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Audinate Ltd flags more “strong growth” in next 12 months

This morning professional audio system business Audinate Ltd (ASX: AD8) reported a statutory net profit of $2.5 million on revenue of $19.7 million for the half year ending June 30, 2018. The profit result was a huge improvement on the $20.4 million loss in the prior year, with revenue also up 30%, or 35% in constant currency US dollar terms.

It should be noted that the big swing from loss to profit is due to a one-off non-cash charge incurred in FY 2017 that was related to a “change in fair value of convertible preference shares” over the 2017 financial year. The FY 2018 profit result also benefited from a $2.4 million one-off tax related gain as a result of Audinate entering a new “tax consolidated group in Australia”.

The group beat its IPO prospectus forecasts with positive EBITDA (operating income) of $0.6 million, with gross margins flat at an albeit impressive 75%.

On an operational basis the group reported that: “Dante enabled original equipment manufacturers (OEMs) products available for sale increased to 1,639 products at 30 June 2018, up 39% from 1,182 at 30 June, 2017. Sales of modules, chips and cards shipped in FY18 was (sic) up 38% to approximately 238,000 units. The Group continues to grow the number of OEMs adopting Dante to 438 manufacturer brands as at 30 June 2018, up from 369 at 30 June 2017”.

Management flagged that this remains a growth business with planned investments in sales and marketing resources over FY 2019, while investing in the tech development behind current and new products.

As a result revenue growth is expected to be in a range consistent with historic performance, although it seems the company declined to provide a forecast for earnings given the plans for rising investments.

However, the CEO noted he believes the group has “strong growth prospects” over the next 12 months.

The stock closed flat at $3.89.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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