Company Announcements

AFERIAN PLC

("Aferian", the "Company" or the "Group")

HALF YEAR RESULTS 

2025 Strategy driving earnings enhancement

Aferian plc (LSE AIM: AFRN), a software-led global media technology company that delivers modern TV experiences, announces unaudited results for the six months ended 31 May 2021 ("H1 2021").  

Strategic and operational highlights

 Financial summary  

Donald McGarva, CEO of Aferian plc, said:

"Last February we launched our 2025 strategy to drive software-led growth and capitalise on the structural shifts in the TV market.  Since then, Aferian has moved rapidly to convert the opportunity in front of us. The focus and dynamism within our business is delivering results, with a 19% rise in revenues and a 37% increase in recurring revenue, providing greater forward visibility than ever before."

"Our 2025 strategy targets both organic growth and strategic M&A. We made the first of our software focussed acquisitions in May, adding Nordija's streaming and Pay TV platform capabilities to our market leading 24i business. Having pivoted towards software and streaming, in June we became Aferian plc to reflect our updated market positioning at a Group level, with 24i and Amino continuing as our go-to-market brands."

"We enter the second half of the year with a clear strategy, building recurring revenues and a strong balance sheet to support software focussed M&A. The Board remains confident in the Group's ability to meet current full year expectations and in our future prospects as we execute our 2025 strategy."

Current trading and outlook 

This announcement contains information that was previously Inside Information, as that term is defined in the Market Abuse Regulation (Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014) and successor UK legislation.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Mark Carlisle, Chief Financial Officer. 

For further information please contact: 

About Aferian plc

Aferian plc (AIM: AFRN) is a software-led, global Media Technology company. We deliver modern TV experiences the way viewers want them, seamlessly integrating streaming and Pay TV services. Our award-winning Next Generation technology platforms enable operators, broadcasters and content owners to provide viewers the choice, usability and convenience they expect.

It is our belief that successful media companies and services will be those that are most consumer-centric, data driven and flexible to change. We focus on innovating technologies that enable our customers stay ahead of evolving viewer demand by providing smarter, more cost-effective ways of delivering end-to-end modern TV and video experiences to consumers. By anticipating technological and behavioural audience trends, our software solutions empower our customers to heighten viewer enjoyment, drive growth in audience share and ultimately, their profitability.

Aferian plc has two operating companies: 24i, which focusses on streaming video experiences, and Amino, which connects Pay TV to streaming services. Our two complementary companies combine their products and services to create solutions which ensure that people can consume TV and video how and when they want it. Our solutions deliver modern TV and video experiences every day to millions of viewers globally, via our growing global customer base of over 500 service providers.

Aferian plc is listed on the London Stock Exchange Alternative Investment Market (AIM: symbol AFRN). Headquartered in Cambridge, UK, the company has over 350 staff located in offices in San Francisco, Amsterdam, Helsinki, Copenhagen, Madrid, Porto, Brno, Buenos Aires and Hong Kong. For more information, please visit www.aferian.com.

Notes 

1.   Exit Annual Recurring Revenue (ARR) is annual run-rate recurring revenue as at 31 May 2021.

2.   Adjusted gross profit is a non-GAAP measure and excludes exceptional items.

3.   Adjusted EBITDA is a non-GAAP measure and excludes depreciation, amortisation, interest, tax, exceptional items and share-based payment charges.

4.   Adjusted operating profit, adjusted profit before tax and adjusted basic earnings per share are non-GAAP measures and excludes amortisation of acquired intangibles, exceptional items, share-based payment charges, and non-recurring finance income and expenses.

5.   Net cash is cash and cash equivalents less loans and bank borrowings.

Chief Executive Officer's review

Strong first half progress towards our 2025 strategy

At the full year results in February we set out our ambitious new 2025 strategy to address the convergence of streaming services and traditional Pay TV.  We have an ambition to triple Group revenues to c$250m and drive recurring revenue as a percentage of Group software revenues to 70% by 2025.

This new strategy capitalises on the increasing consumer expectation that we should all be able to connect to the TV and video we love on any device, at any time, wherever we may be. Aferian is well positioned to capture this opportunity, making it easy for people to connect to the TV and video in the way they want.

During the first half of the year we have made early progress towards our 2025 strategy. We report revenue of $45.3m (H1 2020: $38.0m), up 19%, and improved quality of earnings and enhanced visibility with an exit Annual Recurring Revenue (ARR) of $13.8m (H1 2020: $10.1m) up 37%. Recurring software revenue is currently 56% (H1 2020: 53%) of total software and services revenue.

