Australian (ASX) Stock Market Forum

AD8 - Audinate Group

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Just to follow up. I'm thinking today's volume to be a "trigger" but not necessarily a signal to buy. It is worth watching what happens from here and to watch where the price is when volume dries up.
 
I haven't revisited AD8 much since selling at start of year. Sometime it's hard to return.

From the chart and also AGM outlook, the company is doing better than I thought. If ever a newcomer was going to get hammered, it was one with a business around digital audio (and now video) going out over networks. From $9 to sub $3, it has now mostly retraced.

Slide 8 of AGM presentation shows awareness and uptake of Dante forging ahead while competitors languish; it does seem to be the industry standard.

While they talk of a tripling of networked Audio units by 2024, the 2020 slump means that future growth is only going to be double that of 2019. Meantime, R&D and upgrades comprise a cost that must erode margins (though gross margins still 75%+)

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Audinate returns to pre-COVID revenue levels

Key 1H21 highlights:
• Revenue of US$11.1 million (1H20: US$11.1 million; 2H20: US$9.3 million)
• Gross margin of US$8.6 million (1H20: US$8.5 million; 2H20: US$7.0 million)
• EBITDA of A$1.8 million (1H20: A$1.9 million)
• Net loss after tax of A$1.2 million (1H20: $0.3 million net profit)
• Operating cashflow of A$3.2 million (1H20: A$2.9 million)
• Cash including term deposits of A$66.3 million
• Dante enabled products up 27% to 3,008 – a key leading indicator of future growth

Outlook
Audinate is seeing confidence return amongst OEMs, system integrators and end-users resulting in an overall improved industry outlook for CY21. Whilst COVID related risks remain (including to global supply chains), they are abating as vaccines roll-out. Good trading conditions have continued into the beginning of 2H21, albeit we expect Brooklyn revenue to continue to be impacted by the downturn in live events and live sound.

The Group has accelerated investing for growth, with a target headcount of >140 staff (inclusive of Cambridge) by the end of FY21 and a resulting increase in operating costs of between $2 - $3 million in the second half.

Commenting on the outlook for Audinate, Mr Williams said:
“Whilst we remain wary of the potential nearterm impacts of COVID, we are cautiously optimistic that the pandemic may serve as a catalyst for an acceleration of the transition from old school analogue cabling to networked audio and video. This bodes well for Audinate’s long term growth opportunities, and we are excited by the path we see ahead for our business.”
Click to expand...
 
Key FY21 financial highlights:
• Revenue of US$25.0 million, up 22.5% (A$33.4 million)
• Gross profit (GP) of US$19.2 million, up 23.1% ... steady GP margin of 76%
• EBITDA of A$3.0 million, up 50.1% on FY20
• Net loss after tax of A$3.4 million, 17% better than FY20
• Operating cashflow of A$6.7 million, up from A$4.8 million in FY20
• Cash and term deposits of A$65.4 million at year end

As customers adopt new software based Dante implementations, Audinate expects to see further long term margin improvement. As the mix of hardware and software products shifts, growth in gross profit dollars becomes a more appropriate measure of performance than revenue growth alone.
Click to expand...

Outlook
Having successfully navigated a challenging operating environment over the last twelve months, we continue to take a long-term perspective on running and growing the business to deliver shareholder value. To support ongoing growth and drive development of video and cloud services we are targeting headcount of over 170 staff over the course of FY22 (up from 135 staff at 30 June 2021).

The key focus areas for the year ahead are:
• Driving further design wins for Dante video and next generation software products
• Launching new Dante video software and cloud services products
• Pursuing initiatives to reduce adoption friction, including in-field activation
• Improving adoption of Dante by non-English speakers
• Strengthening our products, services, and systems against cyber-risk
• Implementing business scalability initiatives
 
AD8 is one for the reversal watch list. Business is going well and investors have been loving this one, until now. The price weakness is all to do with the chip shortages. AD8 can't get the chip that's required for it's equipment. They've got plenty of demand for their product but can't supply it.

"The company is focusing its resources an accelerating product transitions to platforms with improved supply outlook and alternate part availability". Ref Q1 Trading Update. 18/10/2021

As usual this will take time and the chip shortages will impact their financial numbers.

IMO this sort of problem is temporary and it's why AD8 is in my reversal list.

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Ally Selby ( Livewire Markets ) : Last but certainly not least we have Audinate. Its share price rose around 7% in 2021. Josh, I'll stay with you. Is it a buy, hold or sell?

