They said it would be later.

@mikebrisy @Travisty thank you both for your summaries. I look forward to watching the recording. I get the same feeling here as with RUL where, at a surface layer it was hard to see the potential during the legacy transition. It’s these opportunities that require looking under the surface that provide wonderful opportunities.

Holder IRL (soon to be in SM)

Anyone got a link to the half-year FY25 Results Webinar?

I have AI Media on the watchlist and will be watching the recording when it is out... In the meantime, see image below, would it be fair to assume the direct employee costs prior to GP would significantly decrease with a complete transition to Lexi? I'm sure there would be some direct employee cost but say annualized that figure is $4 million then that would result in an annual PBT increase of $10 million over the next few years or am I missing something?

@Dominator yes. Tony talked about redeploying some staff, where they have the right skillsets (esp. technical people) but that they had already let some go and more would inevitably go. I assume the direct labour is concentrated in the legacy services. When said staff are redeployed, I expect that would go more into indirect costs - as there is no direct labour in a pure AI solution.

Services won't go away altogether. Most will, and Tony pointed out that ALL services that are doing a parallel offering to the pure-AI technical solution will go - asap, and most/all by end of CY.

Now i've put myself on the spot, my own knowledge is that I can't say what the continuing services are or what quantum they'll make up - although I think Tony might have referred to this.

Hence my need to watch it all again in the coming days and weeks!

(Here we see the failings of a human response. AI the script and you'll get better answers! :-0 )

Wild-ish SP ride today for AIM investors - down significantly at the open and up 6% by the close. I think consensus might be low-information investors sold at the open and the smart money was buying at the close. I'm less sure. My characterisation would be that this morning's sellers were selling on the numbers (and not just the numbers that don't matter) and this afternoon's buyers were buying on the story. Nothing wrong with the latter, as long as you acknowledge that's what you're doing.

So, what numbers matter? For me it's all about the technology numbers. I don't care about the legacy business - in fact the faster they can cannibalise it the better it is for Tech. But the Tech numbers weren't great. Up 12ish% vs pcp? Not even in the ballpark of what they need to get to the FY29 target. Versus last half it's even worse - up just 1%. Those be selling kind of numbers!

What numbers matter to management? We're told that it's a set of newly revealed non-statutory numbers.

In particular, the CEO tells us that encoder sales are key. Makes sense - given the business model it seems like a reasonable lead indicator, and lead indicators are the best kind. Right? I'm not going to argue against it, but it's a story. It might turn out to be a documentary, but it's still a story. Also although encoder sales are up more than revenue, they're still well below the 40% overall Tech sales target. Now maybe that's ok because with Lexi Translate and the AI thingy, they're going to drive much higher ARPU. Again, I have a habit of believing the last argument put to me but that makes sense. But, again, it's a story. Might be right, might be wrong. But I acknowledge that we're stacking the stories together and they kind of all need to be documentaries...a docuseries!

I don't mean to be a negative nancy but I think we pay out on HC for being a hotbed of ramping, moonshots and story stocks. I'm not sure they've got a monopoly on the art.

I'm an AIM shareholder. I ended the day with exactly the same number of shares I had at the start. I didn't buy on the sell down and I didn't sell any this afternoon. I think any company deserves a little bit of rope, that statutory numbers are only one metric (albeit an important one), and I do believe the story. But it is a story and given I've got a fullish position in this I'll be watching the next set of numbers intently. Also, if we're to believe Tony that the numbers above are those that matter, they need to be transparent about these numbers going forwards.

[Held]

@Noddy74 interesting perspective. I also didn’t get the story about tech revenue. Something about how much is recognised as revenue in the period, versus what goes on the balance sheet and is recognised over time. (See note 8 on the Accounts).

So I made a note that I need to understand the revenue model and until I’m clear on that, I will closely follow P&L, BS and CF altogether.

I read back my straw and regret that I came across as too evangelical. That was more a reaction to just how amazing the AI deployments are becoming, and less a judgement on the investment proposition of $AIM.

So thank you for the bucket of cold water!