We are focussed on building a predictable, software-driven growth business, while expanding our addressable market both organically and via targeted M&A. We continue to grow margins through value-based investments; maintain strong levels of cash generation; deliver appropriate returns to shareholders; as well as invest in the future growth of the Company.

In May 2021, we commenced our targeted M&A programme by securing the acquisition of Nordija, a Danish streaming and Pay TV platform specialist, for a total consideration of €5.3m. As customers increasingly look to offload the day-to-day burden of managing and maintaining their end-to-end video platforms to expert partners like Amino and 24i, this move accelerates our progress in the TV as a Service ("TVaaS") market. This enables us to better capture the opportunity created by the convergence of streaming services and traditional Pay TV, which is where we see the greatest opportunity for growth.

This acquisition immediately added $2.1m to ARR as well as bringing specialist capabilities to our team. Nordija has a reputation of innovation and has brought high quality customers to the Group including Waoo, Swisscom Broadcast and Telenor Sweden. I am delighted to welcome Nordija into our growing Group. The integration of Nordija into 24i has started well and is on track to be earnings enhancing in the first full financial year of ownership.

To provide the Group with additional funds to aid execution of its acquisitive growth strategy, Aferian also completed a share placing in the period, raising £9.4 million.  Initially, this was intended to support a bid and auction process to acquire MobiTV, a US live TV and on-demand platform provider. Whilst the bid process was not successful the availability of these additional funds enhances the Group's position in negotiating and executing future acquisitions.

Change of name to Aferian plc

Post period end, in June, the Group changed its name from Amino Technologies plc to Aferian plc. We felt strongly that as our business evolved, it was right that the Group's name was changed to enable us to better articulate the nature of business and the larger opportunity on which our global team is now capitalising.

The two Aferian plc Group operating companies, 24i and Amino, will continue to operate under their existing go-to-market brands. Together they provide a state-of-the-art, Streaming and Pay TV eco-system that enables over 100 million people around the world to enjoy the TV and video they love every day.

H1 2021 Key Performance Indicators

Our five key performance indicators demonstrate continued strategic progress during the first half as we work towards our 2025 strategy goals reporting growth in revenue up 19% and ARR up 37%. Adjusted gross profit margin is slightly lower due to a higher percentage of lower margin device revenue compared to the prior period. The Group also continues to generate strong operating cash flows.

Operational review

24i

24i offers a robust technology platform that streams TV and video programming to any type of screen. 24i has a 12-year market-leading position and works with customers like NPO, Telenor, Pure Flix and Broadway HD.

24i continues to focus on building recurring revenues and has reported a significant year-on-year increase of 47% in ARR at the period end, which includes $2.1m from the Nordija acquisition. The increased focus on driving ARR supports the Group's software-led strategy. As expected therefore, one-off and non-recurring professional services-led revenues has declined. As previously highlighted, we will continue to invest in FY21 both in sales and marketing and in our products to build our pipeline. 

We continue to migrate customers to our industry-leading Smart Apps Next-Gen platform, which was launched last year.  This enables our customers to deploy faster and more cost-effectively.  Generally, across our platforms, customers are now benefiting from the worldwide shift to streaming and a user desire for more flexible viewing powered by our platform.  This has resulted in a 23% increase in monthly average active users over the reported period since last financial year in our Backstage management system.  One key customer has shown 47% growth in video consumption compared to the same period in 2020.

24i has reported strong organic growth of 120% in monthly average active users accessing video content via our Smart Video platform through to May 2021 compared to the same period last year.  This has been driven both by the general growth in streaming services over the period and by the migration of a significant population of Pay TV subscribers from legacy systems to 24i's more flexible and extensible platform.

Enhancements to our Backstage content and application management interface provide our customers with the ability to control and monitor the Smart Video backend from within the same online tool manages the front-end user experience. This makes the benefits of our end-to-end video solution clearer in the market and has supported sales of product-based solutions rather than custom implementations.  This drives ARR growth.  During the period we implemented our Smart Apps Next-Gen platform, including Backstage, for the Canadian Hockey League, together with our partner Verizon Media.

Amino

Amino seamlessly connects Pay TV to streaming services and provides the features required in a multiscreen entertainment world. Amino has a 20-year heritage with customers like PCCW, Cincinnati Bell, T-Mobile NL and Entel.

During the period Amino grew revenues in the half by 25% to $37.8m and maintained its strong margins and cash generation. By offering services that converge linear TV and streaming Amino delivered several new deployments of its Android TV platform in the period.  These include Go Malta and CableNet in Europe, Optage in APAC and Conway, Home Telecom and Hay Communications in North America. These deployments showcase our ability to roll out a next generation TV experience as operators look to combine the best of both worlds for linear TV and streaming apps such as Disney+.

