AIM - #AGM

Forum Topics AIM AIM #AGM

Pinned straw:

Added 4 months ago

The market seems to like what came out of the AGM.

Some positive highlights after skimming the ASX announcement: Technology revenue grew by 37% to $32.9m and the gross margin is impressive at 85%. Tech revenue now accounts for 50% of total revenue. Goal of 80% tech revenue by the end of 2025. Some of the hypergrowth US tech stocks I hold can't match this and their P\S ratio are eye-watering compared to AI-Media.

There's an ambitious but clear path to growth with a goal of $60m EBITDA in 5 years (Currently $4m).

Strong momentum in Europe with an ITV partnership in the UK and 100 plus encoders sold across 14 countries which they describe as a "moat" as the encoder inserts itself into the customers' workflow (55 sold last year across 3 countries).
LEXI 3 now surpassing human captioning accuracy and looking at the voice market that's supposedly a TAM of $69b vs $2b for captioning (Always a bit skeptical about TAM but you'd think voice is several times larger at least).

There's definitely execution risk here although CEO Tony Abrahams thinks this is priced in already in the share price (bold statement, but anyway). They'd like to grow the Tech revenue by 35% annually over the next 5 years so there's no lack of ambition. Both R&D ($7m-$8m) and sales and marketing ($13m-$16m) costs have grown but not unreasonably so I think.

Certainly lots of potential, good strategic vision and outline. At the same time there are many things to watch out for along the way as the execution and other risks are by no means small. An EBITDA of $60m in FY2029 would make today's market cap of $150m seem very reasonable no matter how you choose to discount that back. Even with some inevitable setbacks between now and then you can easily find ways of justifying today's price I think.

The Strawman interview with the CEO a few months back was really great and informative so do yourself a favour and watch that if you're interested in the business

Scoonie

Added 4 months ago

All very good points @mushroompanda , @mikebrisy and jcmleng

AIM takes some time to get your head around. A company that is going to kill off 50% of its business (the “services” business, which is human captioning) over the next 13 months, to just how AIM intends to tackle expansion in Europe, to the up and coming LexiVoice company white knight. It takes some understanding. However the CEO Tony Abrahams lays it all out for shareholders. I would recommend the Strawman interview is a great starting point resource to help understand AIM. Another way to triangulate someone who may come across as a blowhard, is to look at their track record.

I was in the room at the AGM and I have got to say Tony Abrahams is a pretty exceptional CEO. The comprehensiveness of his formal presentation and the care and detail in his responses to questions from the floor was truly out there. After the meeting the way he interacted with his senior staff, shareholders, fund managers generally how he got around the room was impressive. It is not hard to believe he was once a Rhodes Scholar - and thankfully is not up-himself for the experience. Mr Abrahams is captain of my ship any day.

Shapeshifter

Added 4 months ago

Excellent on the ground work @Scoonie !

This is a classic example of a company disrupting itself - the technology business disrupting the services business.

mushroompanda

Added 4 months ago

I find this company strange. Strange like Kelly Partners except without the hubris, pumping, and with far more evident competitive advantages. Strange in probably a good way.

How does someone spend 20 years building a Captioning Services company, and is now declaring that part of the business will be going to zero? Tony also mentions off the cuff that the $20m they’ve spent developing the software to support the Services business (Ai-Live) will be binned. Who makes these types of public admissions?

Who sets an aspirational 5-year target of $150m in revenue and $60m in EBITDA, while explicitly stating there’s no need for M&A or increased capitalisation of development to get there? M&A and capitalised development are well trodden paths to achieving growth target success. On top of that, they’re enhancing transparency about their progress toward this goal.

How does one turn down the opportunity to pump the AI angle of the investment thesis?

This is an unusual setup. On one hand, the CEO is saying and doing all the right things. On the other, the aspirational target is incredibly bold, and the likelihood of achieving it - especially the EBITDA goal - seems relatively low. But Tony is not shirking from it. If anything he’s doubling down.

mikebrisy

Added 4 months ago

@mushroompanda , I’ve only been reviewing this secondhand this AGM season. But it looks like a very assured strategy and leadership performance.

It’s important to recognise business models get turned on their heads quickly in this space (recall $APX), so hat off to the CEO to be proactively driving the creative destruction process. A good sign!

@Wini tweeted this week that it won his award for best CEO address of this AGM season.

Disc: held in RL and SM (only a small position as I am early on my learning curve on this one)

mushroompanda

Added 4 months ago

@mikebrisy I agree. It was a very comprehensive AGM presentation and I believe that the company is making all the right moves. The CEO obviously puts a lot of thought into the company's competitive positioning.

Super interested to see how this one tracks over the next few years.

jcmleng

Added 4 months ago

@mushroompanda , good points which helped me crystallise what I was feeling, but could not quite articulate. I drank off a firehose over the weekend to get my head around AIM (I can't quite remember the trigger), but I watched the SM Video, went through the FY24 results and then last night, the AGM preso and I opened a 1% position over 2 days as the price has retraced a bit in recent weeks.

A few things stood out for me, which also gave me "this is rather strange in a positive way" feeling that you describe:

Tony has gone to great, almost ridiculous lengths to describe the history of the EEQ, how it changed the world, the moat etc - I did appreciate this blow-by-blow account during the SM video. Putting on my IT management hat, what the moat is, and is not, is super clear to me. But, the extent of the focus on this in the various speeches, the preso's etc is quite extraordinary
Coming from a management approach where the golden rule is "tell the Board as little as you can get away with, commit as little as possible and surprise on the upside", Tony's description of the actions and the intemediary milestones were quite a surprise. Eg. articulating what R&D and S&M spend will be for FY2025. He is either supremely confident he can deliver or is really naive about over-committing in public, against which he and AIM will be measured.
Gee, it feels like a really busy ants-in--your-pants company - lots happening/will happen in every corner. Is this level of perceived activity sustainable given that we are in Year 1 of a 3 year journey, I wonder. Relentless management driving is awesome from a shareholders perspective, until it breaks people ...

Have had no exposure to Tony prior to this week, so do not know if this is just Tony being Tony ...

Am not complaining - as a super new shareholder, this level of transparency is awesome. But there is a part of me that wonders if this is a sign of supreme confidence in ability to deliver and/or or a sign of some insecurity from having experienced what must have been a near-death experience, of the company, literally, or a bit of both.

The sharp pivot following the EEG acquisition and the clarity around the moat provides good assurance on Tony and management, and the results show it, but I do share the execution risk concern and is one area I will be watching out closely for ...

Discl: Held IRL

UlladullaDave

Added 4 months ago

I don't think it can be considered as much a pivot by AIM as by EEG. We're all familiar with why AIM wanted to buy EEG, but EEG itself probably saw an opportunity to move out of being a pure tech infrastructure business to a SaaS business. Perhaps they also considered that as more captioning moved to IP there was a chance that being a pure network business risked disruption itself. The transition from human captioning to AI captioning was the pivot moment for EEG. The best way to complete that pivot was to partner with a dominant human captioning business so that Lexi had a natural customer base to leverage off.

Clearly, Lexi is standing on its own two feet here and that to me speak to the strength of EEG – which has always been a core part of my belief in the AIM story.

So, I think seen in terms of the combined AIM/EEG it's best thought of as an evolution rather than a pivot.

Aside from that, I applaud the frankness of Tony's presentation yesterday, even if I cringed a bit at some of the talk about how the market was pricing execution risk into the share price.

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