Announcement PDF LINIUS TECHNOLOGIES LIMITED ACN 149 796 332 ANNUAL REPORT 2023 ANNUAL REPORT LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 CONTENTS PAGE CORPORATE DIRECTORY 2 CHAIRMAN'S LETTER TO SHAREHOLDERS 3-4 CHIEF EXECUTIVE OFFICER'S REVIEW OF OPERATIONS 5-15 DIRECTORS' REPORT 16-31 CORPORATE GOVERNANCE STATEMENT 31 AUDITOR'S INDEPENDENCE DECLARATION 32 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 33 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 34 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 35 CONSOLIDATED STATEMENT OF CASH FLOWS 36 NOTES TO THE FINANCIAL REPORT DIRECTORS' DECLARATION 37-70 71 INDEPENDENT AUDITOR'S REPORT 72-77 ADDITIONAL INFORMATION FOR LISTED COMPANIES 78-79 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 CORPORATE DIRECTORY This annual report covers Linius Technologies Limited and its controlled entities (the “Group” or “Group”) during the year ended 30 June 2023. The presentation currency of the Group is Australian dollars. OFFICERS Gerard Bongiorno James Brennan Stephen McGovern John Wallace Barry McNeill Giuseppe Rinarelli (Non-Executive Chairman) Executive Director and CEO (Non-Executive Director) resigned 15 July 2023 (Non-Executive Director) (Non-Executive Director) appointed 19 June 2023 (Company Secretary and CFO) REGISTERED OFFICE Level 2, 431 St Kilda Road, MELBOURNE VIC 3004 AUDITORS KPMG Tower 2, Collins Square 727 Collins Street MELBOURNE VIC 3000 SHARE REGISTRY Advanced Share Registry Ltd 110 Stirling Highway NEDLANDS WA 6009 Telephone: (08) 9389 8033 Facsimile: (08) 9262 3723 PRINCIPAL PLACE OF BUSINESS Level 2, 431 St Kilda Road, MELBOURNE VIC 3004 Telephone: (03) 8680 2317 Facsimile: (03) 8680 2380 Email: info@linius.com WEBSITE www.linius.com ASX CODE LNU 2 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 CHAIRMAN’S LETTER TO SHAREHOLDERS Dear Shareholders, On behalf of your board of directors, I am pleased to enclose the Annual Report of Linius Technologies Limited for the financial year ended 30 June 2023. 2023 saw our strategy of targeting the sports sector gain significant momentum. The company achieved record financial results with YoY billings rising to $487,000 and customer cash receipts rising 82% to $496,000. The company’s rate of new customer acquisition has increased and we were very pleased to welcome flagship clients such as IMG, Cricket Australia and Inverleigh Media during the year. These clients clearly demonstrate that the Linius Media Solutions product suite has a valuable proposition in the market place, satisfying a clear and growing need from sports organisations and broadcaster service providers to monetise their ‘post live’ video content. All clients are reporting cost efficiency gains and new profitable revenues from our products. With tier 1 global brands now on our roster providing quality case studies we expect the new business momentum to continue to grow. During the year the company also significantly reduced its cost base as we rationalise our target markets as the products matured. As a result, the company achieved a 54% reduction in net cash outflow from operating activities when compared to 2022. It should be noted that there is significant contracted annual recurring revenue (ARR) from new client wins in 2023 yet to flow, meaning the company’s run rate position is significantly better than the numbers reported here. Additionally, we have now formally entered the lucrative US sports market for the first time with Hockey Tech Partners signing up with the group in July 2023. During 2023 we have carefully raised funds where required, successfully backing operations to deliver the growth at each turn. We thank Linius investors for their continued support and patience as our company accelerates its growth on the path to profitability. Taking the above into account 2023 proved to be a pivotal year on our path to profitability. We have a unique product suite that answers a clear need in our target markets. Linius Media Solutions has proven that it delivers on the key objective of every sports federation and broadcaster – it makes fans/viewers watch more of their sport and it does this whilst reducing our clients operating expenditure by making new video content easier to produce AND increases their revenues through such avenues as advertising, subscription, ticket and merchandise sales. It is proving to be a very powerful proposition and with more blue chip clients now benefiting from and advocating our solutions, we expect to see continued growth in 2024 and beyond. In November 2022, we announced the appointment of new Director Barry McNeill to the board, which took effect in June 2023. Barry brings tremendous experience and expertise in the sports market to the company, having led multiple sport-tech companies through rapid growth phases as CEO at Catapult Sports (ASX:CAT) and Prozone. His contributions are already evident and will play a critical part in our growth, particularly as