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Audinate (ASX:AD8) share price soars 18% on strong HY24 result

The Audinate Group Ltd (ASX: AD8) share price is up more than 18% after revealing a strong HY24 result.

Audinate provides the latest technology for audio and video. Its Dante networking solution is used by professional live sound, commercial installation, broadcast, public address and recording industries.

Excellent HY24 result

Here are some of the highlights from the six months to 31 December 2023:

  • Revenue rose 47.7% to US$30.4 million
  • Gross profit increased 50.1% to US$21.8 million
  • EBITDA jumped 137% to $10.1 million
  • Net profit after tax (NPAT) improved to A$4.7 million, up from a A$0.4 million loss in HY23
  • Operating cashflow grew $10 million to $11.8 million

Audinate revealed that chips, cards and modules sales grew by 45.6% and software sales grew 56.2%. The products largely responsible for the revenue increase were Brooklyn modules (up 50%) and Ultimo chips (up more than 200%). This is a very strong growth rate, which may be helping the Audinate share price.

The Ultimo chips were supply-constrained in the FY23 first half, but these pressures have “gradually eased” and the backlog of pent-up demand has been satisfied. The Ultimo growth rate is expected to revert to a lower run-rate in the second half.

Management pointed out the operating leverage demonstrated by the business model. That means profit grows quicker than revenue. Operating expenses only increased by 32% to $23.4 million as it continues to spend on growing the business.

Video growth

Audinate said that momentum is continuing to build in its OEM customers’ adoption of Dante video solutions. with 50 manufacturers now licensing Dante video offerings, up from 30 manufacturers a year ago.

The company has achieved its FY24 objective to double the video ecosystem to greater than 30,000 video units in field or shipped six months earlier than planned.

During the first half, it released its next-generation Dante AV Ultra product.

Outlook for the Audinate share price

Audinate said it’s focused on improving profitability and operating cashflow, and it still expects growth in US dollar gross profit terms in FY24 “consistent with historical performance.”

The FY24 result is expected by Audinate to be consistent with current market expectations.

But, management are also watchful of potential softening of global economic conditions over the rest of FY24. An improving supply chain conditions and shorter lead times for customers, resulting in a reduced sales order backlog, “complicating” the management of any softening in economic conditions.

Interestingly, Audinate is exploring several acquisition opportunities thanks to its strong balance sheet, which had A$111.7 of cash as at December 2023.

Audinate seems to be doing very well, but the higher Audinate share price seems to reflect that. I wouldn’t call it a cheap buy right now.

There are other ASX growth shares I’d rather invest in now. Audinate’s growth in this result has been accelerated by the backlog, so it could be better to wait to see what the growth rate in the second half of FY24 is before buying at this higher price.

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