• Gross Profit: $24 million, down 29% from the prior corresponding period.
• Gross Margin Percentage: Increased to 83% from 72% in the prior period.
• Embedded Software Revenue Growth: 13% increase, indicating strong demand.
• Operating Cash Flow: Positive $1.2 million for the half.
• Free Cash Flow: $8.1 million, compared to $3.4 million in the prior period.
• Cash and Cash Deposits: $111 million, with no debt.
• Design Wins: Increased by 15%, indicating future growth potential.
• Dante Enabled Products: Net increase of 196 products, totaling 4,372 on the market.
• OEM Video Licenses: Increased to 60 brands, with 116 Dante Video products launched.

• Warning! GuruFocus has detected 3 Warning Signs with AUDGF.

Release Date: February 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Audinate Group Ltd (AUDGF) reported first-half results above guidance, with expectations for moderate growth in the second half.
• Strong growth in embedded software sales, which are less impacted by inventory issues, indicates continued demand for Dante technology.
• Gross margin percentage improved from 71.5% to 82.2% due to a shift towards software products.
• The number of design wins increased by 15%, with 196 new Dante products launched, indicating future repeat revenue.
• Audinate maintains a strong balance sheet with $111 million in cash and no debt, enabling strategic investments.

Negative Points

• Revenue headwinds are expected to persist through FY25 due to customers working through excess inventory of chips and modules.
• Gross profit for the first half was down 29% compared to the prior year, impacted by lower sales of Ultimo chips and Brooklyn modules.
• Operating expenses are expected to grow moderately in the second half, despite a 3% reduction in the first half.
• The transition from hardware to software may lead to moderated revenue growth, despite higher gross margins.
• Continued softness in chips and module sales is anticipated throughout the remainder of FY25, affecting overall revenue.

Q & A Highlights

Q: How many video endpoints are currently in the market? A: Aidan Williams, CEO, stated that this information is currently confidential and not being disclosed at this stage.

Q: What is the market response and early take-up for Dante Director? A: Aidan Williams, CEO, mentioned that Dante Director is in its early stages, having exited beta trials with several paying customers. There is significant interest, especially for larger scale implementations, and the company is actively adding new features to the product.

Q: Will DBS Pro become available as a perpetual license? A: Aidan Williams, CEO, indicated that this is a product management question and he is unsure of the plans at this stage.

Q: Can you provide some color on potential acquisitions and strategic partnerships? A: Aidan Williams, CEO, explained that the company is exploring various strategic opportunities, including acquisitions, partnerships, and inorganic development, to drive long-term strategy and complement their audio, video, and cloud-based control and management functionalities.

Q: How is the launch of the new AV Phoenix range expected to impact revenue? A: Aidan Williams, CEO, stated that the new AV Phoenix range is a natural evolution of their AVO adapters, designed to better fit commercial installations. It uses the next-generation Dante chipset and supports media encryption, potentially increasing volume and supporting revenue growth.

Q: How are customers responding to updates for telemetry and retention in Dante Director? A: Aidan Williams, CEO, noted that smaller customers respond well to cloud-based monitoring and management products, while larger customers with their own platforms may integrate with Dante Director through cloud-to-cloud solutions.

Q: What impact do tariffs have on Audinate's business? A: Aidan Williams, CEO, mentioned that the impact of tariffs is still uncertain, with some products like the Ultimo chip already facing high tariffs. The company is waiting for final legislation to determine any significant actions.

Q: How might AI impact Audinate and its competitors? A: Aidan Williams, CEO, highlighted several potential impacts of AI, including processing algorithms for audio and video, multi-modal interaction, and generative AI for designing audiovisual installations.

Q: Are there plans for a video AVO adapter? A: Aidan Williams, CEO, stated that currently, there are no plans for a video AVO adapter as their manufacturing customers are producing a wide range of video products that meet market needs.

Q: How does FX risk and US dollar fluctuations affect Audinate's guidance? A: Chris Rollinson, CFO, explained that while FX assumptions are made, the strengthening US dollar benefits their AUD conversion. However, it is not seen as a significant factor impacting earnings guidance for the second half of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.