20-F: Anghami Inc. Reports Financial Results for Fiscal Year Ended December 31, 2023, and Announces Strategic Partnership with OSN

Anghami Inc.'s annual report reveals a strategic shift towards profitability, marked by improved gross margins and a major partnership with OSN, despite revenue decline due to regional economic challenges.

Summary

• Anghami Inc.'s annual report covers the fiscal year ended December 31, 2023.
• The company is a leading digital music entertainment platform in the Middle East and North Africa (MENA) region.
• Key highlights include a strategic partnership with OSN, aiming to create the MENA region's first integrated music and video streaming platform.
• Despite a revenue decline, gross margins improved from 19% to 25% year-over-year.
• The net loss decreased significantly from $61.2 million to $15.7 million year-over-year.
• The company reported 1.73 million premium subscribers as of December 31, 2023.
• The report details various risk factors, including competition, intellectual property concerns, and geopolitical risks in the MENA region.
• The company is focusing on capitalizing on growth in the digital music market, leveraging its market position, and exploring new revenue streams such as live events.
• Anghami is working to remediate material weaknesses in its internal controls over financial reporting.
• The company is subject to complex taxation regimes in various jurisdictions.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue declined and there are ongoing challenges, the company is showing improvements in profitability and has secured a strategic partnership. The presence of material weaknesses in internal controls and geopolitical risks temper the positive aspects.

Positives

• Gross margins improved from 19% to 25%.
• Net loss decreased significantly from $61.2 million to $15.7 million.
• ROI on marketing expense increased from 4.2X to 4.9X.
• Churn rate decreased from 6.1% to 5.3%.
• Strategic partnership with OSN is expected to boost growth and expand content offerings.
• The company is actively working to remediate material weaknesses in internal controls.

Negatives

• Total revenue declined year-over-year.
• Active users decreased from 18.76 million to 12.55 million.
• ARPU decreased by 27% due to currency devaluation and new pricing plans.
• The company identified material weaknesses in its internal control over financial reporting.
• The company has a history of losses and expects to incur losses and significant expenses for the foreseeable future.

Risks

• Significant competition from other streaming services.
• Potential disputes or liabilities associated with content made available on the platform.
• Dependence on third-party licenses for most of the content streamed.
• Geopolitical risk in the MENA region.
• Volatility in the trading price of ordinary shares.
• Potential for additional capital raises.
• Currency fluctuations and foreign exchange controls.
• Failure to protect intellectual property.
• Risks related to privacy and data security.
• Tax-related risks in various jurisdictions.

Future Outlook

Anghami aims to capitalize on growth in the digital music market, leverage its market position, and explore new revenue streams such as live events and video streaming through the OSN partnership. The company is also focused on improving profitability and optimizing its cost structure.

Management Comments

• Management is focused on sustainable revenue growth and margin improvement.
• Management believes that the partnership with OSN will create the MENA region's first integrated music and video streaming platform.
• Management is working to remediate material weaknesses in its internal controls over financial reporting.

Industry Context

The report highlights the growth of the global music industry, with streaming dominating revenue shares. The MENA region is identified as a fast-growing market, emphasizing the importance of localized content and partnerships with telecommunication companies.

Comparison to Industry Standards

• The report mentions key competitors like Spotify, YouTube, Apple Music, and Deezer.
• Anghami differentiates itself through localized content, cultural fit, and strong relationships with regional brands and telecommunications providers.
• The company's high premium subscriber conversion rate in emerging markets is a competitive advantage.
• The report notes that music streaming penetration in key MENA markets is low compared to developed markets like the U.S., indicating significant growth potential.

Management Changes

Legal Proceedings

• The company is from time to time subject to various claims, lawsuits and other legal proceedings.
• In December 2022, Reservoir Media Management Inc. and Pop Arabia FZLLC initiated legal action against Anghami, alleging the unlicensed exploitation of musical and lyrical works in reference to 12 songs in the UAE territory.
• Society of Authors, Composers and Music Publishers in Lebanon (SACEM) obtained before the execution department court in Beirut on June 7, 2023, a decision to provisionary seize the Company’s shares in Digimusic SAL Off-shore and the amount up to $100,000 and the expenses of $10,000 under MIC1 and MIC2 (the two Telcos in Lebanon) as third parties.
• On 17 July 2023, Anghami received an arbitration claim from Alkonost Investment Ltd requesting the settlement of the deferred price in relation to the Murabaha Agreement signed between Anghami and Alkonost.

Related Party Transactions

• Anghami uses Du's billing services platform, with Du receiving 30% of the net revenue collected.
• Anghami provides content services through Mobily's platform, with Mobily receiving a percentage share of the revenue ranging from 35%-70%.
• SRMG Ventures (SRMG) exercised its option to convert its outstanding principal and interest under the convertible note.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances.
• Employees may be affected by changes in compensation plans and potential restructuring.
• Customers may benefit from the integrated music and video streaming platform with the OSN partnership.
• Suppliers and creditors may be impacted by the company's efforts to optimize its cost structure.

Next Steps

• Continue to remediate material weaknesses in internal controls.
• Focus on optimizing marketing spend and improving user acquisition.
• Integrate OSN+ platform and leverage synergies.
• Expand Arabic content creation and distribution.
• Explore new revenue streams such as live events and video streaming.

Key Dates

Keywords

Anghami, OSN, streaming, music, MENA, financial results, partnership, revenue, subscribers, profitability