@hazza25To be honest, I only found out about the existence of...

@hazza25

To be honest, I only found out about the existence of AI-Media a few weeks ago, so my opinion about the Company is merely the result of quickly going through the ASX announcements/presentations over their short listed history, and you shouldn’t give too much importance to it.

Having said that, I do (like you, it seems) see the combination of Revenue growth and Gross Margin expansion (which, eventually, ought to translate into multiple expansion as well) as the essence of the investment thesis for AIM as of today; and, I have to say, I especially like the part of the overall business which, if all goes as planned, will be the main engine of this growth process, namely EEG.

Looking at the corporate history of EEG (as summarised for instance in AIM’s April 2021 capital raise presentation), I find it remarkable how such a tiny family-run business, which prior to 2017 was basically just a hardware manufacturer with less than 5mUS$ in annual revenue, has over the space of just five years a) almost tripled its revenue run rate and b) largely transitioned to a IaaS/SaaS model with a >80% GM and a >40% EBITDA margin.

Their high EBITDA margin, in particular, suggests that EEG have kept a tight control over their marketing spend, and have made the most out of their network of US hardware distributors; those are the same distributors who are now getting incentivised through revenue sharing agreements (the “Preferred Partner” programme) to push the adoption of Lexi and Smart Lexi across the network of EEG infrastructure users (i.e. iCap).

I think it is important to emphasise that i) these so-called Preferred Partners (hardware distributors) are not the same people as the iCap partners (third-party captioners) who deliver their services to the iCap end users via EEG infrastructure, so they are fully incentivised to displace as much human captioning as possible, as long as they get a slice of the associated revenue, and ii) ACS (i.e. AIM’s previously acquired US captioning business) has only a small share (~13% as of June 2021, probably less than 10% at present) of the total iCap volume.

It follows that the conquering of volume share within iCap via Lexi and Smart Lexi is not just self-cannibalisation of other AIM businesses, but a real “low-hanging-fruit” growth opportunity, which requires a lower marketing effort than it would otherwise be necessary (thanks to the Preferred Partner programme) and enjoys an inherent competitive advantage due to the fact that all iCap end users are (by definition) already running on EEG infrastructure.

Then, of course, beyond the existing iCap network there is also the additional opportunity of leveraging off AIM’s global salesforce to market EEG products to new potential customers and into new geographies.

It seems to me that the market is not fully appreciating these dynamics, and is basically treating EEG’s current high growth rate as a temporary re-shuffling of revenue occurring at the expense of AIM’s pre-existing business; as explained above, that is true only to a limited extent and belies EEG’s true growth potential.

Just my two cents, and please do your own research.

Cheers