we expand into the US market. To accommodate Mr McNeill’s appointment, Steve McGovern announced his retirement from the Board effective 15 July 2023. I thank Steve for his dedication and commitment over the past 5 years. I present to you the report on Linius and its controlled entities for the 30 June 2023 financial year. Gerard Bongiorno Non-Executive Chairman 15 September 2023 3 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS Dear Shareholders, On behalf of your board of directors, I am pleased to enclose the Annual Report of Linius Technologies Limited for the financial year ended 30 June 2023. Summary The 2023 financial year has been transformational for Linius, and I am excited by the progress made. We validated our technology, solutions, and go-to-market strategy, with a focus on sports archives. We won key commercial contracts with some of the world’s leading sports and have proven the value of our solutions whilst providing immediate credibility and validation to the market. Linius now support customers and content across 15 sports from over 40 sports federations in all 3 of our target geographies - US, Europe, and Asia. We have launched foundational new products and refined our solution strategy to meet market demand. We have significant momentum in the market with more, larger opportunities than ever. Most importantly, we delivered record financial performance and are on track to deliver continued strong growth in the year ahead. We executed our strategy to expand commercial deals in the Sports archive market segment, making significant progress in new customer acquisition. We closed deals with Cricket Australia, the A-Leagues, Inverleigh Media, and IMG Replay – one of the largest sports archives in the world. In July 2023, just after the financial year close, we announced our first customer in the US with Hockey Technology Partners for leading US ice hockey federations. These new customers added important validation for Linius solutions, particularly Linius Whizzard, in the market. Cricket Australia is not only the leading sport in Australia, but also a globally recognized brand with 1.2 billion fans worldwide. Their confidence in using Whizzard to unlock the value of their 50+ year archive was a major catalyst for growth this year. Inverleigh Media, a global media company, chose to integrate Whizzard as a key component of their media management and production products and services that they offer to multiple leading sports federations around the world. Finally, IMG Replay, one of the world’s largest and most valuable sports archives, selected Whizzard to help them drive greater value from their archive of 50,000 hours of premium sports content. The awareness and credibility from these landmark deals cannot be understated. Each of these deals provide not only significant revenue, but also tremendous opportunity for future growth; we are only seeing the tip of the iceberg in terms of revenue potential from each of them. I am confident that we will continue to see growth, more new opportunities, and new revenues generated from these deployments in FY24. This year solidified that our go-to-market and product strategies focused on sports archives are absolutely on point. This led us to enhance the Linius Whizzard product to support sports archives and to make it the foundation of our product strategy in this market. Whizzard for sports archives was designed, launched, deployed, and sold repeatably all during this financial year – a milestone achievement. The introduction of Whizzard as a highly repeatable solution enabled an increased rate of new customer acquisition, rate of customer deployment, and speed to revenue. We furthered this strategy with the introduction of Linius Media Solutions, a complete portfolio of products with Whizzard at the centre, that will solve multiple needs and use case for customers, provide higher value and differentiation, and drive higher revenue and margin from each deployment. These advances led not only to increased validation and momentum, but record financial results for FY23 - billings of $487,000 and customer cash receipts of $496,000, an increase of 82% over the preceding year. When combined with the significant cost reductions implemented during Q1 FY23, the company achieved a 53% reduction in net cash outflow from operating activities compared to FY22. This year has been game changing for Linius’ credibility in the global sports market, and we now enter FY24 with tremendous momentum. We have already seen a fast start, announcing our first deal in the US market in July 2023; I can’t overstate how critical the achievement of this milestone is for Linius. Everything we do now is about leveraging the momentum from FY23 for an increased rate of customer acquisition and most importantly recuring revenue growth. I expect to see significant financial growth in the next two quarters from our existing client base, 4 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 