Company Interview / Ai-Media's AI growth plan

Key points:

• Ai-Media Technologies narrows after-tax loss to $1.3M with a 7.2% revenue increase

• Shift to AI-driven solutions enhances quality and cuts costs, improving margins.

• Expansion plans include Europe and Asia, with diversification into new sectors.

Tony Abrahams from Ai-Media Technologies (ASX: AIM) states that the company's annual after-tax loss narrows to $1.3 million from $4 million. Revenue rises 7.2% to $66 million, and gross profit climbs 15% to $42.5 million. The company ends the financial year with a cash balance of nearly $11 million.

Tony explains that the shift towards AI-driven solutions, including a notable acquisition of EEG in the US, significantly improves both quality and profitability. The company's technology allows for more accurate audio transcription, reducing the need for human intervention.

Moving forward, Tony reveals plans for global expansion, especially targeting Europe and Asia. Additionally, Ai-Media aims to diversify into government, enterprise, and education sectors, leveraging strong R&D investments and sustained positive operating cash flows.

Full unedited transcript below:

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Tech company AI media, which provides captioning and transcription solutions globally, has narrowed its annual after tax loss to 1.3 million from 4 million the previous year. Revenue for the year up 7.2% to 66 million, while it saw gross profit rise 15% to 42.5 million. It ended the 23 financial year with a cash balance of almost $11 million. No dividend has been declared, but let's get some more details now. It's received a good bump this morning on the market. Tony Abrahams is the chief executive of AI media. He joins us now. Tony, welcome. Thanks very much. So how would you describe this result as you obviously looking to to move to towards profitability there. Yeah. So I mean I co-founded AI media 21 years ago. And for the first 18 years all of the AI still required some kind of human in the loop three years ago. The sort of changes that we're seeing in ChatGPT and the likes of

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generative AI really began to hit the live captioning market for the first time, and that's when we pivoted from delivering our solutions with the human in the loop to looking at how we could deliver the best possible technology solutions. And doing that, we acquired a business called EEG in the US in 2021. This company actually has the core encoder suite of technologies that embed audio and video from broadcasters directly into the workflow of our customers. Um, and what that's enabled us to do is to get the best possible quality audio, um, think of it as rather than getting post mix audio on the Olympics. Um, you're getting individual microphone input from the commentators, which of course is going to drive the AI transcription to be much better because it's going to know who's speaking and it's going to be much better in terms of

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accuracy. One thing happened in this last year that was super significant, that's helping drive us towards profitability, and that is that for the very first time, the underlying AI technology surpassed the quality of humans for the first time. And it's that moment where, you know, like digital photos got better than the print, you know? And what we've seen is now this massive shift away from the traditional legacy human in the loop workflow to a technology only workflow, which we're delivering for customers at a fraction of the cost. But it's at double the margin for us. So over the last three years since we acquired EEG, when we acquired them, they were doing us $8 million worth of business in the US. Um, uh, we just printed a result of 32 million Aussie in that exact same sector, um, at 85% gross margins. Um, that has seen us

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turn a $9 million EBITDA loss, uh, in 2021 into a $4 million EBITDA profit this year. And the reason we're not actually in, in, in technical profit yet is just because of, uh, amortization of some historical contracts from acquisitions. In terms of what we're actually putting on the balance sheet at the moment, of the 7.5 million, for example, that we spend in product development, only 300,000 is amortized, is capitalized. So, Tony, just back to your business case there with AI and your use of it. Why do we need your service when I guess, uh, and you can, you know, explain obviously your business case here, but, um, you can use AI. Anyone can use AI now to do transcription and translations and so on. So, so where do you come into the picture then? Yeah. So I mean what so our solution really involves kind of three distinct elements. The first is getting the best possible

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quality audio into the system. So if you think about it, it's sort of the difference between sending audio with the quality of noise cancelling headphones, but versus holding your iPhone up at the pub. Right. And so that encoding technology is critical at giving the AI engine the best possible chance. The second element is that we have an AI cat. It's called the Icap network that connects all of the encoders to each other, but also to the AI cap cloud. And it's on the AI cap cloud that we put the latest and greatest AI engines. So when a new large language model is updated, that then triggers updates to the automatic speech recognition AI engines. We have dozens of those available on the cloud. And what we do is we match the content to the right possible engine based on an understanding of how well those engines will perform for a particular language and a particular industry type. So this is all driven by your legacy

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products, correct? Correct. Right. Which you've been building and adding to. Yes. That's right. All right. Yep. Okay. So are there any other competitors in the space. How does your product differ? Perhaps what else is available out there. Oh well look what we're looking to do is actually transform not just the live captioning industry. So, you know, those results which we've printed are pretty much 85% still driven by live captioning that live captioning market. We've been transitioning from human services to technology over that three year period. Um, but we're looking to really grow this business in three different directions. We're looking to replicate the success of us broadcast around the world. So that's the first. Okay. So so beyond North America, you're looking at what Europe and Asia, then Europe and Asia. Exactly. And specifically, this has been an America first strategy because the EEG products were only sold in America before we acquired them. And then it's taken us three years to actually get product market fit for those encoders

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in Europe and in Asia So if you we did a sector analysis and you can see that almost all of the technology sales that we've been delivered are in our largest market, which is North America. Um, and, um, we're now in a process of delivering that same solution into Europe and into Asia. That's the first direction. The second direction is moving away from broadcast and into government and enterprise and education sectors. So. So you want those sticky customers, don't you? Well, our customers are very sticky. We've had zero churn on our technology customers in the last three years. All right. Um, given the space you're operating in, what what are you spending on R&D at the moment and to that point has funding? Well, I'm very proud of the fact that all of our growth has been funded through positive operating cash flow over the last three years. Um, uh, we spend about $7.5 million on R&D and product development. Uh, in FY 24, we're forecast to be over

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8 million in FY 25. I would think a maximum about half a million of that would be capitalized. So we're running a very clean balance sheet.