Audinate Group Limited

Primary source for A$ five-year data: FY26 Remuneration Report five-year earnings table and FY26 financial statements (audited); FY25 financial statements; prior results releases for US$ figures.

Income statement — US$ operating view

FY22 US$ gross profit is entered as 0 because it was not located in the sources reviewed (FY22 gross margin of 74.7% was disclosed).

Income statement — A$ statutory view

D&A and operating profit for FY22–FY24 are entered as 0 where not located in the sources reviewed; do not chart those cells. FY23 and FY24 NPAT exceeded PBT owing to recognition of deferred tax assets on carried-forward losses.

Margin profile (A$ basis, computed)

Revenue CAGR FY22–FY26: A$ 10.0% p.a. (A$46.3m → A$67.8m); US$ 8.3% p.a. (US$33.4m → US$46.0m). Management cited a FY21–FY23 US$ revenue CAGR of 31.8% (FY23 presentation) — the subsequent FY25 destocking reset roughly halved the medium-term trajectory.

FY26 operating cost composition

Underlying employment cost growth of 23% was attributed to Iris (A$2.0m), higher short-term incentive accruals (A$3.9m) and 2H FY25 hiring. US$-denominated expenses of A$24.4m offset ~53% of revenue as a partial natural hedge; the A$ appreciated ~6% against the US$ during FY26, compressing A$ growth to 9% versus 15% in US$.

Balance sheet

FY24 cells entered as 0 where not located; FY24 cash and equivalents of A$47.8m is the opening FY25 cash balance per the FY25 cash flow statement; FY24 equity is the 1 July 2024 opening balance. Short-term vs long-term debt split: Audinate has no bank debt; lease liabilities FY26 are A$1.0m current and A$2.6m non-current.

Cash flow

FY24 capex lines not located; FY24 FCF therefore not computed. Interest received fell from A$4.7m (FY25) to A$3.0m (FY26) as cash was deployed into Iris.

Ratios (computed on year-end balances unless stated)

ROIC is not meaningful for FY25–FY26 (negative NOPAT on an invested-capital base inflated by idle cash) and is not computed. Net debt/EBITDA and interest coverage are not meaningful — the company is net cash and interest expense (A$0.28m in FY26) relates only to leases. Cash conversion cycle not disclosed; FY26 receivables rose to A$10.3m (A$6.9m) on strong 2H shipments while inventory fell to A$3.3m (A$4.1m).

Commentary on trends, inflections and drivers

FY22–FY24: supply-constrained boom. Revenue compounded at ~34% in US$ terms as OEMs, burned by component shortages, placed large forward orders. Audinate's own Brooklyn redesign and FY22 price increases lifted US$ growth above unit growth (FY23 US$ revenue +40% vs. Dante units +30%). Operating leverage pushed underlying EBITDA from A$4.3m to A$20.3m, and the share price peaked near A$16 at FY24 year-end.

FY25: destocking inflection. OEMs stopped ordering while working through inventory; CCM revenue fell 54% and total US$ revenue fell 33%. Because software held up, gross margin expanded to 82.1%, but with a fixed cost base of ~A$50m, underlying EBITDA collapsed to A$0.7m and the company returned to a statutory loss (A$6.4m). Operating costs exceeded UBS expectations (A$50.5m vs. A$48.2m forecast).

FY26: revenue recovery, profit deterioration. Revenue returned to 15% US$ growth (at the top of guidance) and 2H gross profit growth accelerated to 17% from 12% in 1H. However, profitability worsened materially: underlying opex grew 17%, Iris added cost ahead of revenue (A$3.0m loss after tax from Iris), D&A rose to A$19.3m on Iris intangibles and capitalised development, and the net loss widened to A$19.6m (−23.5c EPS). The cash balance fell from A$109.9m to A$65.1m, mainly due to the A$31.0m Iris payment and negative FCF of ~A$11.9m.

FY27: intended operating-leverage year. Management guides to flat A$ operating costs (~A$59m underlying) against US$ gross profit growth "in line with or slightly ahead of" FY26's 14.7% and gross margin ~82%. On those parameters, underlying EBITDA should return to positive territory in FY27, with free-cash-flow breakeven targeted for FY28 (results webinar commentary). Capitalised development (~A$12m p.a.) remains the main swing factor between EBITDA and cash.

