Amino Technologies Q&A: Software is the growth engine for the business (LON:AMO)

Amino Technologies plc (LON:AMO) Chief Executive Officer Donald McGarva caught up with DirectorsTalk for an exclusive interview to discuss their half-year results, becoming a software-led business, streaming services, the 24i acquisition, how the business as a whole has performed and when they will review the final dividend.

Q1: Donald, you announced 2020 interim results earlier this week for the six months ended 31st of May stating that your transition to a software-led business is now complete. What does that mean for Amino Technologies?

A1: Well, as we said 18 months ago, one of our strategic goals was this transformation to software-led business and we accelerated that through the acquisition of 24i just over 12 months ago. So, really, just one year later, here we are and software services now accounts for 26% of the overall group revenue and what’s more exciting for us is that this is actually growing at 24% per annum.

So, that’s supported the overall revenues for the group, increasing 10%, all of that growth coming from software and we saw our recurring revenues also doubled to around $10 million.

So, we see going forward software as the growth engine for the business and we believe that we’ve got a really good strong platform to capitalise on things like the acceleration of streaming that we’ve seen during COVID-19.

Q2: I was just going to say, how does the rise of streaming services impact the business?

A2: In our view, looking at some of our customers and also the view of many others out there is that it’s thought to have accelerated streaming by as much as almost three years and we see this as a big catalyst for growth.

Our software, what we aim to do is deliver a modern TV experience and that is something that streaming services has helped come about. We’re seeing the consumption of TV become increasingly complex, this convergence of streaming and traditional TV becomes much more important to anyone – a broadcaster, a content owner, or an operator – trying to deliver a service.

As we know from market research, this convergence of streaming and PayTV is led by consumers actually demanding a mixture of services, which includes things like live news, sport, as well as the streaming services. Our software is really built around delivering that simplified user experience, meaning it’s also quick to deploy and it’s actually unifying this kind of complex TV landscape.

Q3: How has 24i performed in the first half?

A3: We’ve had an excellent period with was 24i, we have grown organically about 30% in the period and not only have we had good traction with new customers bringing on some new logos, some of which we’ve announced in the first half of this year, but actually growing our business with our existing customers. So, that’s been really pleasing to see.

We’ve had a number of fairly significant successful deployments, we had BroadwayHD who deliver a kind of Netflix-style service offering Broadway & Westend productions and that went from a few thousand subscribers to hundreds of thousands of subscribers. Again, we talked a little about this acceleration of streaming services, they’ve certainly seen their business leap forward, I would say, two or three years and still remains a very successful service with customers even post lockdown and we believe that will continue.

We announced that we’d deployed smart apps and smart video at Topic in New York which was actually the first deployment for us outside of EMEA with that platform & I think there’s some trade press announcement around of service that we launched for Youfone and that’s an end-to-end service that we delivered in just over four months when normally you’d expect services as complex as that to be delivered in 18 months plus.

So, 24i is very much a growth engine for us, right at the heart of the business, and it really gives us good confidence to see that performance they delivered in the backdrop, even with all this what COVID-19 has thrown at us.

Q4: How has the business as a whole performed and what about the future for the hardware business?

A4: The hardware, the device business, is still a critical part of our offering, it’s very complimentary to what we offer, and it’s also at the heart of some of our technology and we’re looking through our operating service there, we’re looking at actually continuing to invest and to grow that.

We’re seeing the operators looking to add a lot more OTT content to their services so we’ve really moved forward from what we call our PayTV+ strategy. We’ve now got five operators choosing operator-ready Android TV devices, three of those running at AminoOS which is certified with Netflix. We’ve also completed Amazon Prime and Disney+ certifications and we continue to bring new services to bear on what is the traditional part of the business.

We’ve had good traction in upcycling projects and that’s where we help to extend the life of assets in our customer base, we’ve got one European operator that it’ll  save them over $5 million of capex and actually, we then become an important part of their platform and able to support them for a much, much longer time.

Operationally, we worked very closely with our customers and our suppliers because we had to ensure that the COVID-19 impact on the supply chain was minimised through the period and I’m pleased to say that that kind of capacity and that kind of service level that we had is returning to pre-COVID-19 levels. We managed to satisfy all of our customer’s needs in the first half of the year in what was a very difficult period.

So, overall, the business continues to be strategically important and it’s very cash generative and very complimentary to the business as we see it.

Q5: Finally, when might you consider reviewing the Amino Technologies dividend?

A5: The Board took the decision really to suspend the dividend back at the start when we were really in the midst of the COVID-19. It was really the prudent thing to do at the time with all the unknowns that were there then, and make sure that our balance sheet was as robust as possible going into that period.

Obviously we’ve performed well in the period and we do recognise the need of many of our shareholders, they want an income for the purpose of meeting aims of their funds because that is one of the reasons they invest so we will consider all options to help meet those shareholder requirements.

The Board has decided that probably the appropriate time to consider the final dividend for this year will be following the period end when we have a much clearer picture of trading in the second half, which we’re very confident about, and also the impact of COVID-19 on the business in the foreseeable future.

Again, I think, we’re performance quite strongly with a very resilient business model and I think we’ll be in a really good position to assess that as we get to the end of this year.

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