Ai-Media to raise $40m for "step change" US caption tech acquisition

Ai-Media to raise $40m for "step change" US caption tech acquisition

AI-Media co-founder and CEO Tony Abrahams.

Amidst a boom for digital content where recorded captioning, transcription and translation have become more common, a founder-led Australian company has today announced a major consolidation of its leadership in the space.

Access Innovation Holdings (ASX: AIM), known as Ai-Media, has reached a US$34 million (AUD$43 million) deal to acquire US-based EEG Enterprises Inc through a mix of scrip and cash, to be funded by a $40 million underwritten capital raising.

Since it was co-founded by Tony Abrahams and Alex Jones in 2003 to develop captions for Foxtel, Ai-Media now brings in 61 per cent of its revenue from offshore with offices in North America, Europe and Asia. 

It is a share of sales that rose by 11 percentage points in the December half, bolstered by deals with customers including Al Jazeera, a major international parliament and numerous colleges in the US.

Now the group will be taking its US presence up a notch through the EEG acquisition, comprising US$20 million in cash, US$10 million in AIM shares that will be subject to shareholder approval at an extraordinary general meeting (EGM) in June, and a US$4 million earn-out depending on FY22 results.

To gather the funds Ai-Media expects to complete an equity raising at $0.80 per share, representing a 14 per cent discount to the last closing price, by 27 May 2021.

Co-founder and CEO Tony Abrahams says the acquisition of EEG represents a step change for Ai-Media, significantly strengthening its technology portfolio and opening up growth opportunities in new markets.

"Over four decades, EEG has established itself as the market-leading provider of video and captioning services in North America, serving major enterprise, government, defence and broadcast media clients," Abrahams says.

"EEG's on-premises and cloud-based technology perfectly rounds out Ai-Media's live captioning product suite, complementing our premium human-curated service and our recently launched Smart ASR product to enable us to meet any customer requirement.

"We're delighted to welcome Phil and the entire EEG team to Ai-Media and look forward to working with them to take advantage of the growth opportunities presented by the alignment of two businesses with highly complementary products and customers and a culture of success."


Ai-Media has been on a long journey since its origins, expanding into live classroom captions in 2006 to support deaf students with the support of speech recognition software, which went live for the first time at a Sydney high school in 2008.

This gave rise the Visible Classroom project with the University of Melbourne in 2013, followed by international expansion into Europe the following year to develop live captioning for a wider range of students, including those with autism; an innovation that brought live captions to classrooms all over the UK.

Before COVID-19 the company launched its captioning and transcription service priced at USD $1 per minute with a two-step content-checking process that ensures 99 per cent accuracy.

Traction across these various projects culminated in a $65.5 million initial public offering (IPO) on the ASX in September last year, priced at $1.23 per share. 

The share price has dropped by close to a quarter since then at $0.93 at the time of writing, but in the December half it was tracking ahead of prospectus forecasts which have been reaffirmed at $43.8 million in revenue and a loss of $5.8 million.

A stronger currency will likely negatively impact returns in Australian dollars, but in the six months to December revenue growth was better than expected and Ai-Media expects further upside in the current period from its US acquisitions of Caption IT and CaptionAccess for US$1.9 million (AUD$2.5 million) in January.

But the EEG acquisition is a totally different ball game, tapping into a technology business that has been around since 1981 and now has 660 active customers including five of the top 10 largest companies by market capitalisation on the NASDAQ.

EEG's flagship SaaS product is a cloud-hosted and on-premises automatic speech recognition (ASR) and captioning platform called Lexi, delivering more than 90 per cent accuracy in English and Spanish based on a self-learning algorithmic structure.

The US group also has cloud-hosted infrastructure up its sleeve for live broadcast and enterprise applications, as well as on-premises video caption encoding.

For FY21, EEG is expected to deliver pro forma revenue of $US8.9 million (AUD$11.5 million) and EBITDA of $US3.3 million (AUD$4.26 million).

"Working with Ai-Media over the past five years, we have come to recognise our shared values in terms of developing proprietary technology and delivering the best products, services and support for customers," says EEG chief executive officer Phil McLaughlin.

"EEG and Ai-Media's technology suites are entirely complementary, allowing us to meet the full range of customer requirements.

"We're excited about the growth potential of the combined business and look forward to being part of this next chapter in our company's history."

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