I think there is ample opportunity here to do some sober work and really understand the business, and probably just wait 6 months and see how the story evolves and what the delivery looks like.

Still, this still feels like it has the makings of a “fat pitch”.

If that came across as a directed criticism towards you @mikebrisy than I do sincerely apologize. It was not that!

It's just that there's been a lot of hype around this stock in the past 12 months (again, I'm on board so definitely not trying to downramp) by numerous players. I just didn't think the statutory numbers were great. Even when you just looked at the Tech segment...and I thought I should call it out.

I agree the unearned revenue number was very bullish. I specifically raised a question about that to confirm it was subscription revenue and would grow as the Tech business grew. I love that model where businesses can grow funded by their customers in advance of recognising the revenue - a negative working capital model. I don't know if they answered it as I foolishly assumed Tony would be done by 12.15 (I mean Change Financial started their briefing 30 minutes later and were done by then!) and had arranged to go for a surf. Will need to listen back to confirm although scrolling forward in the deck it does seem to suggest it is that.

Sorry, I should add If they're trying to explain the anemic Tech revenue growth by the contracted liability number on the balance sheet than that is BS. Contracted liability (unearned revenue) movement can be bullish for future revenue growth but it does not explain movements versus pcp. I say that without having listened to the Q&A so maybe there is some nuance that I'll learn about this weekend but just wanted to clarify my last post.

@Noddy74 @mikebrisy this is excellent stuff! People pay good money for this kind of in-depth analysis. Thank you

@Noddy74 thanks; I didn’t take it as criticism at all. I take everything here in the spirit of robust analysis, constructive challenge, and trying to get to the facts, all in service of leading to good investment decisions.

We often have a lot of work to do in cutting through management spin and selective communications. I’ve vented myself this week on at least one occasion.

So, bring it on! Keep it up.

I missed the webcast but my first impression was disappointment at the headline numbers, especially total revenue falling by 3% and although I’m expecting the legacy services revenue to fall away as that part of the business is phased out there is no sugarcoating it their technology revenue will need to grow much higher than 12% if they are to reach their EBITDA targets.

However the deeper I looked the more I liked what I saw. The iCap network is growing and LEXI’s share of that network is now 54%. They have added 14 new countries to the iCap network (they had 11 previously) mostly in Europe so their land and expand strategy is off to a good start there and the total number of hardware encoders increased by almost 20% (I'm assuming software encoder sales are not part of this?). They are expanding the LEXI toolkit with LEXI Voice set to launch in April which looks good. Cash flow was positive.

The pieces are moving into place but at some point the rubber needs to hit the road and the technology revenue will need to take off. Hopefully this half.

I thought this slide was interesting. Tony mentioned ENCO as a competitor when he last spoke with us who are probably AIMs closest competitor. AIM have competition snapping at their heals and in some ways this is an innovation race. Just how mush pricing power will they be able to maintain?

(Held)

Great post @Noddy74! I completely agree and it's important to try and avoid the endowment bias with stocks that we own. I felt like that Chris Farley GIF where his optimism turns into confusion as I read the AIM announcement:

"Ok let's see, 21% encoder growth, very nice...wow! 45% Lexi growth, looks like they will come in close to the 35% CAGR required for long term targets! Wait...hold on, 12%?"

Which resulted in spending the next 15-20 minutes trying to figure out what is going on. I speculated to @mushroompanda that perhaps the emergence of "Transition" revenue being broken out for the first time may be the answer as AIM may have previously included the human services supplemented by Lexi in Tech revenue. Tech gross margin spiking another 3% to 86% supported that if lower margin revenue was shifted out of the classification.

But with the conference call looming, the speculation seemed irrelevant as we would soon get the answer. Except...we didn't? When asked twice Tony handwaved it away talking about the Tech revenue "bucket" and saying it shouldn't be our focus as investors, we should focus on Lexi revenue instead. Ok, but three months ago weren't we told to focus on Tech revenue?

It's the sort of goalpost shifting I would be critical of any other CEO about, and Tony shouldn't be exempt from that because he presents with an enthusiasm not many CEO's can replicate.

