Audinate Group Ltd (ASX: AD8) reported its FY20 full-year results today, and the share price declined almost 5% at the open.
Audinate is a leading provider in the digital audio-visual (AV) industry. As the company states, Audinate’s frontrunning product, Dante AV, replaces point-to-point audio and video connections with easy-to-use networking.
Audinates FY20 report highlights
Below are some of the key highlights from Audinates FY20 results:
- Revenue of $30.3 million, up 7.1% (compared to FY19)
- An improved gross profit margin of 76.6% (FY19 gross profit margin of 74.4%)
- EBITDA of $2.03 million, a decrease of 26% from FY19
- Net loss after tax of $4.1 million.
- Dante enabled products increased by 31% to 2,804
COVID-19 has hit Audinate hard, which doesn’t come as a surprise as the majority of its customers are venues that cater for large gatherings of people, e.g. stadiums, theatres, etc. The good news is that there has been an increase in demand from higher education and conferencing applications that has partially offset the loss of large-venue customers.
Revenue
Audinate reported a loss after tax of $4.1 million compared to a profit after tax of $660,000 in FY19. EBITDA also decreased by 26% compared to FY19. Additionally, Audinate reported consistent revenue in June and July after a marked decrease in May.
The company expects August revenue to remain consistent; however, this level of revenue is currently below what is required to grow the top line in FY21.
While Audinate may not be growing revenue at present, it may be pleasing for investors to see a 31% increase in Dante enabled products. This growing number may not have a significant impact on revenue now but could help accelerate growth once COVID-19 restrictions are lifted.
After Audinate recently raised $40 million in cash the company plans to strengthen its balance sheet, increase its spending in R&D and look for potential M&A opportunities. With $29 million cash already on hand before the capital raising, Audinate is expecting to have $68 million in cash by year-end.
Management Comment & Outlook
In the FY20 investor presentation, CEO Adam Williams said he was “pleased” with the progress the company had made during these difficult times.
“We were pleased with the resilience of our repeat revenue base through the unprecedented Q4 impact of COVID-19,” Williams said. “We remain prudently focused on delivering our medium-term strategic priorities whilst positioning Audinate to capitalize on economic recovery when it occurs.”
On Audinate’s outlook, Mr Williams said, “Whilst we remain wary of potential near term impacts of COVID-19 on revenue; we are encouraged by recent market research showing the audio over IP market tripling over the next five years. This further strengthens our conviction in the pursuit of Audinate’s medium-term strategic objectives.”
Is it a buy?
Audinate investors have taken a hit because of COVID-19. The share price is 43% off its all-time high which it reached at the end of 2019. Having said that, Audinate’s Dante product is first-class in its field and was rapidly taking market share before the pandemic.
With cash set to increase to approximately $68 million due to the recent capital raise, Audinate is well-placed to ride out the storm and deliver returns for investors over the long term.
Audinate has a large total addressable market (TAM) and only just entered the video market. Over the medium to long term, Audinate should see its growth return, but current investors need to be ready for the volatility of investing in a growth company affected by the current climate.
