Audinate Group Limited

Good morning, everyone. Thank you for joining our call today. My name is Aidan Williams. I'm co-founder and CEO at Ordinate. With me is Chris Rollinson, our Chief Financial Officer, and Nick Pease, our Chief Strategy Officer. So today, in the first part of the call today, we'll be talking through the investor presentation that accompanied our financial results. and both of those were lodged with the ASX earlier today. You can ask questions as usual at any time by typing them into the Q&A box. At the end of the presentation, we'll collate those questions and answer as many as we can in the time that we have available. So before getting into the meat of the results part of the presentation, I would like to recognise that this year is the 20th anniversary of Ordinate as a company. It's been a year to look back and to reflect on how far we've come and to remember the many people who have contributed to Ordinate's success over the years. There are so many to thank, but I would like to particularly recognise the two prior CEOs, Lee Ellison and David Myers. They took on responsibility for the company in those very early and challenging years. It's a hard thing to start something from scratch and to build something self-sustaining and there were certainly many challenges on the way. I am and I think we should all be proud of how far we have come. The Dante Networking technology itself has been successful, perhaps more successful than we had dared to hope when we started. There are now over 8 million devices in the field and over 5,000 products that support it. Around the world, hundreds of thousands of AV professionals depend on Dante to deliver experience at the highest profile events, but Dante also underpins a wide range of bread and butter, day-to-day, behind-the-scenes AV systems that do their thing without people being aware. In another way, our vision to pioneer the future of AV, and that's beyond just the Dante technology itself, is gaining traction in the industry and our role in carrying that vision forward is becoming clearer. For me personally, I'm energised by the talent we have at Ordinate and the platform investments that we are making. The vision has stayed remarkably consistent throughout the last 20 years and now is the time to capitalise on the success of the Dante ecosystem and deliver something new in the AV industry. We've built a strong foundation and the opportunity ahead of us is the largest it has ever been. And now onto our FY26 results. Turning to slide four, you can see the FY26 highlights. On the revenue side, FY26 saw a return to growth coming in at the upper end of our guidance range and with improved momentum across the whole product portfolio. Second half revenue was strong and underpinned delivery of the FY26 outlook. Revenue growth from ABO adapters was supported by the introduction of a new range of ABO products targeted specifically for the AV installation and integration channel. Overall, the Dante ecosystem is healthy and continues to expand. Over the full year, a record number of 555 new Dante-enabled products came to market. Each new Dante product hitting the market generates revenue in FY27 and beyond in the form of chips, modules or royalties. Each time an equipment manufacturer builds a new batch of those products for sale. The product design pipeline is also healthy, with 137 design wins during FY26, pointing to future revenue expansion as those products hit the market. 229 OEM brands are currently developing new Dante Enable products. During FY26, our Dante certification and training programs were refreshed and relaunched. Training, as we continue to say, is key to supporting AV professionals as they design and deliver AV systems using Dante. Over 375,000 AV professionals have completed certification or training around the world. On the product side, the portfolio has expanded. We have expanded the AVO product range with models specifically targeted at the AV installation market. The idea there here is to have a form factor that enables simplified installation under tables and inside cabinets. Dante Director was enhanced with features required for enterprise usage and for additional control functions, and Iris was integrated following acquisition. Iris extends our product offerings with deep camera controls and into video production workflows. Strategically, it has been a big year for Audinate. To briefly summarise, our long-term strategy remains to capitalise on the growing installed base of networks' audiovisual devices and to provide the software platform used by the industry to deliver projects globally. AV installations are generally understood to require three kinds of functions, audio, video and control and today, including IRIS, there are more than 8 million audio and video devices available in our product system. The time has come for us to invest further into the third leg of the stool, the control function. During the year, Ordinate has made organisational changes to better align our cost-based and R&D investment with our strategic objectives for the Dante platform. These changes reflect the natural progression of the product investment cycle with several major initiatives now complete. The full benefit of cost-based realignment will be realised in FY27 and beyond. and supports disciplined, profitable growth as revenue scales. We retain a robust balance sheet with $65 million in cash and term deposits. An improved cash flow trajectory