Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ai-Media Technologies Ltd (ASX:AIM) is on track to transform into a high-growth technology SaaS business, aiming for $60 million in EBITDA by FY29.
• The company has successfully expanded its market presence in Europe, adding 12 new European countries and increasing European revenue by 36%.
• Lexi, the core SaaS product, is experiencing significant growth, with a 48% increase in volume and 45% increase in sales dollars.
• The technology gross margin has increased to 86%, indicating strong profitability in the tech segment.
• Ai-Media Technologies Ltd (ASX:AIM) has successfully launched new products like Lexi Voice and Lexi Brew, which are expected to drive future growth.

Negative Points

• Total revenue declined by 3% due to a strategic reduction in services revenue, which the company is trying to phase out.
• The transition from services to technology revenue is causing some financial noise, with statutory numbers being a mix of decreasing and increasing revenue lines.
• There is a significant reliance on the success of Lexi and new product launches to achieve future growth targets.
• The company is undergoing restructuring, which includes cost-cutting measures and potential one-off restructuring costs in the second half of FY25.
• Encoder sales, while important for initial market entry, are not a reliable indicator of long-term growth due to their lumpy nature and the shift towards SaaS revenue.

Q & A Highlights

• Warning! GuruFocus has detected 1 Warning Sign with ASX:AIM.

Q: Have most EU broadcasters already planned to adhere to the EAA Act, or is there still demand from those lagging behind the deadline? A: Tony Abrahams, CEO: We have seen an increase in compliance, and while full compliance may not be achieved, we expect around 80% compliance by June 30. The investment in Europe was strategic to meet this timeline, and the opportunity now lies in technology advancements that surpass human capabilities.

Q: Can you explain how Lexi Brew works in a law firm or financial services firm, and what makes it unique? A: Tony Abrahams, CEO: Lexi Brew enables the distribution of intellectual property within an organization by digitizing archives and automating metadata tagging. This allows for efficient access and utilization of historical data, providing a business case for digitization and enhancing content monetization.

Q: Do you expect higher European encoder sales in the second half of FY25, and how many were sold in the first half? A: Tony Abrahams, CEO: Timing is uncertain due to compliance extensions, but we initially aimed for around 180 encoders for the full year in Europe. Currently, we have about 125 encoders sold. Encoder sales are less significant compared to the recurring revenue from Lexi services.

Q: Should we expect North American tech revenue to plateau until gaining traction in non-broadcasting segments? A: Tony Abrahams, CEO: We focus on Lexi volume and dollar growth rather than tech revenue as a whole. Lexi revenue, including Lexi Voice and Lexi Brew, is expected to grow consistently, with margins over 80% and no human involvement.

Q: What are the expected cost savings from the restructuring, and will there be more one-off costs in the second half? A: Jason Singh, CFO: We expect half of the $5 million annual cost savings to materialize in the second half. While there may be some one-off restructuring costs as we transition from services to technology, the focus is on optimizing expenses and reallocating resources to growth areas.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.