Post period end, in APAC, we have completed the implementation of our Android TV platform and Netflix integration with PCCW in Hong Kong to enable its Now TV video service. This was done using Amino's Hailstorm Partnership with Netflix. This partnership cuts the time to integrate Netflix from as long as 12 months to a few weeks.

Engage, our leading SaaS device software management, customer support and analytics solution, continued to grow strongly. 18 new customers deployed Engage in the period and the user base grew by 22% year-on-year. We regard this solution as a key differentiator in our competitive landscape.

The global supply chain shortage continues to be a challenge for businesses globally. This is a market-wide issue and the impact of Covid-19 continues to be seen in our supply chain. We have seen extended lead times of key components such as semi-conductors in the period. We continue to actively manage the situation and are working closely both with customers on longer-term supply arrangements to enhance visibility and with suppliers to ensure timely deliveries of materials. Despite these challenges, we shipped approximately 30% more devices in H1 2021 compared to H1 2020.

Environmental, Social and Governance ("ESG")

Today we have published our first ESG report. This can be found on our website at https://aferian.com/esg/. Our approach to ESG uses the Japanese concept of Ikigai meaning "a reason for being" and which refers to having a meaningful direction or purpose in life. The ESG report provides an overview of our progress against our chosen six of the United Nations Sustainable Development Goals as well as the Sustainable Accounting Standards Board's ("SASB") Software and IT Services and Hardware sustainability accounting standards.

Board change

Post period end, after more than five years on the Group's Board of Directors, our Non-Executive Chairman, Karen Bach notified the Board of her intention to step down from her role. During her tenure, Karen has made a significant contribution to the Group, including leading the Board as it developed the Group's 2025 strategy, which is already delivering meaningful improvements in revenue quality and growth.

On behalf of the Board and all of our Aferian employees, I would like to thank Karen for her service, dedication and support during her tenure. We have all benefitted from her energy and perspective and wish her well in her future endeavours. A search process has commenced to find a new Chair and Karen will continue to serve in the role until a successor has been appointed.

Current trading and outlook

Overall, the Group has traded well during the first half with revenue and recurring revenue up and continued improvement in earnings quality and visibility. In short, we have more visibility today than ever before as evidenced by further growth in ARR.  Having commenced our targeted M&A programme to capitalise on the convergence of streaming, the integration of Nordija is underway and on track.

We enter the second half in a solid position and continue to strengthen our pipeline of potential M&A opportunities as we seek to continue to deliver against our 2025 strategy. The Board remains confident in the Group's ability to meet current full year expectations and in the Group's future prospects as it executes it strategy and vision to make it easy for people to connect to the TV and video they love.

Donald McGarva

Chief Executive Officer

3 August 2021

Chief Financial Officer's review

Revenue increased significantly by 19% to $45.3m (H1 2020: $38.0m). This strong year on year organic growth resulted in a 21% increase to adjusted operating profit for the period to $5.1m (H1 2020: $4.2m).  Operating profit increased by 171% to $1.9m (H1 2020: $0.7m) as a result of the revenue growth in the period.

The Group reported gross cash of $17.0m and debt drawn of $6.9m resulting in net cash at 31 May 2021 of $10.1m (31 May 2020: $2.1m, 30 November 2020: $9.5m).  The Group has remaining credit facilities of $8.1m (31 May 2020: $12.9m; 30 November 2020: $15.0m) to support further M&A activity and working capital requirements.

Revenue and gross profit

High margin software and services represent 22% of total revenues for the period (H1 2020: 26%), of which 56% was recurring (H1 2020: 53%).  This comprises revenues from our 24i division, upcycling projects, our AminoOS and Amino Engage software (sold independently from devices) and support for our Amino View devices.  At 31 May 2021 ARR increased significantly to $13.8m (31 May 2020: $10.1m), which represents year on year growth of 37%. 

Volumes of devices shipped in the period increased c30% year on year resulting in device revenue of $35.4m (H1 2020: $28.3m), representing a growth rate of 25%.  The phasing of revenue in FY20 was impacted by manufacturing facilities shutting down temporarily in Q2 2020 due to the COVID-19 pandemic. 

Software and services gross margin reduced from 82% in H1 2020 to 79% in the current period.  This reduction was driven by higher 3^rd party costs incurred for the set-up phase of projects. On a full year basis, software and services margins are expected to be slightly ahead of the prior year.

Device gross margin declined from 39% last year to 36% for the current period due to phasing and mix of products sold in the period compared to the prior year. On a full year basis, device margins are expected to be similar to the prior year.

