The Audinate Group Ltd (ASX: AD8) share price is under pressure after giving a trading update for the first quarter of FY25. It’s down 9%.
FY25 trading update
Audinate announced that it made gross profit of US$7.2 million, or A$10.6 million, in the first quarter of FY25.
The AV software and hardware business explained that its FY25 first quarter reflected “several challenges” including shorter order lead times, increased inventory across the industry, slower clearance of raw material inventories by manufacturing customers, and softer-than-expected demand from end-users.
Audinate said these headwinds are expected to continue into the second quarter of FY25, leading to a second quarter gross profit generation in line with the first quarter of FY25.
The company said it no longer expects to generate a “slightly lower” FY25 gross profit compared to FY24.
Management said they will update the market on its performance and outlook after the FY25 second quarter is completed. Audinate is expecting a “moderately stronger” second half.
Audinate said it’s expecting FY25 will be a “transitional year” and it’s expecting these difficult conditions to only last a year, returning to growth in FY26 and more normal customer order patterns. A return to growth could be good news for the Audinate share price.
What about costs?
Audinate said it expects its costs to grow between 7% to 9% in FY25, and reflects the company’s confidence in its long-term growth prospects.
It’s focusing on carefully balancing its cost structure with strategic investments in new product development to “drive sustained future growth”.
Long-term growth
The company said there are over 6 million Dante devices in the field and more than 1 million are being added each year. It said its growth “will continue to be driven by the increasing adoption of Dante technology across a wide range of audio and video products.”
As the installed base grows, there is more of an opportunity to “build a robust platform software business, enabling AV professionals to efficiently manage and monitor audio-visual installations.”
In the second half of FY25, it will launch new AVIO adaptor products and a premium version of Dante virtual soundcard. Both are expected to make a positive contribution earnings in the second half of FY25 and beyond.
Audinate also said the demand for Dante continues to grow as manufacturers develop new Dante products, and AV system designers and installers increasingly choose Dante solutions. Design wins in the first quarter of FY25 are up 22% compared to the previous year, reflecting a healthy pipeline of new Dante products, a leading indicator of future revenue growth.
Final thoughts on the Audinate share price
It’s disappointing to see that FY25 won’t be as profitable as expected, but it’s good to see the company is still positive about the long-term.
In my view, I think this could be a good time to invest for the long-term if it’s able to return to good, profitable growth in FY26 and onwards. It’s usually a good idea to own high-quality shares with an in-demand products if they can grow profits at a good speed over the long-term.
There are also plenty of other ASX growth shares that could be good investments too.