Josh Clark ( QVG Capital ) (HOLD) : I really like this business. It's a hold for me, though I've admired it from afar for a long time, I've always struggled to get my head around the valuation for this one. I remember a while ago, back when you could travel, going to an audio-visual conference in Las Vegas, where all of the OEMs like Yamaha, Bose, and the like were advertising that they were using Audinate's technology. So it really gave a bit of insight into how much they dominate that niche within audio. And they also have the potential over a longer period of time to do something similar in video. But I think just to earn a reasonable return out of the stock, you need to buy it at a low valuation or you need video to be much more progressed than where it is at the moment. So that one's a hold.

Ally Selby: Last one for you, John. Audinate obviously suffered during COVID lockdowns. But now with re-openings happening around the world, could this be a winner? Is it a buy, hold or sell?

John Deniz ( Paragon Funds Mgmt. ) (SELL) : Ally, it's a sell for us on valuation. We actually owned this from the IPO when the easy money was made and like Josh, we also really like the business. However, the market's already priced in excessive amounts of growth, and we see continued supply chain issues around chip shortages, which we think will impact the business. So it's a sell for us.
 
Would you buy the chart? Not me - at this time anyway
James Gerrish whom I tend to listen to, is backing it strongly at this price.
Not a business that I understand at all but interested by its global market, revenue growth, apparent dominance and 'network' thingo; plus it is founder led. Another one for the crash list :)

All Data Monthly
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www.livewiremarkets.com

A beaten-down stock with 60% upside

Having been caught up in the recent tech sell-off, a global market leader is now looking alluringly cheap. That's according to Market Matters' James Gerrish, who on the back of Audinate's (ASX: AD8) half-year results on Monday says the stock is a definite buy. Find out why by clicking the...
www.livewiremarkets.com www.livewiremarkets.com
 
finicky said:
www.livewiremarkets.com

A beaten-down stock with 60% upside

Having been caught up in the recent tech sell-off, a global market leader is now looking alluringly cheap. That's according to Market Matters' James Gerrish, who on the back of Audinate's (ASX: AD8) half-year results on Monday says the stock is a definite buy. Find out why by clicking the...
www.livewiremarkets.com www.livewiremarkets.com
Click to expand...
was reading the article this morning;; these businesses can be cloned (aka started from scratch), and are valued in my opinion when money is so plentiful than big boys just go and buy the set of players in a field .
I know how hard it is to start tech in Oz for a global world market..and they plan to grow locally hum..
But will keep the name handy too
 
I can't value profitless start-ups but the revenue and ebitda aren't accelerating that I can see - just arithmetically creeping upwards. How long would you have to wait for NPAT earnings to reach a level to justify this price? And there's not going to be a crash or depression in the next 5 years to make it ridiculous?
FY22 sems to be continuing the trend so looking at FY21 actual :
EBITDA: $3.29
REVENUE: $33.4
M.C. $573M
M.C / EBITDA = 174 x
M.C / REVENUE = 17 x

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  • record revenue of $US33.4 million for the 2022 financial year, up 33.4 per cent on FY21.
  • record EBITDA of $4.3 million, up 41 per cent on the prior year.
  • gross profit increased 29.7 per cent to $US24.9 million.
  • gross margin at 74.7 per cent.
  • Audinate reported a net loss after tax of $4.5 million.
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used to hold, prior to 2020. I am somewhat surprised they are making a go of it. (still with losses, though)
 
everything's hunky dory.

down 36 per cent, and as low as $6.40

Outlook for FY25
FY25 revenue faces a combination of headwinds, including:
• The preference for software-based Dante implementations is expected to increase during FY25, driving the business's overall margin towards 80%. Software Dante implementations drive adoption via hardware cost savings for equipment manufacturers, however per-unit revenue is lower.
• Shortening order lead times, re-balancing of inventory holdings across the industry and the rate at which our manufacturing customers clear raw material inventory will influence our FY25 result.
• Expected end-of-life of Viper and MY16 products.

NH
 
Does anyone remember the stated reason for this price drop after what appears to be reasonable numbers?

AD8 setting up a reversal trading opportunity but I'd like to know the reason for the selloff first.
 
The market has digested the results and seen the selloff, yet hasn't moved lower. I'm not concerned by the mgt outlook. They may have been overly conservative after being surprised earlier in the year by the lack of chip availability.

I've bought an initial position (half size) in a conservative (non trading portfolio) and will look to add after seeing a higher low formed.
This portfolio helps me to diversify my positions from the resource companies that I mostly trade.

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