Segment result

The segment result shown above is in accordance with those shown to the Chief Operating Decision Maker. Segment result has been calculated as Adjusted EBITDA for each segment; the Adjusted EBITDA for the six months to 31 May 2021 was $8.3m (H1 2020: $7.1m). Adjusted EBITDA is a company specific measure which is calculated as operating profit before depreciation, interest, tax, amortisation, exceptional items and employee share-based payment charges. This is consistent with the way the financial performance of the Group is presented to the Board and Chief Operating Decision Maker.

The Directors believe that this provides a more meaningful comparison of how the business is managed and measured on a day-to-day basis.

24i segment result

With the increased focus on annualised recurring revenue (ARR), that aligns to the Group's software-led strategy, ARR has grown from $6.8m to $10.0m in the last 12 months.  This represents year-on-year growth of 47% and includes $2.1m from the Nordija acquisition. The decrease in revenue compared to the prior year was due to fewer one-off professional services led projects.

Segment result (continued)

Amino segment result

The Amino segment comprises the results of the sales of Amino devices, related support as well as the AminoOS middleware and Amino Engage management platform.

Central costs

Central costs comprise the costs of the Board, including executive directors, as well as costs associated with the Company's listing on the London Stock Exchange.

Capitalised development costs

The Group continues to invest in research and the development of new products and capitalised $3.5m (H1 2020: $2.6m).  This investment is focussed on driving further growth in recurring revenue from the Group's 24i NextGen Platforms and Amino device management SaaS platform. 

Operating profit

A reconciliation of Adjusted EBITDA to operating profit is provided as follows:

Exceptional items

Exceptional items within cost of sales were $nil (H1 2020: $0.2m).

Exceptional items within operating expenses were $1.4m (H1 2020: $0.8m) and comprised:

Depreciation and amortisation

Excluding amortisation of intangibles recognised on acquisition, depreciation and amortisation was $3.2m (H1 2020: $3.0m).  Amortisation of intangibles recognised on acquisitions was $1.4m (H1 2020: $2.5m).  The decrease of $1.1m in the period relates to acquired intangibles from the Entone and Booxmedia acquisitions in 2015 being fully amortised by the end of FY20.

Operating profit

Adjusted operating profit was $5.1m (H1 2020: $4.2m) excluding share-based payment charges of $0.4m (H1 2020: $0.3m), exceptional items of $1.4m (H1 2020: $0.6m) and amortisation of intangibles recognised on acquisition of $1.4m (H1 2020: $2.5m). Statutory operating profit was $1.9m (H1 2020: $0.7m).

Taxation

The tax charge of $0.8m (H1 2020: $nil) comprises:

The reason for the increase in the current tax charge is due to the UK tax losses being fully utilised at the end of FY20.

Profit after tax was $0.7m (H1 2020: $0.5m).

Cash flow

A reconciliation of adjusted operating cash flow before tax to cash generated from operations before tax is provided as follows:

Adjusted cash flow from operations was $4.0m (H1 2020: $4.8m) and represented 48% of adjusted EBITDA (H1 2020: 68%). The reduction in adjusted cash flow from operations, and the conversion to adjusted EBITDA, was due to cash outflow for working capital of $3.6m (H1 2020: $1.9m).  This is primarily due to orders shipped to customers at the end of H1 2021 with longer average payment terms than those at the end of FY 2020. In addition one specific customer order for $3.3m took longer to collect however cash has been received after the period end date. 

Cash generated from operations before tax was $1.8m (H1 2020: $4.8m).  This includes an amount of $1.8m in relation to a deposit paid for the proposed acquisition of MobiTV.  This deposit was refunded on 2 June 2021 following the completion of the sale of MobiTV to TiVo Corporation.

Tax payments, principally in respect of UK corporation tax, totalled $2.8m during the period (H1 2020: $0.6m).  The increase is due to tax losses in the UK being fully utilised by the end of FY 2020 and instalment payments required for the current financial year. 

Cash flow (continued)

During the period the Group spent $0.1m (H1 2020: $0.1m) on capital expenditure in respect of tangible fixed assets and capitalised $3.5m of research and development costs (H1 2020: $2.6m).  The increase of $0.9m is due to further investment to drive further growth in recurring revenue from the Group's 24i NextGen Platforms and Amino device management SaaS platform. 

The acquisition of Nordija included initial cash consideration of $4.9m, net of cash acquired of $0.1m.

Following the equity placing in May 2021, the Group raised $12.7m, net of share issue costs.  A final dividend in respect of the year ended 30 November 2020 of $2.0m (H1 2020: $nil) was also paid during the period.

