Aferian plc (LON:AFRN), the B2B video streaming solutions company, has announced its unaudited results for the six months ended 31 May 2023, which demonstrate a performance in line with the trading update announced on 28 June 2023.
– Improving quality of Group earnings and enhanced revenue visibility.
– Continued strong demand in 24i division in fast growing video streaming market.
– Amino division refocused on higher quality, higher margin streaming devices.
– Confident in full year outturn with high percentage of contracted revenue and a well-developed pipeline.
Donald McGarva, Chief Executive Officer of Aferian plc, said:
“This has been a very busy and challenging half for Aferian. The restructuring of our cost base in 24i and Amino is generating significant annualised cost savings and providing a stronger platform on which to build and grow. Demand in our 24i division has remained strong as we continue our strategic focus on growing software and services revenue in the fast-growing video streaming market.
To align ourselves better with our customers’ changings needs, our Amino business has been refocussed to concentrate on higher quality, higher margin streaming and device management opportunities and we have seen good initial customer engagement in the Pay TV and digital signage markets. We have continued to progress our strategy to improve the quality of our earnings and enhance revenue visibility in the first half, against what is for everyone, a challenging macroeconomic environment. Our higher margin software and services revenue was up 17% year on year, and we closed the period with exit run rate ARR up 19%.
Following the successful completion of our $4.0m equity raise in July, we have the resources to focus on driving forward our advantage and growth in the video streaming market. With 90% of revenue contracted for the full year and a well-developed pipeline of well qualified prospects, we remain confident in the full year outcome and Aferian’s positioning to capitalise on long-term opportunities in the fast-growing video streaming market.”
Financial Key Figures
| Periods ended 31 May | |||
| US$m unless otherwise stated | H1 2023 Unaudited | H1 2022 Unaudited | Change |
| Total revenue | 23.3 | 44.5 | (48%) |
| – Devices | 9.4 | 32.5 | (71%) |
| – Software and services | 14.0 | 12.0 | 17% |
| Exit run rate Annual Recurring Revenue (“ARR”) (1) | 18.8 | 15.8 | 19% |
| Statutory operating loss | (8.0) | (0.6) | N/A |
| Statutory operating cash flow before tax – H1 2022 restated(5) | (12.3) | 4.9 | N/A |
| Statutory basic earnings per share (US cents) | (10.20) | (1.76) | (480%) |
| Adjusted operating (loss)/profit (2) | (4.2) | 2.4 | N/A |
| Adjusted operating cash flow before tax(4) | (7.0) | 6.7 | N/A |
| Adjusted basic earnings per share (US cents) (3) | (6.40) | 1.50 | N/A |
| Net (debt)/cash | (12.9) | 7.8 | N/A |
| Interim dividend per share (GBP pence) | – | 1.0 | N/A |
Notes
1. Exit Annualised Recurring Revenue (ARR) is annual run-rate recurring revenue as at 31 May 2023.
2. Adjusted operating profit is a non-GAAP measure and excludes amortisation of acquired intangibles, exceptional items, and share-based payment charges.
3. Adjusted basic earnings per share is a non-GAAP measure and excludes amortisation of acquired intangibles, exceptional items, share-based payment charges and non-recurring finance income and expense.
4. Adjusted operating cash flow before tax is a non-GAAP measure and excludes cash paid/received in respect of exceptional items.
