Pinned straw:
Some may wonder why $AIM SP opened up strongly after the release of the results this morning, but then has actually dropped significantly after the investor call.
Before explaining why I think this has happened, I want to say that, in my opinion, $AIM gave a reasonable update today. I haven't gone through it in detail yet, but I'll jot down some of the highlights at the end of this straw.
So What's the Big Deal?
I wonder if anyone else noticed the sleight of hand which - to me anyway - is a significant change in strategy? (I wrote this sentence when the SP was still up amost 10%, and I guess the answer is "yes" lot's have noticed!)
Spot the difference in the following 2 slides: the first is today's at FY25, and the second from 1H FY25.
From today at FY25
From 1H FY25 6-months ago
Put simply, the target for FY29 Tech revenue has come off from $150m to $120m in 6 months.
And so, a continuing Services revenue (being new professional services to help clients embed new products) has been created.
Magically, $30m revenue is targeted for this new Services product, so the $150m overall revenue target remains, but presumably the previous $60m EBITDA will be reduced. However, what the $60m has become was not communicated (but can easily be calculated).
I was a bit slow at picking up this difference (didn't realise until it came up on the Q&A), and so I consider that Tony and his CFO were less clear in explaining the change in thinking.
My Assessment
For those of us who have modelled what a $150m revenue tech business in FY29 looks like in terms of value, the SP today does not reflect this value. In fact, the margin of safety is so large, that there is ample room for several more "downgrades" like today.
If you want to have a quick look, consider @Travisty's recent valuation (noting the discount rate as well as margin of safety applied!)
Pending a deeper analysis of today's result, I think $AIM is making progress. But this material change in just 6 months is - to my way of thinking - a clear demonstration of why a high discount rate and/or factor of safety is warranted for this business.
My assessment of risk also means I will maintain my current position size of 5%.
Should, in future reports, $AIM demonstrate that it can scale towards its lofty ambition, there will be ample opportunity to add more.
Selected Other Highlights
Above, I have focused on the big shift of the day, there is also a lot to like in the FY delivery, including:
- Encoders growing by +39%
- Tech revenue up +19%, accelerating +$23.6m in H2 from +$17.5m from 1H
- Cash balance up by +$3.8m to $14,2m and no debt - aided by change to structure of contracts
- Investment in product fully expensed ($3.5m off EBITDA)
- Expanded from 11 to 25 countries, driven by EU
- LEXI Voice is now being implemented in initial customers, with revenue expected in H2 FY26
- LEXI AI is targeted for launch at the NAB show in April 2026
There are a few technical revenue issues that I need to work through, including it sounds like some restatement of last year. (Note to self to have a closer look.)
Tony peppered the presentation with progress at several high profile clients. A few examples:
AWS is switching off its human services and moving fully to Lexi, one of $AIMs largest enterprise customers, for the live events it hosts. (Breaking news today,....based on accuracy of the AI being better than humans.)
Wins in the US Government (US Congress and US Senate, leveraging a reference case from the US) and Canadian parliament - indicating progress on the Government row of the 9x9..
Conclusion
Long term aspirational targets are a double-edged sword, Initially last year we saw the $AIM SP benefit from them, and today we are seeing it suffer. However, overall, this business is executing its strategy, and is growing strongly, with the new products moving into commercialisation phase and potentially opening up the addressible market.
While the aspiration has been reset, from my perspective, the overall thesis is intact and the changes are relatively minor within the margin of safety.
Disc: Held in SM and RL
It's worth noting that Thorney is likely a forced seller at the moment. Hence the heavy volume going through post FY25 results.
Source: FY25 Report
Source: The Australian, today.
@Schwerms , Deanne Weir looks to be done dumping - exited the last lot on results day last week. The Form 605 just popped into the Inbox.
EDITED based on@Silky84's comment : Deanne Weir had 10m shares on the register, a 4.79% stake at 30 June 2025. With these sales, she has a minimum of 9,112,826 shares left to dispose off, for which there will be no further Form 605 disclosures.
