AIM reported strong performance in FY22-H1 (see here). Revenue of $29.6m was up 29% on the pcp; gross profit ($15.7m) up 78%; and gross margin (53%) up 39%. EBITDA was breakeven compared with the loss of $7.0m on the pcp.

Much of this strong performance was due to the increased demand for AIM’s higher margin SaaS products Lexi and Smart Lexi which account for 26% of total revenue, up 44% on the pcp. Total captioned minutes for these automated SaaS products was up 98% on the pcp.

This strong performance is even more impressive given that students in universities and employees in workplace meetings are increasingly using Zoom and MS Teams (which incorporates AIM’s live captioning solutions). As a result, revenue from AIM’s legacy services in such individual support settings declined 25% on the pcp.

These trends vindicate management’s decision to grow the company as a technology platform not just a people services business, with lower revenue per minute caption but higher margins and scalability. In November 2021 Morgans acknowledged the long-term benefits of this strategy but cautioned the transition in product mix was likely to result in meaningful EBITDA decline in the short term. Morgans now acknowledges the transition has been well planned and executed, maintaining an Add rating and their 12-month target price of $1.09.

AIM is well placed to benefit from global regulatory tailwinds for live captioning. The FY22-H1 report did not provide an update on live broadcast opportunities it was pursuing in India. Such contracts would clearly enable AIM to grow its revenue beyond the $60-$62m it is now forecasting for FY22.

Disc: held

The addresses and presentation by the Chair and CEO of AIM at last Friday’s AGM confirmed the company is on track to become a global leader in captioning, transcription and translation solutions. The link to that document in my previous straw wouldn’t open, so this link is to the ASX website which also provides the announcement.

An updated report on AIM by Morgans after the AGM on 12 November was generally positive, retaining an ADD recommendation and a 12-month price target of $1.46. That report, however, referred to lower revenue in the short term as the Company transitions towards new product mixes, while acknowledging significant medium- and long-term gains from higher margin SaaS products.

The Company’s share price fell 20% yesterday, closing at $0.775, and has fallen a further 8% this morning at time of writing. AIM has issued an announcement today, advising that it does not adopt or endorse the forward projections reported by Morgans.

One matter of interest in today’s announcement is that significant new markets are emerging faster than anticipated, as countries like India introduce live captioning standards after adopting the UN Convention on the Rights of Persons with Disabilities. If AIM expands into these markets, even the short-term costs involved in changing product mix may be outweighed by increases in new SaaS revenue. AIM’s management seem highly committed and capable of navigating these new pathways.

Disc: I have taken this opportunity to top-up my holdings.

The Chair and CEO Addresses at today’s AGM confirm AIM’s strong growth since listing at $1.23 in September 2020.

The company has a long history of providing high quality live captioning for those with disabilities, but strategic acquisitions have enabled AIM to become a leading global provider of captioning, transcription and translation services. The company now has more than 2,200 customers globally including Disney, Fox, NBC, Channels 7 and 9, Sky News, UK and NSW Parliaments, and the World Economic Forum. Microsoft Teams users can now access AIM’s live captioning solutions.

AIM’s captioning, transcription and translation services are offered at three price levels: automated (Lexi), semi-automated (Smart Lexi), and premium (Ai-Live). FY22-Q1 revenue was 35% higher than FY21-Q1 with an increase in gross margin from 39% to >50%. However, a 75% increase in Lexi and Smart Lexi usage since the PCP, together with sales of other new SaaS products, should significantly improve AIM’s gross margin in the years ahead.

AIM has a healthy balance sheet and recently announced an on-market buy-back for up to 2 million shares over the next 12 months, which will benefit shareholders.

Like the global commitments at the Glasgow Climate Summit to reach net zero emissions by 2050, 163 countries have ratified the UN Convention on the Rights of Persons with Disabilities. New laws introducing captioning services to meet obligations under this treaty should provide further tailwinds for AIM.

AGM Presentations

Thanks to Trancer for today’s comments on AIM’s business model/strategy. I couldn’t find a Reply button – hence this straw.

In their June 2021 Newsletter, Chris Bainbridge explained why Pie Funds are excited about the upside ahead of AIM, a new addition to their Australasian Emerging Companies Fund. The company listed in September 2020 with an IPO price of $1.23. At that time the company relied on human curators for live captioning/ translation/ transcription of speech with 99.5% accuracy. They have since launched automatic (Lexi) and semi-automatic (Smart Lexi) speech recognition services achieving 98% and 98.5% accuracy that meet industry standards and are well in advance of the 92% accuracy associated with out-of-the-box solutions.

AIM’s acquisition of EEG in May 2021 is transformative, increasing the intensity of their technology and improving the effectiveness and efficiency of human curators. AIM is now able to provide market leading live captioning services from any language to any language, streamed in any format to any device at any time, that can be recorded for later access. Clients include the United Nations, World Economic Forum, Channels 7 & 9, and Sky News.

Mark Tobin’s Coffee Microcaps interview with Tony Abrahams, CEO of AIM, confirms the upside ahead of AIM which is on track to exceed their long-term 18% CAGR forecast:   https://www.youtube.com/watch?v=dak0LpYi2oU