 1. So the first item of business is to receive and consider the annual financial report of the company for the financial year ended 30 June 2023, together with the declaration of the directors, the directors' report, the remuneration report and the auditor's report. The reports are contained in the annual report, which was released to the market on 30 August 2023. I will take those reports as read and now formally lay them before the meeting. Shareholders were invited to submit questions in advance of today's meeting to our auditor on the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by Ai-Media relating to the preparation of the financial statements and the independence of the auditor in conducting the audit. No prior questions were received, but are there any questions from the room on the Annual Report or Audit Commission for either the auditors or the Board? All right. Seeing no questions. I do note that there is no requirement to [Technical Difficulty] so I will move to the items of business, which do require a formal resolution. So Resolution #1 relates to the adoption of the remuneration report. Resolution 1 is an advisory nonbinding resolution required by the Corporations Act in relation to the adoption of the remuneration report, which forms part of Ai-Media's annual report again, released on the 30th of August this year. The remuneration report is set out on Pages 16 to 21 of our annual report, and it provides information concerning executive and director remuneration. The resolution is played on the screen. Of course, that is passed the following as an ordinary resolution that in accordance with Section 250 R2 of the Corporations Act, the remuneration report as set out in the company's annual report for the financial year ended 30 June be adopted. I'll be now -- the resolution being on the screen, I'll now be happy to answer any questions or receive any comments in regard to the remuneration report. There being no questions. Details of the direct and proxy votes that have been received are displayed on the screen. Okay. And just for those [indiscernible], that is about nearly 64 million in favor, 291,000 against and about 120,000 open. So -- all right. I will then move to resolution #2. It's a very happy resolution from my point of view because it relates to the reelection of Director, Mr. John Martin. John has indeed been a Director of this company since 2010, prior to our listing and it is an honor and pleasure to serve the company. The resolution being considered in regard to John's reappointment is displayed on the screen. John's Extensive credentials are outlined in the explanatory statement attached to the notice of meeting and are outlined in the annual report. Would anyone like to ask a question or express a view in regard to the resolution? I'll just -- for the sake of people at home, read that resolution that John Martin being a director who retires by rotation in accordance with Rule 7.1D2 of the constitution and listing 14.4 and being eligible for reelection, be reelected as a director. And the directors with Mr. Martin abstaining, unanimously recommend shareholders vote in favor of this. Would anybody like to ask a question or express their view? There are being no questions or comments. I note that the details of the direct and proxy votes that have been received are displayed on the screens. And Mr. Martin overwhelming support for your reelection with over 76 million votes in favor. All right, we will now -- I now ask shareholders that being that the final resolution proposed. I now ask shareholders, proxy holders and corporate representing holding blue voting cards to complete the card, if you've not already done so, to finalize your poll votes as the poll will be closing shortly. Would Glenn [indiscernible] Computershare, please come forward to collect the voting card? All right. Glenn will forward these cards to the share registry for the conduct of the poll. So again, for people playing a lot on home when it's moving around the room, receiving those cards. Are we all done? We're all out, no more cards, no, going, going, gone fabulous. All right. I now declare the poll to be closed. Computershare will now count the votes, and the results will be available on the ASX platform later on today. And as you can see from the direct and the proxy votes received, all resolutions will pass by a majority. Do I have any further final questions from the floor? All right. There being no questions, then I would like to thank everybody for attending today, both in the room and online to thank Tony and the rest of the team for joining us from the U.S. and Canada. And I really, again, sincerely like to thank our shareholders, our customers, our executive leadership team and fabulous staff at Ai-Media, the company's advisers and our auditors and our French and Computershare. Ladies and gentlemen, that concludes our business for the day, and I now declare our meeting closed. Thank you very much.