Last night I came across the announcement from CES in Vegas last week that VLC (the not-for-profit, open source media player) has now built in a FREE AI Powered Subtitle and Language translator into its media player that will even translate and subtitle videos into 100 languages while the user is watching videos offline!

https://www.facebook.com/reel/8974527792583812

https://www.pcmag.com/news/vlc-media-player-to-use-ai-to-generate-subtitles-for-videos

I don't know enough about the product or industry to know if free, open source advancements like this eventually disrupt AIM's live broadcast niche, but it doesn't seem like a huge leap.

In Strawman's notes after interviewing the AIM CEO he mentions the company is in the early stages of tapping into the broader market potential and that 25% of the total market is subtitling pre-recorded media. Assuming the quality of VLC's FREE translator and subtitling engine is similar, surely that whole segment just went the way of Appen?

AIM is on my watchlist... I think I'll sit tight and watch a while longer..

I note this morning EEG Video holdings LLC principal Philip McLaughlin sold 5.3m shares for around $4.1m. EEG is no longer substantial, though looks like it still has around 9.3m AIM shares.

 89298.pdf

Philip sold EEG, the AIM company maker (so far anyway) in April 2021 for around $34m.  To fiancé the purchase AIM raised capital at 80 cents.

It is interesting his recent sale is at around 78 cents, so maybe he is just getting some of his sale proceeds back. I would not read too much into it all. Though judging by his pile at Long Island maybe he needs the money to pay his gardener.

CEO Tony Abrahams has purchased another 312,500 shares on market @$0.80 (value $250,275).

That’s about half a million dollars worth of shares this month from the CEO

AIM CEO Anthony Abrahams has bought another $200,000 worth of AIM stock @ $0.80

Adding to his significant skin in the game.

https://investorpa.com/announcement-pdf/20241209/78690.pdf

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

The appointment of Otto Berkes and Brad Bender seems to be a great move, when you look at their CV's. These fellas have some decent experience, by the looks of things.

AI-Media appoints two US-based directors

AI-Media Technologies Limited (‘AI-Media’ or the ‘Company’) (ASX: AIM), a global technology provider of captioning, transcription and translation solutions, today announces the appointment of two new US-based non-executive directors, Otto Berkes and Brad Bender, completing its process of board renewal announced earlier in the year.

AIM Chair John Martin commented “A key priority was to strengthen the board’s expertise in advanced and emerging technologies and experience in scaling a global technology business. We were also seeking candidates with strong connections in the United States as this is a key growth area for us. We are delighted to announce that we have found two highly experienced US-based directors, providing the board with complementary and diverse additional skills in engineering and product development.”

Otto Berkes brings over 30 years of senior technology and business leadership together with over 15 years of director-level experience. An Xbox founder, Otto’s previous roles have included General Manager at Microsoft, Chief Technology Officer at HBO, where he led building HBO’s streaming services, and Chief Technology Officer at CA Technologies, where he drove the company’s technology strategy and innovation efforts. He was also CEO of HireRide, an end- to-end analytics-based hiring platform he created through both acquisitions and organic development. Otto has a BS in physics and an MS in computer science and electrical engineering. He is currently a non-executive director of Integral Ad Science (NAS: IAS), a global digital advertising measurement and optimization platform, and an advisory board member for IntelAgree, an enterprise-scale AI- enabled contract management system.

Brad Bender brings over 25 years of global product and management experience together with over a decade of director-level experience. As Vice President of Product Management at Google, Brad most recently led Google News and Search Ecosystems, delivering AI-driven initiatives serving billions of people

worldwide. Brad previously led Display and Video Advertising at the company, where he founded the Google Display Network and drove its growth to become a multi-billion-dollar business. Prior to Google, Brad was most recently a Vice President at DoubleClick. He has a BS from Cornell University, and currently serves as an independent board director of Entravision (NYSE:EVC) and an advisory board member for OutcomesX.

Alongside the appointment of Brent Cubis as non-executive director and Chair of the Audit & Risk Committee in July, we believe we now have a board with the expanded mix of skills and experience to steer AI-Media to its next stage of product development, growth and international expansion.

The appointment of Otto Berkes and Brad Bender is intended to take effect from 1 December 2024 and is subject to the Company obtaining shareholder approval for an increase to its aggregate remuneration of non-executive directors at its 2024 annual general meeting to be held on 27 November 2024. The Company will despatch is Notice of Meeting later today.

A couple of days ago, AIM released the following PR announcement regarding winning ITV (UK) as a customer: https://www.ai-media.tv/knowledge-hub/insights/ai-media-and-itv-announce-landmark-partnership/

ITV is the UK’s biggest commercial broadcaster – so think a Channel 7 or 9 here in Australia, scaled to the UK population. Even large-ish customer wins are no longer price-sensitive for this company, so there’s no associated ASX announcement. It might be worth following Ai-Media’s LinkedIn or Twitter accounts for those who follow this company.

A couple of points that were of note to me:

• Europe and UK expansion was a big priority this year. Tick.
• The ITV director quoted spent 8 years at Red Bee, which is a competitor to AIM. If this is an indication of Red Bee’s competitive position, given the director knows them so well, then it bodes well for Ai-Media. Red Bee currently holds the captioning contracts for ABC (Australia) and SBS, which I understand are up for renewal in the next year or two.
• This announcement confirms AIM’s competitive strengths – able to be embedded in a customer’s complex workflow and its reputation. I had to ChatGPT what “VANC embedded data” is, and it demonstrates how specialized captioning workflows can be for large broadcasting customers – it’s a headache no new entrants would want to deal with.