and exciting new customer wins in new target markets including the US, broadcasters, and college sports. Our rate of growth is increasing and will continue to do so in FY24 as we execute our plan to profitability. Highlights of FY23: x x x x Company achieved record financial results including: o Total yearly billings were $487,000 and yearly cash receipts were $496,000, an 82% increase over FY22. o Significant cost reductions announced in June 2022 took effect in Q1 of this year. The company operated under the reduced cost structure through the remainder of FY23, and when combined with the increase in cash receipts, resulted in a 53% YoY reduction in net cash outflow from operating activities. o Company has new revenues, including monthly recurring and variable fees, yet to flow through from existing contracts, Company has materially penetrated the sports market and gained market credibility with long term contracts with blue chip clients and content from 15 different sporting codes, 40 different sporting federations, in all three of its target geographies – US, Asia Pacific, and Europe. This has included new deal flow with the following new customers: o IMG Replay, one of the world’s leading sports archives. Linius Whizzard will be embedded within the IMG Replay service, virtualizing the entire archive of nearly 50,000 hours of exclusive premium sports content. This is Linius’ largest commercial contract to date. The deployment has progressed through important initial design and scope approval phases during FY23 and is now in active development. o Cricket Australia (CA), Australia’s largest sports federation with 1.2 billion fans worldwide. CA procured Whizzard to unlock the value of their 50+ year archive with over 25,000 hours of content. Whizzard will be used by internal CA staff, broadcasters and other B2B users to search, curate, publish, and license content from the entire CA archive. The deployment was completed during FY23, with CA actively creating and publishing content on the website, applications, and social media. Initial usage indicates an average savings of 8+ hours per video created, as well as the ability to create higher quality content from deep in the CA archive. o Inverleigh Media, a leading global media company based in Australia. Whizzard will be integrated as a core component of their ENGINE platform for global sports federations and broadcasters, unlocking the value of these high value sports archives, and enabling efficient, high quality search, curation, publication and use of this content. ƒ The first archive to be made available through Whizzard is for South Africa, New Zealand, Australia and Argentina Rugby (SANZAAR), which includes the All Blacks and Wallabies as well as the Super Rugby competition. ƒ The second archive added to Whizzard for Inverleigh Media is for an additional national professional and amateur rugby federation. ƒ Total volume of the 2 deals is 15,000 hours of archive content. ƒ Inverleigh deployment progressed through FY23, going live in Q1 FY24 o Australian Professional Leagues, Australia’s professional soccer (football) league known as the A-Leagues. The deal saw MatchVision fan engagement solution deployed league-wide for the ALeagues, launched and promoted as a key feature on the KeepUp.com.au website and mobile app with strong initial interest from A-Leagues fans. A-Leagues deployed and went live with MatchVision in just 4 weeks o Hockey Technology Partners LLC (HTP), announced just after the end of FY23. This is the company’s first deal in the lucrative US sports market. Under the agreement, Linius will virtualize over 2,000 games per year and support HTP in building innovative new fan experiences across web, mobile, and TV platforms for the most recognizable bodies in ice hockey With the success and momentum in the sports market, Linius has narrowed its go-to-market strategy on this key market in the near term. Based on highly positive customer and market reception of Whizzard, the company has adapted its product strategy to introduce Linius Media Solutions, a complete portfolio of products and services with Whizzard at the core. Linius continues to accelerate and grow a significant commercial pipeline, led by the success of Whizzard, which provides a clear path towards profitability. 