Release Date: February 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ai-Media Technologies Ltd (ASX:AIM, Financial) reported a significant increase in technology revenue, now accounting for 48% of total revenue, offsetting a 7% decline in legacy services.
- Gross margins improved to 63%, up from 39% three years ago, demonstrating strong financial performance.
- The company achieved an EBITDA profitable position and reported operating cash flow of $3.1 million, up from $0.5 million last year.
- Ai-Media Technologies Ltd (ASX:AIM) has a healthy cash balance of $11.7 million, net of all final payments to EEG and ACS vendors, leaving the company debt-free.
- The launch of LEXI 3.0 has been successful, with the AI-powered captioning solution outperforming human captioners in accuracy, leading to increased customer adoption.
Negative Points
- The company continues to see a decline in services revenue, which is expected to persist as more customers transition to technology solutions.
- Operating expenses increased by $1.7 million, primarily due to higher personnel costs and investments in product enhancements.
- The transition from human to AI-powered solutions may lead to challenges in maintaining service quality and customer satisfaction during the transition period.
- There is a need for continuous investment in sales and marketing to drive further growth, which may impact short-term profitability.
- The company faces competition from other AI-powered captioning solutions, which could impact market share and pricing power.
Q & A Highlights
Q: In terms of the language services, do the other language services like French and Spanish extend to translation, i.e., English to French?
A: That is the LEXI Translate product. What I was talking about today was actually same language transcription. We've had good traction with our automated translation engine going from English into French. The breakthrough is in live same language transcription for French and Spanish.
Q: Does your language service extend to other languages using different characters, like Chinese?
A: Yes, we are working to ensure that we have all the character sets from different languages embedded within the iCap code. This involves making sure that the characters are displayed correctly on various devices, which is a language-by-language, country-by-country process.
Q: Can you clarify if LEXI 3.0 is faster and better than human captioning?
A: Yes, LEXI 3.0 has outperformed human captioners on average. This improvement allows customers to decommission legacy modem infrastructure and move to a full technology solution, providing significant cost savings.
Q: What impact does LEXI 3.0 have on cost of sales and operating expenses?
A: As we see the decline in services revenue, the direct cost associated with human captioners will decrease. We will also see a reduction in costs related to maintaining legacy infrastructure, such as dark fiber.
Q: Are there any technology advancements that threaten EEG's encoders' importance?
A: No, EEG technology is not analog. We provide encoding technology for all new and upcoming video standards. Our products are proving better positioned in the market, even though they are higher priced.
Q: What is the outlook for OpEx growth? Will investment in sales and marketing continue to drive growth?
A: We expect some operating leverage to come through. While costs will grow in coordination with the business, the improvement in gross margin should accelerate beyond the costs.
Q: What issues surrounding the business now and upcoming keep you up at night?
A: Ensuring we have sufficient sales resources to attack all markets ripe for LEXI. We need to make sure we are not leaving anything on the table and are unlocking all potential markets.
Q: What is the revenue potential from LEXI expanding into new language captioning such as French and Spanish?
A: About 99% of traffic through iCap six months ago was English. With new sign-ons, we expect this to fall to about 95%. Ultimately, we see English being less than 50% of the total, with other languages making up the difference.
Q: Are your competitors seeing similar results with their automated captioning offerings?
A: Microsoft Teams is a good example of a competitor seeing significant uptake of automated tools. They are doing billions of minutes a month on automated captioning, which has almost completely displaced humans.
Q: What is the context behind the increase in trade receivables in the half that had a positive $2.4 million impact to cash?
A: We have tightened up processes and brought debtor days down significantly. This improvement is expected to be maintained, and we do not expect a reversal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