heading into FY27 ensures we retain a strong financial and strategic position, enabling prudent investment to unlock future growth. Organisationally, we have realigned resources around three core categories of business during Those three categories are embedded components, so that's things sold to manufacturers like our Dante chips or software. Installed products, these are things that go into AV installations like AVO adapters. And the third category is software and services, so audiovisual software and services. These are platform products like Iris and Dante Director. You will see this structure reflected throughout this presentation in how we are reporting product revenue, in how we are generating future value and future growth at Ordinate and also in how we think about our strategic priorities. New leadership roles have been established to ensure that each category has the appropriate focus and accountability to drive growth in FY27 and beyond. The new structure recognises the channel and go-to-market differences between products sold to manufacturers of audiovisual equipment and products that get sold into the installation itself, like AVO adapters or platform software and services. Turning to slide 6, you can see the key financial metrics for the full year. 15% revenue and gross profit growth was at the upper end of guidance, reflecting a return to growth as anticipated. Revenue for the full year was US$46 million, and we retained a strong gross margin percentage of 82%. Ordinate continues to grow at a multiple of the underlying growth rate of the AV industry, which has slowed with the abatement of COVID and return to office tailwinds and things like tariff uncertainty. The Australian dollar numbers reflect FX headwinds experienced during the year. Keep in mind that Ordinates products are largely priced and sold in US dollars. Our COGS are largely in US dollars and we have also got employment costs in US dollars too and that gives us a natural hedge against adverse exchange rates movements. Overall, the full year result is extremely pleasing. Slide 7 breaks down our product portfolio into the three categories described earlier. Embedded components, installed products and then AV systems, software and services. Revenue growth in FY27 was spread broadly across all three product categories, led by new product launches. Embedded components include what we historically have reported as chips, cards and modules and also includes embedded software products like Dante Embedded Platform, our Linux implementation and Dante IP Core. The CCM component delivered or the embedded components business delivered a strong second half as first half bookings translated into revenue. Install Products is our ABO product range. Growth in this category was driven by new product introductions, specifically targeting ABO installations like meeting rooms, boardrooms and higher education applications. Software and Services includes new products like DBS Pro, the early uptake of IRIS as well as other PCMAC software and management software like Dante Director and Dante Domain Manager. These products are typically used in audiovisual installations and get attached to those installations as AV professionals design and install projects. Slide 8 shows continuous strength in the key operating metrics associated with the Dante ecosystem and the growth of the Dante ecosystem. Each of these metrics are leading indicators of future revenue. Ordinate sales cycle to manufacturers involves an initial design win followed by a period of 12 to 24 months for product design to be completed, followed by repeat revenue derived from the ongoing purchase of chips or the payment of royalties as each new unit is manufactured over the sales lifetime of that AV product. Design wins are the earliest indicator and represent manufacturers signing up to use Dante technology in their products. 137 design wins is an excellent full-year result and highlights the ongoing take-up of Dante technology by AV manufacturers. In the middle column, the number of manufacturer brands with Dante products in the market and importantly, the number of manufacturers developing their first Dante product continues to grow. There are now 771 AV equipment manufacturers signed up to use some form of Dante technology in their products, with 542 manufacturers shipping one or more Dante-enabled products today. 229 manufacturers are currently developing new Dante-enabled products, the largest it has ever been. The right hand column contains a key indicator that that is the number of Dante-enabled products available on the market. You can think of this as effectively the catalogue of products that an audiovisual professional can choose from when they are designing and installing an AV system. Over the year, a record number of 555 new products came to market, making a total of 5,158 Dante-enabled products on the market. Since the Dante networking technology provides interoperability between competitive brands, the growing product ecosystem continues to strengthen the economic network effect associated with the Dante technology and its competitive moat. Ultimately, these charts illustrate the continued health of Ordinate's core Dante technology business. product development activity and product launches are all leading indicators of future revenue for our embedded component business in FY27 and beyond. And I'll now hand over to Chris to talk through the financials. Thank you very much, Aidan.