5 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 Purpose & Strategy Linius’ purpose is to unlock the value of the world’s video, creating immersive, deeply personalized viewing experiences. For the first time, we make it possible to find, curate, and utilize the valuable moments across vast libraries of video, enabling viewers to create an infinite amount of personalised video compilations on-the-fly, providing the most relevant content to each viewer. Our patented Video Virtualisation Engine™ (VVE) turns big, bulky video files into lightweight, searchable data that is enriched with AI and ML, making it easy and efficient for users to find and share what matters to them. Creators and owners of video can drive greater viewing, and monetisation of their video assets. The strategy for FY23 was as follows: 1. Repeat sales and drive revenue in chosen markets x Close more new customers x Generate near term and repeatable recurring revenues x Optimize commercial models to drive near-term and repeat recurring revenues x Onboard additional customers using repeatable methodology for greater speed and lower cost 2. Create and commercially validate products and go-to-market strategies through successful customer deployments x Launch additional products in selected markets, specifically Sports x Onboard new clients for these products, with consistent, simple pricing and packaging models x Engage closely with customers and partners to drive adoption, user acceptance, and customer satisfaction x Deliver products that are easily replicable, deployable, supportable x Gain product insights for continuous refinement of product and go-to-market strategy x Gain key insights, feedback, and analytics to use as proof points for new business development Detailed summary of FY23 Operations: Linius executed against this strategy in FY23 as follows: 1. Linius achieves record financial results Increased commercial activity in FY23 resulted in record financial results including billings of $487,000 and customer cash receipts of $496,000, an increase of 82% over FY22. During the year, the company also reported record quarterly financial results of: x x Quarterly cash receipts of $201,000 in Q3 FY23, 3.4x higher than Q2 FY23 Quarterly billings of $198,582 in Q3 FY 23, 2.1x higher than Q2 FY23 The increased billings and cash receipts in FY23 came from a combination of existing customers with ongoing contracts, as well as new customer contracts. Linius’ commercial model now includes a combination of setup fees, ongoing monthly license subscription fees, and variable fees. Setup fees are typically billed upon contract signing and/or delivery of the solution. Monthly subscription fees begin upon delivery of the solution to the customer. Variable fees begin after delivery of the solution to the customer and are dependent upon the take-up of the service. Variable fees may include usage based fees (e.g. per play, per minute), additional archive discovery/enrichment fees (per minute), and/or revenue share (percentage of advertising, sponsorship, and/or subscription fees). During FY23, billings included a combination of setup fees, recurring monthly fees, and/or variable fees from existing customers Racing.com, NBL, University of Newcastle, Swanbay and new customers A-Leagues, Cricket Australia (“CA”), IMG, and Inverleigh. 6 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 The following contracted items were not billed in FY23 and will be billed in FY24 x x x Variable revenue share from new customer CA Final setup fees and monthly recurring fees from new customer IMG Final setup fees, monthly recurring fees, and variable fees from new customer Inverleigh These contracted billings will provide a strong uplift to the Company’s billings in the first half of FY24. Additionally, significant cost reductions announced in June 2022 took effect in Q1 of this year. The company operated under the reduced cost structure through the remainder of FY23, and when combined with the increase in cash receipts, resulted in a 54% reduction in net cash outflow compared to FY22. 2. Rate of new customer acquisition increases through the inflection point of growth During the year, the Company continued to execute its strategy to expand commercial deals in the Sports market segment. The Company made significant progress in new customer acquisition, closing deals with: x x x x IMG Replay – one of the largest sports archives in the world. Cricket Australia, Inverleigh Media (working with content from SANZAAR – South Africa, Australia, Argentina, New Zealand Rugby and other national rugby federations), and the A-Leagues (Australian professional soccer), The company continued to work with and support current customers including Racing.com, the Australian National Basketball League (NBL), Swanbay.tv (working with teams in the English Premier League and Belgian Pro League), and The University of Newcastle. Across deals under contract, Linius is now working with over 10 end customers with content in 15 sports and across 40+ federations. The pace of new customer acquisition is faster than ever. 7 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 IMG Replay In April 2023, Linius announced a new commercial agreement with IMG Replay. x x x x x Linius Whizzard will be embedded within the IMG Replay service, virtualizing the entire archive of nearly 50,000 hours. Production companies, advertising agencies, broadcasters, film makers, and other content licensees from around the world will use Whizzard to search, create automated clip reels, and license content from within the IMG Replay archives. IMG Replay