All that said, like yourself I took no action. It certainly wasn't a thesis breaker, I expected muddy numbers through the segment transition and I never expected Tech revenue to grow in a straight line.

And to bring some positivity to this post: I thought the CFO acquitted himself well and through the deluge of information presented by Tony the commercialisation of Lexi Voice was genuinely valuable.

Further to my point, thinking on it further I am almost sure my theory is correct. I think the 14% "Transition" revenue (classified as human based Services supplemented by Lexi tech) was classed in Tech last year:

As AIM transitions Seven and Nine across to full Lexi and Tech revenue, they saw an explosion in this revenue and I think AIM had to make a decision. Report rapid Tech revenue growth but a declining gross margin (I suspect this "Transition" revenue would be at the normal Services 45% margin) or reclassify it and report lower Tech growth but higher gross margin?

They opted for the latter which is probably reasonable but it was very poorly explained. That said, it is just a theory but it explains it perfectly so I suspect I'm right.

Thanks for the deeper dive @Wini! I was certainly in a post conference call daze when I replied to the original thread by @mikebrisy and now have had to time to realise I jumped the gun on pumping up aspects of the call when there was far more to unpack and understand around the numbers than just how Tony was explaining them. I certainly didn't & haven't reacted with any buying or selling since the results release and will most likely hold off a few months until the dust settles in my head.

It could be that @Wini but if so it should be able to be back solved using notes 3 and 4 as well as the %s supplied in the deck. I've done so below and I get closest (least 'variance') if I include Transition revenue in Services in both years. I've sourced each row so you can follow my workings. Also, they shouldn't of been allowed to change the accounting treatment from one year to the next, unless they were willing to restate the comparative. It doesn't matter if it's just a disclosure in the notes, they need to be consistent. They might try arguing that it had an immaterial impact on the prior year, but that wouldn't fly because they changed their Major Product Lines in note 4 from Broadcast vs Non-Broadcast in 1H FY24 to Technology vs Services in 1H FY25, so the prior year is already getting restated.

I think the reason for the anemic growth (and the calculation below bears this out) is that they've actually declined in North America in both Services and Technology. That may or may not be a major cause for concern. For instance, I'd be less concerned if the reason is related to non-recurring hardware sales in the prior year. Thinking about it now it seems likely the Product Lines might be Hardware vs Software once Services is run down, which would assist with this. I'd also love to see them report Churn and/or Net Revenue Retention, which would assist as they mature and become more of a recurring software-based business.

For the time being I'm willing to put it down to "growing pains" but I'm hoping the numbers start lining up better with the story going forwards or they are better able to explain why this is.

[Oops, updated the financial year...my bad]

I think the reason for the anemic growth (and the calculation below bears this out) is that they've actually declined in North America in both Services and Technology. That may or may not be a major cause for concern.

The CFO, who in an act of mercy from God is far less verbose than Tony, got straight to the point on North America in the Q&A...

(if you have access to the transcript it is worth reading over – much better than trying to sit through Tony's two hour talkfest)

Question:

Melanie Singh

Thanks, Tony. We just have a few questions on the revenue mix. So maybe I'll start with Stella has asked North American tech revenue was relatively flat. Should we expect North American tech revenue to plateau or until gaining traction into non-broadcasting segments?

It's a good callout @UlladullaDave (and I said watching the Q&A was on my to-do and I still haven't done it!) but I don't think it's the answer. Stella - who is a microcap gun - specifically asked about Tech revenue being flat in North America. The CFO's answer explained why overall revenue would be suppressed in North America. What he said makes sense in that regard and brought in a new element that I hadn't fully considered i.e. recognition over time versus at point of sale. However, he's talking about a sale that in the prior year was Service revenue but in the current year is Tech revenue. Any of those conversions should be accretive to Tech revenue in the current year, even if you're not recognising the full amount up front (also excluding the discount they are passing on for Technology sales).