So just turning to page 10 and the income statements. So this is presented in Australian dollars. So starting with revenue, FY26 revenue, grew 9% to $68 million. Now, this growth was lower than the increase reported in U.S. dollars, reflecting the Australian dollar-U.S. dollar exchange rate movements during the year, with the Australian dollar strengthening around 6% over the year compared to the U.S. dollar. So while revenue is 100% U.S. dollar denominated, the group has U.S. dollar denominated expenses covering approximately half of this revenue and provides a partial natural hedge against these exchange rate movements. Our gross margin was 81.9%, down slightly from 82.3% in FY25, and this was driven by the strong performance of Chips, Cards and Modules revenue in particular in the second half of the year. We continue to maintain high margins overall and expect a similar margin result as we look forward in FY27. Turning to costs, employee expenses increased 23%, or $8.2 million. Now this was driven by a $2 million increase in the IRS as a result of the employment costs from the IRS acquisition. It was $3.9 million as a result of stronger performance against short-term incentive targets, which drove higher variable incentive costs. And the remainder of this increase was from headcount increases in the second half of FY25. An operating restructure was undertaken during the year, resulting in a net reduction of 10% of roles across the broader group, despite the additional headcount from IRS that came into the year. Sales and marketing expenses decreased by 15% following the completion of launch-related investment activities in control, in particular Dante Director, while we maintained targeted presence at key trade shows across major regions. Our other operating expenses increased 18%, reflecting the cost of running a geographically diverse listed business. So putting this all together, underlying EBITDA was a loss of 3.6, down from a positive 0.7 million in FY25. Now this reflects a deliberate choice. So we invested ahead of revenue for Iris, Dante Director and the broader platform because we believe the market opportunity in front of us justifies this. We're broadening Dante's footprint across audio, video and control and each of these product launches solves a problem of a different kind for a different customer and together they put Dante in front of a much wider set of buyers than audio could do alone. Now, at the same time, we didn't lose sight of cost discipline. We restructured the business during the year to concentrate our cost base on the highest return parts of the platform and expect the full benefits to show up in FY27 as stronger operating leverage and improved cash generation. Turning to the cash flow statement, so operating cash flows were $1.2 million, down from $7.4 million in FY25. While this remains positive, the reduction reflects three factors. A $1.7 million reduction in interest income from a lower cash balance following the IRIS acquisition, a $2.7 million increase in operating costs from IRIS as the business scale subscribers and also the $1.8 million cash outflow from the operating restructure that took place during the year. The largest driver of cash movement in the year was investing activities. So there was the $31 million acquisition of Iris and then the $12.4 million invested in continued development in product lines across the Group. Altogether, the overall movement in cash during the year was an outflow, was $44.8 million. If we look to FY27, we'll continue to invest in the business but increasingly funded through improved operating cash flow rather than the balance sheet. We expect an improvement in operating cash flow next year driven by our revenue outlook combined with the benefits of a leaner cost base. And this will be the foundation of our path to positive free cash flow in future years. If we now turn to the balance sheet, so the cash movement flows directly through to the balance sheet. Cash and term deposits together stood at $65 million at the end of the year. We remain in a robust financial position, we carry no external debt and our balance sheet gives us the flexibility to fund our strategic initiatives. The most significant movement on the balance sheet relates to intangible assets which grew to $65 million. an increase of $27 million, which is made up of the continued investment in our platform, but the majority of that is through the recognition of goodwill through the IRS acquisition. So we look at that combined across the P&L cash flow and balance sheet. FY26 tells a very consistent story. Deliberate investment in the platform expansion were funded through a strong balance sheet and cash position. and we enter FY27 with a positive revenue outlook and a leaner cost base and together this will drive improved profitability and cash flow generation. I'll now hand you back to Aidan.