exclusively manages and commercialises the video archives for some of the world’s leading sporting organisations including the Premier League, World Rugby, The Championships (Wimbledon), The R&A, The International Skating Union (ISU) and Professional Golf Association of America (PGAA). The agreement is for an initial 2-year term and includes a fixed setup fee and monthly license subscription. It is Linius’ largest contract to date. IMG Replay deployment progressed through important initial design and scope approval phases during FY23 and is now in active development. This initial deal with IMG Replay is just the tip of the iceberg with this customer. The IMG Replay archive includes the video archives of over 30 of the top sports federations in the world. Once this content is virtualized within Linius Video Services and Whizzard, these virtual assets can be used by any number of applications. The use case of Whizzard for B2B users licensing content is just the beginning. Once deployed, we will be able to approach each of these federations to show the value of virtualized video for their own internal and fan facing use cases. Turning on a fan engagement solution for any of these customers will be quick and easy. The discussion no longer needs to be around the technology nor the deployment, but simply on the end user experience and the value created. This significantly reduces the time required in the sales cycle along with the cost of deployment. Further, IMG Replay is part of Endeavor, one of the largest media and entertainment companies in the world. There are multiple divisions of Endeavour that can benefit from Linius’ solutions. These divisions cover live and ondemand video streaming for the biggest sports in the world, production studios, data and fan engagement solutions, wagering and gaming, college sports, and talent/creators. Successful deployment for IMG Replay will allow us to open multiple opportunities across the Endeavor group. Opportunities are already in development with several of these groups. 8 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 Cricket Australia In November 2022, Linius announced a new contract with Cricket Australia (CA) to deploy the latest version of Linius Whizzard to monetise its extensive match archive and create new content experiences for fans. x x x x x x At the time, it was Linius’ largest revenue contract to date and includes an opportunity to monetise the service through advertising, sponsorship, and other revenue streams, with Linius receiving a significant advertising revenue share percentage. CA has an extensive, high value video archive including all new and 50+ years of historical Australian cricket. It includes Australian Test, ODI, T20, Sheffield Shield and Big Bash competitions for men’s and women’s teams dating from the 1970s to the present day. In total there are over 25,000 hours of content. Cricket is the second most popular sport in the world, and CA is in the top 3 cricket leagues globally. CA has over 1.2 billion fans worldwide, with billions of content views per year, and hundreds of millions of content views each month on YouTube. CA became Linius’ first sports customer to use the Whizzard archive search, curation, and publication product for a sports archive. It allows CA to easily search its archive for relevant content, quickly edit and publish content. That content can then be made available publicly through their websites, mobile app, social media channels, partner broadcasters, news agencies and other external organizations. The solution was deployed during FY23, with CA actively creating and publishing content on the website, applications, and social media Initial usage indicates an average savings of 8+ hours per video created, as well as the ability to create higher quality content from deep in the CA archive Inverleigh Media In March 2023, Linius announced two deals with Inverleigh Media. x x x Three-year master agreement signed to integrate Whizzard as a core feature within Inverleigh Media’s archive management software ENGINE used by global sports federations/leagues, teams, and broadcasters around the world. Inverleigh, headquartered in Australia, is a global end-to-end integrated media company providing a range of services including content creation, production, rights management, content management and distribution via more than 600 broadcasters and their own over the top (OTT) subscription service. Further, they prove ingest, tagging, storage, archive management, and development of digital solutions to suit all applications including the management of over 30,000 hours of historical sport and federation vision. The first archive virtualized and made available under this deal is for SANZAAR, South Africa, New Zealand, Australia, and Argentina Rugby, which includes 5,000 hours of All Blacks, Wallabies, and Super Rugby content. 