Selling pressure was still there today. Looking at the volume, a bit of dumping went on today as the price tried to push upwards, unsuccessfully. If Thorney isnt done flogging his stake, unlikely we will see any price movement above 61.5c to 65.5c for another few weeks - today's volume was 1.49m, Thorney would have started with 20.5m, so still some days to go to absorb the bulk of that volume, it would seem ..
@jcmleng The graph is not showing all the volume that went through in the past few days. I suspect it's only tallying ASX volume, and not Chi-X. 6m shares went through yesterday (4/9) with a lot of big crosses.
@mushroompanda , poked around a bit and you are right that my Trading View chart shows only the ASX volumes. I got this chart, below, of the AIM trading volume from the ASX page itself, which mirrors the Trading View chart numbers.
The AIM volume on 3 and 4 Sep on Chi-X is ~2.4x and ~9.1x the ASX volume, respectively, on those days .... pretty huge! Would be very interesting to see today's Chi-X volume - can you please post the link to find the Chi-X volume - haven't been able to find it via Google.
Guess we will just have to wait for the price action on the charts to reveal when the selling has abated!
Discl: Held IRL and in SM
Adding a few more charts and comments to the excellent comments already made.
My thesis and conviction is based on (1) AIM having one hell of a technology moat (2) has mission critical captioning offerings that is far more accurate and cost effective minus humans (3) a huge TAM against which to sell those offerings and (4) once sold, is sticky as hell recurring and high-margin usage-based revenue.
My AIM thesis is not predicated on the FY29 target at all, and so the gyrations around valuations, expectations etc is not a focus for me. Rather than focus on the FY29 aspiration (will they meet/will they not meet), the transition, challenges with revenue definitions etc, I am more focused on tracking progress of the underlying operational leading indicators. If these indicators continue to trend and scale correctly, the other issues will sort itself out over time and the AIM share price will follow suit.
My overriding sentiment is the leading indicators are trending very nicely, there are early signs of acceleration, and there is more to come, soon.
All said, my conviction went up a notch with these results.
Network Trends
iCap Network usage, LEXI SAAS Usage and % of LEXI usage all continue to grow - acceleration in all 3 metrics is evident in 2HFY25.
Encoder Numbers
Active Encoders at end of FY25 was 7,062 (FY2024: 5,094)
In the footnote in slide 6, 800 inactive encoders in FY24 were activated in FY25 - these were from large customers who were waiting on SOC 2 Type 1 security accreditation which was received in FY25
Active Encoder numbers are accelerating - this lines up with the acceleration in iCap Network and LEXI Usage and the expansion of countries
Global Expansion Progress
- Global expansion has progressed - +23 countries from a FY24 base of 13 countries
- 9 countries added in 2H25, 14 countries was added in 1HFY25
Revenue Transition, Impact on Margins
Winding down of Services Revenue and transitioning to Tech Revenue is both accelerating
Blended gross margin rise as a result of the skew towards higher-margin Tech Revenue is also accelerating HoH
2HFY25 was a big jump from both 1H and YoY as @Wini pointed out
Sales Acceleration
To test the Sales Acceleration” point and work out pro-forma “Actual Sales” in each FY, did the following:
(1) reversed out the previous year’s Contract Liabilities from Current Year Tech Revenue - this revenue is actually last year’s sales, recognised in the current FY as services are delivered
(2) added the Contract Liabilities from current FY balance sheet - these are clearly sales in the current FY but revenue cannot be recognised as they relate to services to be rendered in the coming FY
The Sales Acceleration ie, the gap between “Actual Sales” and P&L Tech Revenue seems clear in FY2025 as more 12M contracts were locked in for delivery in FY26 - this trend should continue in FY26 as AIM progressively signs up new customers on annualised contracts ie, more sales is locked in now, for delivery up to 12M out - this is a good thing as it will provide more future revenue certainty, improve cashflow etc.
Other Operational Things That I Liked
Cyber Security Accreditations - SOC 2 Type 1 and US Defence Security Accreditations were received. This is quite key, operationally, as they help remove customer acceptance and customer onboarding friction. A good chunk of encoders were turned on in FY25 once SOC 2 Type 1 accreditation was received.