I'm increasingly getting the sense that some customers in North America broadcast have churned and they don't want to admit it. New sales and conversions from Service have largely offset this but the overall impact is North American Tech sales are flat to down. Again, maybe that's ok and we just need to get used to the fact that North American broadcast is at maturity and will on balance, hopefully, go sideway-ish from now with the other eight grid squares taking up the load. It seems like a lot of effort to get a single straight answer though.

I see by giving the transcript a quick flick that they've invited us to query them if questions remain unanswered so I think that's what I'll do.

@UlladullaDave , would you be able to please post a link of the transcript? ChatGPT has told me to piss off and the recording of the session has not been put up on the AIM website yet ... many thanks!

Great discussion @Noddy74

However, he's talking about a sale that in the prior year was Service revenue but in the current year is Tech revenue. Any of those conversions should be accretive to Tech revenue in the current year, even if you're not recognising the full amount up front (also excluding the discount they are passing on for Technology sales).

I think he is calling out the deferred revenue because it tells a part of the story. If the company is transitioning to upfront payment that is accrued to revenue through the year. That doesn't eyeball as unreasonable. However, as hardware sales are part of tech revenue and now that those sales are rolling off (at least in North America) they are apparently trying to segment tech revenue into "buckets" with the focus being the SaaS based Lexi revenue. I think they could have done a better job at explaining this rather than obfuscating.

I'm increasingly getting the sense that some customers in North America broadcast have churned and they don't want to admit it.

That's a possibility. It's difficult to square with the rising deferred revenue balance which JS attributed to the North American market. There's only really one thing that could be driving that rising balance: Hardware sales are recognised at the point of sale and services revenue is in terminal decline...

(The sense I got was that the new CFO is far less promotional than Tony is. Hopefully in the next few periods they can become a bit more straight shooterish)

The CFO's answer explained why overall revenue would be suppressed in North America. What he said makes sense in that regard and brought in a new element that I hadn't fully considered i.e. recognition over time versus at point of sale. However, he's talking about a sale that in the prior year was Service revenue but in the current year is Tech revenue.

@Noddy74 The CFO didn't make it clear but some of the sales could be already be technology revenue but with up front payment which is transitioning to SaaS based revenue. If the North American service revenue and technology revenue were both converting to SaaS then you could get supression of each of these revenues as it rolls off into the furure without necessarily a change in the proportion of services to tech revenue and the CFO did say, "So for example North America was the question. So we have had set targets for a sales people. They have hit those targets. They have sold to customers that are on long term contracts, 3 to 5 years, that pay annually in advance."

However in note 4 while the technology revenue as a proportion of overall revenue has gone from 48% in 1HFY24 to 55% in 1HFY25 (green arrow) the recurring revenue as a proportion of overall revenue has fallen from 71% in 1HFY24 to 64% in 1HFY25 (red arow). This is at odds with the CFO saying they all selling more recurring SaaS revenue. Maybe this is because one off hardware encoder sales an included in the "goods and services transferred at a point in time"? Either way the recurring revenue bucket has decreased in absolute number compared with the pcp.

However in note 4 while the technology revenue as a proportion of overall revenue has gone from 48% in 1HFY24 to 55% in 1HFY25 (green arrow) the recurring revenue as a proportion of overall revenue has fallen from 71% in 1HFY24 to 64% in 1HFY25 (red arow). This is at odds with the CFO saying they all selling more recurring SaaS revenue. 

It's not necessarily at odds with Singh's commentary.

The old services revenue had both point in time and over time revenue – it's anyone's guess what the actual splits are. I don't believe the CFO or the CEO are being nefarious here, I think as @Wini suggested the accounting is a bit messy to follow as this transition happens and they haven't done a great job of reconciling the presentations to the accounts.

Only caught up with AIM posts just now after seeing the wild moves on the share price

I only have a small holding, almost watch-like as I'm trying to still understand the stock. But it appears in summary the big talk about Lexi is not translating to the top and bottom line just yet.

I also see from my own research the North American market to be competitive with more players in that geography and that chart of US revenue and talk of churn sums it up nicely.