I think it's over to Nick to talk through some of the strategy slides. Thanks Aidan and Chris.

It's worth reiterating why Dante is the de facto AV networking standard trusted by customers around the world with more than 8 million devices in the field. In summary, Dante is chosen by AV professionals because it enables them to distribute high-quality, low-latency digital signals across standard IP networks. Dante enables AV system designers, installers and operators to build and operate more flexible AV networks with significantly reduced cabling and labour costs. So AV professionals choose Dante for five main reasons. Ubiquity, which is underpinned by interoperability. Any brand, any Dante device, and the confidence that Dante's large installed base and broad OEM adoption provides. Scalability. From single room to multi-site enterprise deployments, running on standard off-the-shelf networking equipment and extending from audio into video control and software. Reliability. This is a must-have when you're trusted with high-profile AV installations such as Premier League grounds, major concert tours, and Fortune 500 HQs. AWS, which is supported by our extensive training program, is really one of our most important assets. As Aidan mentioned, over 375,000 trained professionals across 24 countries. And security. This matters more every year as AV moves on to enterprise IT networks. And so that's why customers choose Dante. How then do we build on this to sustainably grow value? So we think about our business as having three categories. So it's best to talk about each of them in turn. So I've shown us about how we're going to do that in parts to sustain value. So the first two are aimed at expanding Dante's installed base across audio and video. So with OEMs, we're continuing to work with AV OEMs globally to embed Dante across their product ranges. 771 OEMs are either currently shipping or developing Dante-enabled products, utilizing either our hardware or our embedded software offerings. So this is the largest part of our business today, and it's our continuing priority to ensure that our products meet the needs of OEMs across the breadth of their product ranges. Beyond OEMs, we're developing Ordinate-owned products that extend Dante into more AV installations. So current examples of this include products such as AVOs, which we sell primarily to AV integrators and installers. So these extend the benefits of Dante AV networking to AV products which are not natively Dante-enabled. In practice, this means that AV professionals can bring in more AV devices into Dante networks, even in existing brownfield installations. So in each of these first two categories, we do generate revenue on a per-unit basis. But there's an additional dimension as well, though, which is to build products which help AV professionals manage, control and operate Dante AV networks. So products like Dante Director and Iris enable us to deepen our engagement with our customers and to generate recurring revenue from our global user base. So we're aligning our business around these three categories, not just to guide us on what we build, but also to help us best engage with, to sell to, to train and support each segment of the AV industry. So that's the model. It's worth now turning to our major priorities in each of these categories. for FY27. So firstly, our component business. We continue to see opportunities to work with AV OEMs to further expand the adoption of Dante across their product ranges. One significant initiative this year is making Dante's embedded software solutions as easy as possible for OEMs to implement into their AV products. A broader priority though is to continue to encourage the broadest possible adoption of Dante by AV specifiers, integrators and end users. We're continuing to deepen the Dante ecosystem across AV specifiers, integrators and installers in our major markets via Dante certification, training and support. So notwithstanding we've been in business for 20 years, digital AV networking is still in its early stages globally. and adoption does vary significantly by country and by region. Hence, we've been reviewing each of our major markets on a country-by-country basis to guide us on key local ecosystem initiatives for this year. With an installed products category, we will be growing AVO revenue through recently launched product offerings which target installed AVO projects. In addition, we've recently restructured our sales organisation to create a dedicated solution sales team which focuses on integrators and end-user customers. So this team is responsible for AVO product sales and together with products such as DDM, Dante Director and DBS, which are also aimed at AV professionals and end-users. Beyond our existing product range, though, we're continuing to develop new products that set the benchmark for Dante-enabled installations. In terms of monetising the network, growing the IRS subscriber base is an important FY27 priority, as is growing the uptake and the capability of our control solutions across enterprise end customers, integrators and consultants. From a product perspective, we see significant opportunities to deliver products that help AV professionals better manage, control and operate AV systems. So accordingly, extending Dante and Iris into higher value AV workflows and applications is going to be a significant focus for this year. Over to you.