There's a lot about AI-Media that is easy to miss, so I wanted to try and elucidate the key aspects of the business, its offering and the competitive advantages it has -- as informed by today's conversation with co-founder and CEO Tony Abrahams.

But, to be honest, i'm not confident i've got things right so please correct me if you think I'm off base.

First, as @mushroompanda has already said, they aren't building AI models themselves. AI-Media’s technology relies on APIs (Application Programming Interfaces) to connect their software with these external AI engines.

AIM's products provide context to AI engines, such as metadata from broadcast streams (e.g., identifying speakers, locations, or specific program segments). This customization improves the accuracy of AI-generated captions by using additional data.

Their competitive edge comes from effectively embedding these AI models into a unique, customer-focused delivery system which integrates into existing workflows. It's more about ingesting audio/video feeds, extracting the relevant information, and sending it back in real-time so it cam be inserted/overlaid into the broadcast.

The acquisition of EEG (a provider of encoding hardware) was really a pivotal moment for AIM, giving it control over the critical hardware needed to feed audio data into AI models, allowing seamless integration with their cloud-based captioning services.

The total addressable market for AI language services is vast, estimated at around $70 billion annually. Tony pointed out that AI-Media’s current focus—live speech-to-text and live captioning—represents just a small fraction of this market, approximately 1%.

At the moment, around 90% of AI-Media’s operations are centered on live captioning and transcription, primarily driven by their LEXI solutions. However, Tony stressed that this is just the tip of the iceberg, indicating that the company is still in the early stages of tapping into the broader market potential.

A significant portion of the market opportunity lies in recorded media, which accounts for about 25% of the total market. This includes transcription and captioning for pre-recorded content like TV shows, movies, and online videos.

There are also considerable opportunities in broader AI language services such as voice dubbing, audio description for visually impaired audiences, and other multilingual services. This segment, which Tony identified as the larger $69 billion part of the market, involves using AI to handle voice processing, translations, and enhancing accessibility through audio descriptions.

The market for AI language services extends beyond broadcasting and includes government, enterprise, education, and entertainment sectors. Each of these industries has unique needs for language services, from live captioning and translations to complex workflows

Tony highlighted that one of the key drivers of market growth is the reduction in costs associated with AI-powered services compared to traditional human-based models. For example, automated audio description, which traditionally required 25 hours of human labor per hour of content, can now be fully automated, significantly reducing costs and making these services accessible to a broader range of content creators.

He also said that regulatory requirements for accessibility, such as mandatory captioning and audio descriptions, are increasingly pushing broadcasters and content providers toward adopting AI solutions. This trend further expands the market opportunity for AI-Media’s products.

As mentioned at the results briefing (or potentially earlier?) Tony outlined ambitious financial targets, including reaching $150 million in revenue and $60 million in EBITDA within five years. 

And he said they wouldn't need to raise capital to pursue this -- all the pieces are in place and growth can be driven by organic cash flow.

He certainly has his money where his mouth is, recently acquiring 5m more shares to lift his stake to almost 17% of the business (he bought at 31c -- not a bad trade so far!).

Anyway, it seems that AI-Media is a genuine market leader in a fast growing market that offers increased service and lower cost for its customers. It's well capitalised, cash flow positive, founder-led and expecting to 15x EBITDA in the next 5 years.

Shares are on ~27x EV/EBITDA

I don't presently hold in real life, but will be adding a watching position here on SM today.

CEO purchased $1.5m worth of stock on market at $0.31 taking his holdings to 16.9%. https://announcements.asx.com.au/asxpdf/20240618/pdf/064nxhfbzh5rd9.pdf

Previous to this, around 1.5 years ago, he purchased $1m worth. https://announcements.asx.com.au/asxpdf/20221129/pdf/45j5m9b1sh00x3.pdf

The size of the purchase is not what you typically see in ASX microcaps.

I went back and watched the interview with CEO Tony Abrahams from 2 years ago. It’s amazing how much of it is still relevant today. Back then, it was a captioning services company that had just made an acquisition of a captioning technology business (EEG) and was pivoting hard in that direction. The services business was impacted by free captioning offered by the likes of Zoom and Microsoft Teams and saw a horrendous -25% decline in revenues. The transition from services to tech is now two years on, so what does it look like?

In that period, Tech has gone from 28% to 48% of revenues and now accounts for nearly 2/3 of the group’s gross profits. It’s now not only backfilling, but over-powering the declines in services and is powering revenue growth at the group level as well. Tech has much higher gross margins (80% vs 40% with services) and has improved the overall gross margin from 53% to 63%.

The bottom line has also improved and has now inflected into profitability and FCF positivity. The amortisation of previous acquisitions and the historically higher capex spend is suppressing the statutory numbers. My normalised EBIT number (EBITA minus current capex spend) is my preferred metric for underlying profitability and that’s now well in the green.

It’s currently trading at 1x revenue and 19x EBIT, and the market clearly doesn’t believe this to be growing tech business, with improving margins, inflecting into profitability and who’s largest division by gross profit is growing at 40%pa.