5. H1 2022 restated see note 8.
6. Constant currency basis calculated using the closing FX rate for H1 2022 in both years
Financial Highlights
| · | Further momentum demonstrated in improving the quality of earnings and enhancing Group revenue visibility: |
| o Higher margin software & services revenue of $14.0m, up 17% year-on-year. | |
| o Recurring revenue of $9.5m, up 16% in H1 2023 compared to H1 2022. | |
| o Exit run rate ARR of $18.8m, up 19% year-on-year (constant currency(6) basis: 20%). | |
| · | Adjusted operating loss of $4.2m, (H1 2022: profit $2.4m) is due to the reduction in Amino device revenues. |
| · | Management actions taken in February and June 2023 have reduced the Group’s annualised cost base, including capital expenditure, by a total of c$8m. |
| · | Additional cost reduction actions are underway and expected to be completed in early September 2023. |
| · | The Group’s inventory balance at 31 May 2023 was $8.6m (30 November 2022: $9.2m). |
| · | Net debt at 31 May 2023 was $12.9m (31 November 2022: $4.0m net cash). This is expected to reduce over the remainder of the current financial year as Amino inventory levels reduce further. The Group remains in compliance with its loan facilities covenants. |
| · | Post period end, on 25 July 2022, the Group successfully raised $4.0m through an equity placing to be used for general working capital. This replaced the need for further drawdown of the Group’s existing shareholder loan facility (currently £1.25m) from Kestrel. The undrawn element £2.125m expired on 31 July 2023. |
| · | No interim dividend payment (H1 2022: 1.0 pence / 1.26 US cents). |
Strategic & Operational Highlights
| · | 24i – focussed on streaming video experiences. | ||
| o | 24i continues to win new customers and grow recurring revenue driven by continued strong demand for streaming video solutions. The division is prioritising profitability and cash generation over nominal growth. | ||
| o | The business launched two significant platform enhancements in March 2023: | ||
| § | 24i Broadcaster Studio, a new pre-packaged solution targeting broadcasters who go direct-to-consumer with streaming apps as part of a wider strategy to capitalise on growth in ad-funded streaming. | ||
| § | Three new tiered packages of 24iQ, our data-driven SaaS personalisation platform, enabling customers of all sizes to drive greater engagement and end user churn. | ||
| o | Partnership with global Free Ad-supported Streaming TV (‘FAST’) experts, Amagi, announced in March 2023, is already delivering results with the first joint Amagi and 24i customers launching their 24i-based streaming apps post period end. | ||
| · | Amino – connecting Pay TV to streaming services. | |
| o | The poor trading conditions at Amino caused by customer de-stocking at a time of rising interest rates has also resulted in a higher than planned inventory balance of $8.6m as at 31 May 2023. The Amino inventory balance is expected to reduce back towards November FY21 levels (which were $2.6m) in H1 2024. | |
| o | We have refocused the division on higher quality, higher margin Pay TV and digital signage streaming devices incorporating the Group’s software and Amino’s SaaS device management platform. | |
| o | Digital signage devices were deployed into a number of international airports in India during the period. | |
| o | Sports betting brand, Paddy Power, is now using Amino digital signage devices throughout its shops in the UK and Ireland to improve the customer experience and reduce costs. | |
Current Trading and Outlook
Trading remains in line with the trading and outlook communicated in our trading statement on 28 June 2023. For the full year ending 30 November 2023, 91% of expected revenues are contracted. The remaining 9% is covered by a well-developed sales pipeline. Combined with the cost reduction actions taken above, this provides the Board with confidence in the expected outturn for the full year in which the Group is expected to generate a positive material EBITDA.
The Board anticipates full year software and services revenue growth of c.10% to 15% in the current financial year. As we move in to FY2024, the 24i business and management team is re-orientating its focus to deliver enhanced profitability and cash generation.
Devices revenue in H2 2023 is expected to be higher than H1 2023 and this recovery is expected to continue in FY 2024 as inventory levels within the supply chain continue to normalise.
24i
Demand for 24i’s video streaming platform remains strong. Investments previously made in sales and marketing have delivered results. The 24i management team, under its new leadership, is focused on growing revenue and ARR at double digit percentages in FY2023, whilst ensuring targeted R&D investment and improved customer project scoping and pricing to increase profitability in the second half of the financial year. This will ensure a better balance between nominal revenue growth and profitability / cash generation in the future.
Amino
The device market is forecast to continue to grow, however, the market has evolved with low-cost manufacturers meeting the needs of many pay TV operators who, whilst needing to upgrade their services to incorporate video streaming, remain focused on cost reduction. Therefore, to better align with these changing customer needs and to target enhanced profitability, Amino’s focus will be on delivering value through:
| · | delivering higher quality, higher margin pay TV streaming devices which can also be bundled with the Group’s Software-as-a-Service (“SaaS”) device management platform, Engage. This SaaS device management platform is also integrated with third party devices and sold on a standalone basis; and |
| · | driving growth in its digital signage business selling into large integrators and via distributors. |
