Why the Audinate (ASX:AD8) share price is booming

The Audinate Group Ltd (ASX: AD8) share price is booming, it’s up almost 12% after the FY21 first quarter update.

Audinate is a leading provider of professional digital audio networking technology with its Dante platform which distributes digital audio signals over computer networks and is designed to bring the benefits of IT to the professional AV industry. It ensures interoperability between audio devices and allows end users to enjoy high quality, flexible solutions, usually for a lower cost.

Audinate’s improving conditions

The company has been affected by COVID-19 impacts. However, today at the AGM the company gave a promising update.

Audinate said that trading conditions are steadily improving since May, customer and market segments are being impacted differently. Management said there is good momentum in corporate conferencing and higher education. However, there are still challenges for live sound and large events.

Pleasingly, there’s a sales backlog going back to pre COVID-19 levels.

In terms of revenue, it generated US$5.2 million of revenue in the first quarter of FY21. Some products have seen strong growth compared to FY20, including Adaptors, Ultimo, Broadway and Retail Software Sales. However, Brooklyn revenue is down because of the live sound exposure.

Audinate generated unaudited EBITDA (click here to learn what EBTDA means) of AU$0.3 million for the quarter.

Management believe the right thing to do is to return to investing for growth. It’s expecting to add another 10 roles globally in FY21. Further operating costs are expected to add $1.5 million of expenditure compared to FY20.

Over the medium it’s looking to continue to invest and double its engineering and R&D functions, compared to July 2019. It’s going to expand its total addressable market with new video and software products. Audinate is also developing the next generation of Dante software.

The business is investing in its capabilities to ensure that it can keep winning new customers, offer the best service and have strong business operations.

Audinate also mentioned that it’s exploring acquisition opportunities to accelerate potential growth.

Summary

Audinate was a very interesting business proposition before COVID-19. The current conditions have hurt its growth prospects somewhat, but the Audinate share price is still about 20% lower than before COVID-19. Plus, interest rates are lower. So, it could be worth considering buying for the long term today.

However, there are some other ASX growth shares I have a higher conviction in such as Pushpay Holdings Ltd (ASX: PPH)

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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