Management guidance (FY27)

• US$ gross profit growth in line with or slightly ahead of FY26's 14.7% (implies ~US$43–44m gross profit).

• Gross margin ~82%.

• A$ underlying operating costs flat versus FY26 (~A$59.1m), excluding one-offs.

• Improvement in operating profit and cash flows; FCF breakeven targeted for FY28.

Illustrative arithmetic (analyst, not guidance): US$43.3m gross profit at an assumed AUD/USD of ~0.66 ≈ A$65–66m gross profit less ~A$59m opex ≈ A$6–7m underlying EBITDA in FY27 — a swing of ~A$10m from FY26. Capitalised development (~A$12m) means FCF would remain negative unless capitalisation falls or growth exceeds guidance, consistent with the FY28 breakeven target.

Bull case

1. Operating leverage is locked in: Opex held flat after a 10% role reduction while gross profit compounds at ~15%+ and margins hold at 82% — EBITDA could inflect sharply from FY27.

2. Ecosystem moat intact and undervalued: 137 design wins, 555 new products in FY26 and 8m+ devices are trading at an EV of ~A$130m (~1.9x sales), a fraction of FY24 valuation despite recovering revenue.

3. Software optionality: Iris (20 camera brands), Dante Director and DVS Pro could convert the installed base into recurring revenue, with gross margins above the Group average.

Bear case

1. Platform expansion is consuming capital without returns: Iris generated US$0.2m revenue against a A$31m upfront price and an A$3.0m loss; Group cash fell A$45m in one year.

2. Video and control face entrenched competitors and open standards (IPMX, NDI, Crestron, Q-SYS) where Dante's audio network effect does not automatically transfer.

3. Supply-chain and cyclicality risk: Elevated RAM costs and FPGA tightening, plus demonstrated channel-inventory cycles, could again decouple revenue from end demand and derail FY27 operating leverage.

Catalysts and monitorables (next 12 months)

• 20 October 2026 AGM: remuneration report vote (strike risk given share price decline) and any trading commentary.

• Q1/1H FY27 trading updates: gross profit growth vs. ~15% guidance; evidence of flat opex.

• 1H27 results (February 2027): first half with full restructure benefits; Iris and Dante Director revenue disclosure.

• Iris commercial traction relative to the US$4m revenue-based earn-out hurdle.

• Component supply (RAM, FPGA) and pricing pass-through.

• Index inclusion status and substantial-holder movements.

• Any strategic interest in the company given depressed valuation (no evidence to date).

Analyst verdict

Audinate enters FY27 as a fundamentally strong franchise wrapped in a financially weakened company. The core asset — Dante's position as the de facto networking layer for professional audio — has survived the FY25 destocking shock intact: design wins, product launches and OEM counts all rose through the downturn, revenue recovered 15% in US$ terms in FY26, and gross margin has structurally reset above 80% as OEMs migrate to software implementations. Few small-cap technology businesses can point to 540+ OEM partners, 8 million deployed devices and a self-reinforcing training ecosystem of 375,000 professionals.

The problem has been capital allocation and cost control rather than franchise erosion. Between FY24 and FY26, Audinate moved from A$20m of underlying EBITDA to a A$3.6m loss, from a A$10m profit to a A$19.6m loss, and from A$117m to A$65m of cash. The Iris acquisition, while strategically coherent with the move into video, control and recurring SaaS, has so far produced negligible revenue and materially undershot at least one broker's near-term expectations. The share price decline of roughly 85% from the FY24 peak reflects a market that has stopped paying for platform optionality and now demands evidence of self-funding growth.

FY27 is therefore a credibility year. Management's guidance — flat costs, ~15% gross profit growth, 82% margins — is arithmetically achievable and would restore positive EBITDA, but cash breakeven is not targeted until FY28, leaving limited room for error given supply-chain pressures and soft end markets. At an enterprise value of roughly 1.9x sales for an 82%-gross-margin standard-setter, the valuation embeds substantial scepticism; delivery on cost discipline could re-rate the stock meaningfully, while another year of investment ahead of revenue would raise questions about balance-sheet adequacy and governance. Our assessment: fundamentally attractive franchise, execution-dependent equity — a high-conviction "show-me" situation, with the 1H27 result the decisive checkpoint.

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