Expenses Under Control - Total Expenses down 1.8% YoY, down 2.4% HoH - G&A down 3% - cost out program took $5m cost out, 50FTE - the savings from this has been reinvested in headcount for Sales & Marketing and Product Investment which makes sense
Transition to Annual Billing - Billing is progressively been changed from monthly-based-on-actual to annual billing for fixed minimum usage with an annual true up for overages - this can be tracked by the growth in Deferred Revenue in the balance sheet. Hated this as a customer, but love it as a shareholder!
Really glad this helped in some way @Clio and @Travisty .
I should have added this slide which to me, very clearly articulates the AIM moat. The moat is not one component, but the combination of ALL the 4 capabilities, working together, literally every second, 24/7, at 99.99% uptime as disaster recovery is built in, via LEXI DR, to guarantee the uptime. From an IT perspective, this is wet-thy-pants stuff for me ...
I built the charts in the previous post rather haphazardly as I worked through the pack, but inadvertantly, this slide helps bring together why it is important to track each metric - the Encoders, the iCapNetwork, the country expansion and more obscure things like cyber security accrediation.
Each of these are key components of the moat. So if the metrics are firing, the moat must be firing and good things, thus, should dutifully follow.
Tony has been very consistent in this messaging in the past 2 years.
@jcmleng I also appreciate the detailed and structured assessment you did of the $AIM result. I gave it a cursory review on the day and attended the call, but in terms of next level detail (and importantly) the trends over time, you've saved me some work. Also @Wini's chart really does draw attention to how strong the 2H step-up was, albeit 1H was underwhelming.
I agree with your overall sentiment, and equally my conviction is also strengthening. I've added a further 12% to my RL ASX portfolio on recent weakness post the result, and now have a 5.5% RL position (also added a little to SM to track my buying intentions.) I think that's as heavy a position as I am willing to hold.
I think Tony must have gotten the message from investors that his communication was misunderstood. Below I've copied his 4 daily LinkedIn posts, on progress on the investor roadshow.
Key messages on Target framework for FY29
- $150m revenue
- $120m tech and $30m services
- Tech at 86% Gross Margin
- Services ... they are "new high-value services" ,,, and they'll have c. 50% GM
- And, yes, ... $60m EBITDA is still there.
But back to your straw, it is the short term delivery and trajectory that should give us confidence.
So, I then wondered why does the market have such a downer on it? (vs. any reasonable calculation back from FY29)
I wonder if the real question is, in the AI space:
- What is the product life cycle - can the growth be sustained? Do the encoders and integration into customer workflow present a sustainable moat, or can it be disrupted? Who can even predict one year ahead, Let alone 4?
- LEXI Voice and LEXI AI - can $AIM deliver material sales from these? We'll get a reading on this over the next 12 months.
Overall, it's a thumbs up from me. Lot's of upside if Tony can deliver the vision.
Disc: Held in RL and SM
Overall, cautious holder after FY25 results. For me the key is still whether they can execute on selling products other than transcription.
Good to see tech sales and deferred revenue explained and detailed for past 3 years. The story about more up front revenue being sold tracks with deferred revenue more than doubling from FY24 to 10.5m in FY25. Gross margin swelled to over 70% for the half.
iCap and LEXI network usage continued the right trend with solid increases from H1 so that's a tick.
Revenue wise, the services declined even more than I expected but total revenue was slightly higher than I thought. The decline in APAC revenue for the 2nd straight year was a bit surprising to me and I don't think was addressed. Good to see EMEA sales up after such focus there.
The most worrying point was LEXI voice. There was only 1 customer since launching in June, I wonder whether demand is there or whether it has product market fit - perhaps 8 second lag is too long. This will likely still be question after H1 FY26 since they don't expect meaningful revenue until H2. Much of the strategic focus has been put on Voice so it's a wait and see. I have to adjust my chance of success lower though.
Nice to see a positive NPAT for the half, looks to be from the higher gross margin. One thing I was tracking was Free cashflow and EBITDA margin by half and it was trending along well for H2 FY25. Still working on what's the best thing to track though.
