Updates On Audinate Group; YTD return Stands At 124.16%

Updates On Audinate Group; YTD return Stands At 124.16%

With companies striving every minute to cope up with the dynamic nature of the business, it is important for market analysts and investors to keep themselves updated on all events surrounding the industry, internally and externally. A vigilance to knowledge is perhaps the key requisite of a healthy and wise investments.

On this note, let us dive right in- towards the recent updates and stock performance of audio tech player, Audinate Group Limited (ASX: AD8):

Company Profile: A global lead provider of professional digital audio networking technologies, AD8 is best known for its award-winning Dante platform, which distributes digital audio signals over a network of computers and is designed to enhance the information technology networking with the professional AV industry. The platform offers products at a lower total cost of ownership. AD8 was incorporated in Sydney and it got listed on the Australian Securities Exchange in 2017. The company’s registered office is in New South Wales and there are over 200 manufacturers that utilize Dante audio networking.

Company products (Source: Investors Presentation Report)

 

Stock Performance on ASX: On 8 July 2019, AD8’s stock last traded at A$8.2, up by 2.757 per cent. The 52-week high and low of the stock is A$8.66 and A$3.08, respectively. The company has a market capitalization of ~A$513 million, with ~64.3 million shares outstanding. The P/E ratio of the stock has been recorded at 407.14x with an EPS of A$0.020. In the last one, three and six months, AD8’s stock have generated returns of 0.88 per cent, 33.89 per cent and 121.67 per cent, respectively. The YTD return stands at 124.16 per cent.

AD8’s stock’s 6-month returns since Feb’19 (Source: ASX)

 

Issue of New Securities: For AD8, July 2019 began with an issue of 3,941,446 fully paid ordinary new shares, released from mandatory escrow on 30 June 2019.

New Software Products on board: On 7 June 2019, the company announced a couple of new software-centred offerings for Dante: Dante Embedded Platform™ and Dante Application Library™. The Dante Embedded Platform™ would allow production players to make an addition to full Dante operations in the software on Linux for Intel and ARM processors. The platform would enable users to savour Dante support in a wide segment of price sensitive products. The second newbie on board, The Dante Application Library™, would enable the developers to smoothly merge Dante’s tasks straight away into their MAC apps and personal computers.

These two products were due for the official launch at the Infocomm 2019 trade show in Orlando in June. It is being anticipated that they would begin an initial revenue contribution in FY2020. Both the solutions have more flexibility than dedicated hardware, and bear potential to be functional among the already existing products, as well as allow system integrators and end users to add new features and more Dante channels to products, as the systems grow and change.

There are three partners supporting the company’s introduction of new products- QSC (as part of the strategic partnership between both companies, QSC would deploy the Dante Embedded Platform within the Q-SYS Ecosystem, enabling local audio channels which are software-based). The second company, ADI (Analog Devices), would aid in reference design for Dante Embedded Platform on the ADSP SC58x family of chips. Lastly, Zoom Video Communications Inc., would integrate the Dante Application Library, to facilitate video meetings.

Capital Raising Presentation: On 6 June 2019, the company made a Capital Raising Presentation, wherein it notified the market that it was raising A$20 million and up to A$4 million in a Share Purchase Plan. The funds generated from this placement would be used towards expanding the company’s global sales penetration, pacing up the products initiatives and developing a next-gen Dante platform. The funds would also be used to provide for additional balance sheet strength and flexibility, supporting growth.

The placement consisted of ~2.86 million new ordinary fully paid shares and the offer of the raising was priced at A$7 per share, representing a 5.9 per cent discount to the last close of A$7.44 (on 4 June 2019) and 6.3 per cent discount to the 10-day VWAP of A$7.47 (closing price on 4 June 2019). The SPP also allowed eligible investors to subscribe for New Shares up to a maximum of 2,142 shares, capped at A$4 million. The SPP was due to close on 4 July 2019 and the allotment would take place on 10 July 2019, with the trading on ASX to commence on 11 July 2019 and SPP holding statements to be dispatched on 12 July 2019.

On the competitive edge, AD8 stated that it leads the market when compared to other competing audio networking solution providers, and its Dante platform was more than five times the adoption of its closest competitor. The company had over 2000 products, with a significant growth trajectory, (as on 30 May 2019), more than any other player in the game:

Competitive Landscape (Source: Investor Presentation Report)

The OEM data had been undergoing regular review and updates, and during 1H19 period, 31 new Dante licensees were added & 17 OEMs were removed. In the same period, the company’s OEM customer base grew to 455 and 228 OEM customers had announced products in the market.

 The company follows the below three core business growth strategies:

  • Increase the market awareness of Dante products, for increased number of product installations.
  • Increase penetration of Dante across each OEM brand’s product portfolio.
  • Increase the number of OEMs adopting Dante.

Financial Performance: In mid-April, the company released its Quarterly cash flow report for the period ending 31 March 2019 and reported cash collections of A$6.3 million, up by 40 per cent on pcp. The unaudited revenue of the period amounted to A$6.6 million and the company received R&D incentive for FY18, amounting to A$1.3 million. The cash flow statement is summarised in the table below:

Particulars Amount (A$’000)
Net cash from operating activities 1,606
Net cash used in investing activities 1,766
Net cash from financing activities 7
Cash and cash equivalents at the end of the period 12,012
Total estimated cash outflows for the next quarter 6,859

Post this update, AD8 announced that going forward, it would not lodge quarterly cash flow statements (approved by ASX) but continue to report half and full year financial statements.


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