ASX:AIM
Ai-Media Technologies Ltd
Investment Summary
The fund managers believe that despite Ai-Media Technologies Ltd's recent report showing revenue down 3% and an increased net loss, it is crucial to view these figures within the broader context of the company's strategic shift. In their opinion, the decline in the low-margin human-based Services segment is a necessary step to support growth in the high-margin Technology segment. They express concern regarding the Technology revenue growth of only 12%, which falls short of the compound rate needed to meet medium-term targets. However, they note that the introduction of subscription sales for the Lexi automated translation service is a pivotal change, as it leads to a spike in deferred revenue to be recognized later. This transition underpins a strong cash result, highlighted by a $2.5m free cash flow, demonstrating the benefit of upfront cash for annual subscriptions. Overall, the fund managers are cautiously optimistic but emphasize the importance of monitoring revenue growth in the Technology segment.
Commentary From The Managers
Mereweather Capital
28 Feb 2025
$0.72
- Mereweather Capital continues to assess the impact of AI-Media's recent revenue decline of 3% and an increase in net loss from $1.2m to $2.7m.
- The reported figures are influenced by the company’s strategic decision to accelerate the decline of its low margin human-based Services segment.
- AI-Media is heavily investing in growth within its high margin Technology segment, positioning itself for future success.
- Concerns have arisen regarding Technology revenue growth of only 12%, which is below necessary rates for medium-term targets.
- It’s important to understand that the company has started offering subscriptions for its Lexi automated translation service.
- This subscription model leads to revenue being recognized over time, not immediately, contributing to deferred revenue spikes.
- Despite the declining revenue, AI-Media reported a robust cash flow of $2.5m, supported by upfront cash from annual subscriptions.
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