The most positive thing about Tony is his ability to pivot and adapt. He can come up glib and bold, aiming for the UN as a LEXI voice customer. But he showed decisiveness in this result with move to in-house LEXI AI. That's not to say it was the right decision. There is potential that it is over-investing in something that won't work since it's such a fast moving space. But the thing with this business if it doesn't work it won't be for lack of trying, and I'm willing to give management some more rope. They have executed well on the human to technology transition.
So overall, holding at this stage. Need to do update my valuation but my sense is the price is reasonable for the base case, and plenty of upwards asymmetry for the bull case.
I'm really keen to read other's view now - I found this really useful to write out before reading anybody else's view, I'd recommend.
By the way, both AIM and RTH that reported today had the rocket emoji in their slides, as if that seals the deal!
If you're not going to fess about the change in strategy, you have to wonder what their rationale was for keeping that slide in the deck! It was so obviously different to what they've been presenting for the past 12 months. For me it's not the change of strategy that's annoying. It's the lack of transparency and the lack of necessity for it. It wouldn't be hard to explain how you might of been a little hyperbolic in the exact components of the business in a mature state. Particularly when you're still going to get to the same place, in the same time - maybe with a slightly lower EBITDA.
For me the issue isn't the new slide, it's the previous one. They'd spoken about how there was likely to be scenarios where you need a human in the loop, and yet they were presenting a slide that had Services going to zero.
Other than that there was a lot to like in the result. I was concerned at the lack of Tech growth at H1 but that's not an issue in this result. The strong growth in encoder sales, the increase in unearned income (which is likely to continue), continued geography rollout etc. I particularly liked this nugget:
I think churn of their top 20 customers should be a standing question at each of the presentations going forwards.
I've taken the opportunity presented by their own goal to nibble at it this afternoon.
Great thread guys, agree with everything.
My main thought as I read the AIM report and watched the share price reaction is that it is messy. The business is messy as it transitions from Services to Tech, the accounting is messy as they transition from selling Lexi minutes to annual subscriptions and the IR is messy as Tony focuses on a long term target no one thinks he can hit with little guidance in what the short term looks like (other than unlabelled columns on a chart!).
That said; I thought this was a great result. To be more specific, I thought this was a great second half result, which the company did a poor job breaking out. The company had a decent slide in their deck showing Tech revenue plus the deferred revenue balance (slide 15). For me this is the right way to think about Tech growth as they undergo the SaaS transition, though again it could have been better broken down half by half:
Even if you add back the $1.6m accounting change that is a huge step up in the 2H.
I think AIM suffers from some "lady doth protest too much" when Tony jumps on a call. The heavy focus on Voice, AI, FY29, etc. causes people to overlook the fact he has a pretty damn good business right now!
Anyway, this was a far better result than I was expecting. Will digest it over the weekend but at first glance this looks like the rare example of a good result being sold off which can be great opportunities.
I totally agree @Wini. I can't help but see huge upside in this company, despite the messy numbers there is fantastic growth in the area's they're targeting, continue to build a moat around their business as they embed into more workflows of customers. Have picked up their first big Government client in a US Gov Department. And we stil have the upside of Lexi Voice with a TAM that is 30x that of text. Then there is Lexi AI as something that may increase that product suite to be an all in one go to for many large broadcast, enterprise and government clients!
Anyway, I did a quick bear case DCF scenario to see what would need to happen growth and margin wise for the current share price to be fairly valued.
To get to the current SP, I significantly reduced the forecast REV Growth. Lowered EBITDA Margins in the event they get squeezed for some unforeseen reason (e.g some sort of competitor entering the space). I also raised the SOI growth to 0.4%pa and also lowered the PE to a conservative 30x. STILL after using a 20% discount rate PLUS a decent Margin of Safety that increases the further I predict out and I just get to the current SP!
Looks like the market thinks there is very little chance Tony and the team can make it anywhere near their target...... I believe otherwise and see this as very good risk/reward investment, especially with having No Debt and an increasing cash balance, reducing the risk of dilution via cap raise.