Audinate (ASX:AD8) share price lower despite stellar sales growth

Supply chain issues couldn't stop Audinate growing its revenue strongly…

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Key points

  • Audinate has been battling supply chain issues and chip shortages
  • Despite this, it delivered strong sales growth during the first half
  • Growth is expected in the second half but at slower than normal rates

The Audinate Group Ltd (ASX: AD8) share price is trading lower today following the release of its half year results.

In afternoon trade, the audio-visual media networking solution provider's shares are down 2.5% to $7.54.

Audinate share price lower despite delivering strong revenue growth

  • Revenue increased 31.6% over the prior corresponding period to $20.2 million (US$14.8 million)
  • Gross margin of 75.6%
  • EBITDA up 11% to $2 million
  • Net loss after tax of $2.1 million
  • Strong cash and term deposits balance of $60.3 million prior to completion of Silex acquisition in January

What happened during the half?

For the six months ended 31 December, Audinate overcame supply chain disruptions and chip shortages to deliver a 31.6% increase in revenue to $20.2 million or 33.3% in US dollars terms to US$14.8 million.

Management advised that this growth was driven primarily from its chips, cards and modules, which was supported by robust demand for software products. This helped offset a decline in revenue from design wins as it moved away from up-front license fees and adopted a subscription model to successfully drive more design wins.

Nevertheless, Audinate still secured 57 designs wins with OEMs during the period, with 16 of these design wins related to next generation Dante software products. The company also revealed that it has grown the number of OEM customers shipping Dante enabled products to 403 OEMs. This represents an increase of 12% over the prior corresponding period.

Management commentary

Audinate's Co-Founder and CEO, Aidan Williams, was pleased with the half, particularly given the challenging operating conditions.

He commented: "The business performed strongly during the first half in a very challenging operating environment and delivered revenue growth exceeding 30%. Further supply chain tightness is expected in 2H22 but we are pleased to have received indicative additional commitments from chip suppliers. Consequently we now anticipate satisfying demand for our Brooklyn and Broadway products in the second half."

Outlook

Management advised that second half revenue will be driven by chip availability for both Audinate and its OEM customers. At this stage, it expects USD revenue growth for FY 2022 overall, but not at historical growth rates.

Audinate advised that it is proactively managing the challenging operating environment through product redesign, sourcing of alternative parts, and passing through price increases. Positively, it expects to be able to continue to meet demand for most flagship products.

Once again, Audinate's committed sales orders continue to grow to all-time highs, which it believes positions the business strongly for a future supply chain easing, fulfilment of orders, and associated revenue.

Though, it is also expecting its costs to increase in the near future as it grows its headcount. This reflects the Silex acquisition and the desire to support ongoing growth and drive development of video and cloud services. Audinate is targeting a headcount of 185 staff at the end of June, which will be up 37% from 135% at the end of FY 2021.

Mr Williams concluded: "The acquisition of the Silex video business is another exciting chapter for Audinate. With the establishment of the Cambridge (UK) video software team, the acquisition completes a significant transformation of our video capabilities over the last twelve months. Whilst supply chain disruption is likely to linger through CY22, we look to fulfilling increasing demand for our products and services. We also look forward to the release of future video and cloud products that complement our existing revenue streams."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended AUDINATEGL FPO. The Motley Fool Australia owns and has recommended AUDINATEGL FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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