The Access Innovation Holdings Ltd (ASX: AIM) aka Ai-Media share price is surging higher today after the company announced two new acquisitions in the United States. The company also released a full investor briefing on the news.
At the time of writing, the Ai-Media share price is trading up 3.59% at $1.01.
Ai-Media provides live and recorded captioning, transcription and translation services. Its technology combines artificial intelligence (AI) and human expertise to deliver speech-to-text as accurately as possible.
Right now, Ai-Media is the biggest captioning provider in the Australian market and has a growing international presence, capturing more than 1 million minutes of live and recorded media every month.
Details of the acquisitions
The company's new acquisitions – Caption IT and CaptionAccess – are strategic within the US market.
Caption IT is based in Wisconsin and offers real-time, offline and post-production captioning, transcription and translation services. The company generates most of it's revenue from corporate customers. White label product sold via resellers in the technology space are a large part of this revenue.
CaptionAccess is based in Illinois and is owned and managed by people who are deaf and hard of hearing. It provides communication services to the government, corporate and education sectors. Revenue comes mainly from enterprise customers in these sectors and particularly in the university space, where it has 23 clients.
Key terms
The key terms of the acquisition agreements include the following points:
- Total purchase consideration for the acquisitions, on a cash and debt free basis, is US$1.9 million comprising approximately US$1.6 million in cash and US$0.3 million in AIM shares with the number of AIM shares issued to be determined based on the 30-day VWAP to 11 December 2020 (consideration shares).
- The consideration shares will be subject to the three-year escrow agreement applying to board and senior management, as set out in the Ai-Media prospectus.
- 10% of the total purchase consideration will be retained in escrow for a 12-month period to cover any breaches of representations and warranties. There are no earnout amounts associated with the acquisitions.
- The acquisitions are expected to be completed on 4 January 2021 and will be funded by existing cash reserves.
Rationale behind the acquisitions
The rational behind this move was to grow revenue and expand the company's presence in North America. Together, the acquisitions represent complementary additions to Ai-Media and help to achieve a number of goals for the company. Caption IT has a "top tier" corporate customer base and CaptionAccess is well positioned to service the education space.
These two companies will directly help Ai-Media to expand its high-quality live captioning services in the US market. According to Ai-Media, the US is a fast growing market for these services and one that is directly in their target zone. The acquisitions are consistent with strategic goals to pursue consolidation opportunities that can complement the existing technology platform.
Ai-Media technology will help to leverage the already strong growth recorded by these new companies.
Earlier this year, Ai-Media completed another acquisition of Alternative Communication Services (ASC) to further enhance the US footprint. These latest acquisitions continue the expansion efforts.
Caption IT and CaptionAccess are expected to produce revenue of around US$2.2 million this calendar year. This is to be added to AI-Media's revenue for six months of FY21.
This revenue increase is incremental to the current revenue produced by Ai-Media, which will account for more than 95% of the total, even after this acquisition. It's complementary, but not majorly altering of the bottom line. AI-Media is expected to report around A$43.8 million in FY21. As this is incremental revenue, it's not yet known what kind of long term affect it might have on the AI-Media share price.
Management commentary
Ai-Media CEO and co-founder Tony Abrahams said North America now made up around 50% of the company's total revenue.
Both CaptionAccess and Caption IT have been built on foundations of high-quality service delivery to loyal enterprise customers with values and cultures that are strongly aligned with Ai-Media.
Following our successful integration of ACS in North America in recent months, I am excited that Ai-Media can provide the infrastructure and scalable technology platform to enable these great businesses to continue to accelerate their growth in the years ahead.
We continue to see strong demand for Ai-Media's services across all regions, in particular in live enterprise where COVID-19 restrictions have accelerated the adoption of video as a key communication tool for business and the education sector.
Caption IT Founder and CEO Maureen DeRuyter added:
Following years of strong growth with top tier enterprise customers, we knew we needed to partner with a great technology business to provide the scale to continue to grow. Ai-Media's demonstrated success with the recent ACS acquisition has given us enormous confidence to further enhance the excellence in service and quality that Caption IT is known for.
CaptionAccess founder and CEO Bill Graham said:
As a proud deaf business owner with Disability Owned Business Enterprise (DOBE) Certification, it was important for me to partner with a business that shares our community roots and our values, as well as focusing on delivering the highest quality services to our customers who rely on us to participate equally in education and at work.
Ai-Media share price
The Ai-Media share price has been on a downward slope since listing on the ASX in September this year. Shares listed at $1.23 and have slipped as low as $0.95 before rallying today.