9 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 x x x x x It became the shortest sales cycle of any deal to date, taking just three months from initial introduction to executed contract. The introduction was a direct result of the deployment of Whizzard at CA. A second deal with Inverleigh, closed under the terms of the original master agreement, was signed just 2 weeks later. This deal was for an additional 10,000 hour archive of professional and amateur rugby for a national rugby federation. This deal has potential to expand further as Linius supports Inverleigh in bringing Whizzard to more of their customers’ and prospects’ sports and entertainment archives, as well as extending the solutions to include immersive fan engagement experiences for broadcast and OTT services. Each new archive/federation signed under this agreement brings additional setup, monthly license, and variable fees and most importantly unlocking the value of these high value sports archives, and enabling efficient, high-quality search, curation, publication and use of this content. Inverleigh deployment progressed through FY23, going live in Q1 FY24. A-Leagues In October 2022, Linius announced a new contract with APL to deploy MatchVision, the award-winning digital fan engagement service with the Linius Video Services (LVS) platform at its core, for the A-Leagues. x x x x x x x x x A-Leagues sees MatchVision as a strategic tool for fan engagement and a key part of their digital strategy. The solution was deployed and went live within just 4 weeks. Its available on both the A-Leagues website and mobile app and is live at https://matchvision.keepup.com.au/ Official launch and large-scale promotion of the service to fans began in February 2023. The league committed significant promotion, advertising, and visibility to the launch. MatchVision is featured in the main navigation of the website and app, as well as in the Google search results when users search for the A-Leagues or any of the A-Leagues teams. Special promotion of the feature included website placement ads, full screen “takeover” ads in the mobile app, inclusion in newsletters, and email promotions to registered fans. Usage and feedback from fans and A-Leagues staff has been strong and positive. To date, the service has attracted visitors from 97 countries, generating nearly 5,000 hours of personalized video It was the first deal under a new enhanced partnership with Swanbay, which allows Linius to sell the joint MatchVision/Linius Video Services (LVS) solution directly to customers. It was the first deployment of MatchVision outside of Europe and the first league-wide deployment of MatchVision, supporting all 13 teams of the Isuzu UTE A-League men’s competition. Additional opportunities for expansion of the service exist within the contract and include expansion to the women’s competition, individual teams, previous season archive content, and addition of Linius Whizzard. 10 LINIUS TECHNOLOGIES LIMITED ANNUAL REPORT 2023 In July 2023, shortly after the close of FY23, Linius announced the addition of its first customer in the US market, Hockey Technology Partners LLC (HTP). x x x x x HTP is a leading provider of digital solutions for global ice hockey leagues, teams, and fans. Solutions include websites, mobile applications, OTT streaming subscription services, and data management solutions. Linius will virtualize over 2,000 games per year and support HTP in building innovative new fan experiences across web, mobile, and TV platforms. HTP will use Linius Media Solutions to develop end user applications and experiences for fans of the most recognizable bodies in ice hockey. This is a 3-year contract, and includes setup fees, monthly subscription, and revenue share. HTP will begin using the solution in the current quarter with end-user applications to roll out through the 2023/2024 ice hockey season. 3. Linius adapts its product and go-to-market strategy based on market demand With the world’s best video search capabilities and growing success and momentum in the sports segment, the Company has narrowed its focus on this segment, with all product, development, and commercial efforts and resources dedicated to sports. In the early part of FY23, it became apparent that our customers had significant immediate need to unlock the value of their archives– whether minutes or decades old, and to make it easier and more efficient to curate and publish more content. This led the company to focus its efforts on the enhancement of the Whizzard product to support sports archives. The first customer to take this refined product was Cricket Australia, announced in November 2022 and released to production in March 2023. Since the announcement of CA, all deals closed have been for Whizzard. Based on customer feedback, it is clear that Whizzard is providing immediate value and satisfying current needs. Additionally, as we approach new markets and larger customers, we found that the needs of these customers were slightly different to the teams and smaller leagues we were prev