Financial position

The Group had cash of $17.0m and debt drawn of $6.9m resulting in a net cash balance at 31 May 2021 of $10.1m (30 November 2020: $9.5m).  The Group has retained the $12.7m net proceeds received from the equity placing in May 2021. At 31 May 2021 the Group also had $8.1m (30 November 2020: $15.0m) undrawn on its multicurrency working capital loan facility, which expires in November 2022.

At 31 May 2021 the Group had total equity of $101.9m (30 November 2020 restated: $88.0m) and net current assets of $5.5m (30 November 2020 restated: net current liabilities assets of $0.5m). 58% of trade receivables were insured (30 November 2020: 51%) and debtor days were 39 days (30 November 2020: 23 days).  Debtor days increased due to a higher proportion of the period revenue being recognised in the latter months of the period, compared the prior year.

It remains the Group's policy to obtain insurance and where this is not possible, due to the territory or customer involved, payment in advance is required to a level that limits exposure to the margin on the sale of devices.

Prior period restatement

During the period we identified that the number of shares used in the calculation of the put option liability at inception, in respect of the 8% minority shareholders of 24i Unit Media B.V, a subsidiary of the Company, was incorrect.  As a result, the initial recognition of the put option liability in FY19 was understated by $1.1m. The comparative period in the interim financial statements has therefore been restated.  The impact on the comparative financial information is summarised in note 2.

Dividend

Last year the Company announced a new dividend policy, to deliver returns to shareholders via growth and income, and reflecting the Company's growth ambitions.  This policy of paying between 33-50% of adjusted EPS in dividend is expected to provide shareholders with a growing income stream whilst allowing the Company to invest in growth.

The Board intends to pay an interim dividend of 1.0 GBP pence (1.38 US cents) per share (H1 2020: nil GBP pence).  This interim dividend will be payable on 2 September 2021, to shareholders on the register on 13 August 2021, with a corresponding ex-dividend date of 12 August 2021.

Going concern

In carrying out the going concern assessment, the Directors have considered a number of scenarios, taking account of the possible impacts of the pandemic, in relation to revenue forecasts for the next 12 months. The current global economic conditions continue to create uncertainty, and specific to the Group, recognising the strength and flexibility of the Group's software-led strategy, there are potential risks that the Group will be impacted by decisions further up our supply chain. This could lead to delays in contract negotiations and deferring or cancelling of anticipated sales, and that sales and settlement of existing debts are impacted too.

In reaching their going concern assessment, the Directors have considered the foreseeable future, a period extending at least 12 months from the date of approval of this interim financial report. This assessment has included consideration of the forecast performance of the business, as noted above, the payment of proposed dividends and deferred contingent consideration, and the cash and financing facilities available to the Group. In light of all of this analysis, the Directors are satisfied that, even if this downside scenario were to occur, the Group has sufficient cash resources over the period of at least 12 months from the date of approval of the interim consolidated financial statements.  As such, the interim consolidated financial statements have been prepared on a going concern basis.

Brexit

The United Kingdom ("UK") formally left the European Union ("EU") on 30 January 2020.  The transition period ended on 31 December 2020, where upon the UK-EU Trade & Cooperation Agreement (together with other connected Agreements concluded on by the UK and EU, which includes the Exchanging and Protecting of Classified Information Agreement) signed on the 24 December 2020 came into effect.

The effects of the UK's current transitional period outside the EU and the adoption of the UK-EU Trade & Cooperation Agreement has not had a significant impact on the Group's operations nor does the Group consider it likely that it will be significantly impacted in the future due to the global geographical footprint of the business.  However, the Group continues to monitor the situation so it can manage the risk of any volatility in the global financial markets, that could arise due to Brexit, and the effect on global economic performance.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group remain consistent with the principal risks and uncertainties reported in Aferian's 2020 Annual Report.

The impact of COVID-19 on the Group continues to not be as marked as other organisations. However, the full effect on the business still requires focus and real time management of the working practices, health and wellbeing of our global workforce and the risk of delays to the global supply chain for components used in Amino devices.  As the COVID-19 pandemic continues, it is not yet clear when global economic activity will recover to pre-pandemic levels.

Mark Carlisle

Chief Financial Officer

3 August 2021

Consolidated Income Statement

For the six months ended 31 May 2021

Consolidated Statement of Comprehensive Income

For the six months ended 31 May 2021

Consolidated Balance Sheet

As at 31 May 2021

Consolidated Balance Sheet (continued)

As at 31 May 2021

Consolidated Cash Flow Statement

For the six months ended 31 May 2021