Thanks, Nick. So on slide 17, so given the potential for AI to disrupt a variety of software and seek-based SaaS businesses, I thought it would be helpful to again share how we think about the relationship between AI, Ordinate and the broader AV industry. For Ordinate, the bulk of our revenue is linked with hardware devices that are installed into physical locations. So here you should think microphones, amplifiers, cameras and the like. This revenue model is infrastructure-oriented rather than seat-based, and it is connected to the audiovisual equipment that's needed in physical environments. Another point to make is that the value of Ordinate's key technology, Dante, is tied to the economic network effect created by interoperability between competing AV equipment brands. There are currently 8 million devices in the field with an ecosystem of over 5,000 products from over 500 brands. As this ecosystem and the store base grows, the moat deepens since replacing or reworking that whole portfolio of Dante products and the install base is extremely expensive. Ultimately, I see Dante and Iris technology, so specifically the networking APIs and platform services components of those technologies, as enabling workflow automation and also AI applications. Both Dante and Iris put audio and video signals onto networks with APIs to control them, and this creates a natural foundation for AI works and workflow automation. AI is broadly applicable in the AV industry. The AV industry is largely project-based and there's typically three phases, a design phase, an installation phase and then an operation phase. So if we look at that in a little bit more detail, for example, in the design phase, converting customer requirements documents into detailed specifications can be accelerated using AI. for system programming. This is not unlike software programming that is a substantial application of AI tools today. And also when we think about the operation of audio-visual systems, the ability to speak or use natural language instructions to control and change the operation of a running AV system I think is a significant opportunity. Furthermore, technologies like Dante are enabling change in the industry. with IT-style networking, software and APIs really replacing old-school AV equipment and wiring. If you think about it, the interface for AI in the AV industry is networking and APIs because AI is essentially software that's running inside computers. So Dante and Iris provide key networking and control technologies that ultimately end up enabling a broader adoption of AI throughout the industry. Slide 18 summarises the FY27 outlook. Audinate enters FY27 with sustained revenue and gross profit momentum, strong gross margins and a pathway to positive free cash flow. In FY27, US dollar gross profit growth is expected to be in line with or slightly ahead of the rate achieved in FY26. with gross margins maintained and operating costs held flat, supporting a meaningful improvement in operating profit. As I said earlier, our long-term strategy is to capitalise on the growing installed base of Dante devices and to provide the software platform the industry uses to deliver audiovisual projects and services globally. New product development, expansion into new geographic markets and deeper customer engagement are accelerating growth. Continued investment in the Dante platform is expected to support meaningful revenue growth over time. Ordinate holds sufficient liquidity to fund its growth initiatives and strategic priorities. We expect materially stronger operating cash flow in FY27, driven by improved revenue and a leaner cost base. Finally to wrap up on slide 19, where is Ordinate today? So there have been various ups and downs over the last 20 odd years of Ordinate being in business. However our core Dante networking business has remained strong and it continues to gain even more traction in the industry. The leading indicators of design wins, products under development and new products coming to market show ongoing momentum and there is plenty of further runway ahead. We're expanding our product offerings into video and control and have strategically realigned our business around those three activities that I was talking about further to create focus and growth. So that's our component business to manufacturers, our installed product business like AVO adapters and audiovisual system software and services. The consistent long-term effort over the last 20 years has created the installed base, the team and the conditions to make our long-term vision a reality. So ultimately, Audinate has a proven core business model, a robust balance sheet position and the discipline to succeed over the next few years. And with that, I will hand back to Chris to coordinate questions.

Thank you very much. Thank you, Aidan. We had a number of questions, so I'll just read through them and we can look at how we answer that. So the first question from Tom, can you give a little more colour regarding the traction for AV and when we can expect breakeven versus the cash outflow we've had in this result? So maybe I'll talk about the cash position and outlook, and Aidan, Nick, we can talk through then the traction that we're seeing across the AV products. So in terms of cash flow, we have an operating restructure, as we've outlined, has taken place in FY26, and those benefits will flow in FY20. So in terms of our outlook, the expectation is revenue and gross profit growth in line with what we've had in FY26 and we're maintaining a flat cost base. So what we're seeing in FY27 is certainly an improvement in our operating leverage and certainly an improvement in our operating cash flow. and for us that is a much more positive result from a cash outlook. In terms of cash flow breakeven, the expectation is not that we'll be free cash flow breakeven in FY27 but certainly as we get to the end of FY27 we should see have much more clarity around what our cash position and free cash provision looks like as we go into FY28. Aidan or Nick, did you want to talk about the traction in AV?

Right. Well, we've obviously touched across a number of dimensions in terms of what we see in terms of the OEM business. Our take there is continues to be steady. In terms of monetising the network, we're sort of... We're continuing to attack that deliberately and really focus on getting the basics right, delivering value to customers, to end users, building products that stick within their workflow and then expanding out from there. So like all recurring revenue models, you've got to grow with stickiness and gradually build out from there. So it's early days with both the director and... and IRIS, but increasingly it's going to be focused on ensuring steady attachment to our user base and growing account by account, segment by segment. So sort of early days, but we're sort of buoyed by what we're seeing at the moment.

Next question is can we get an update on your strategy for IRIS? What is the likely revenue pathway for IRIS?

Yeah and I think that was actually related to the first question as well. So the acquisition of IRIS actually represents a pretty significant strategic shift for Ordinate in how we think about monetising our networking technology and how we think about monetising audio-visual installations as a whole. So I think in the past, maybe sort of two years ago, we would think about the success of the audio business that we have, selling components to manufacturers, and then we would think, oh, we can just do that again with video. And that turns out to be a tougher proposition because of a variety of reasons, which I think we've covered in previous episodes. either results or conversations that we've had with investors. But the nutshell really is that in video world, things like codecs, so the need for the compression technology creates quite a lot of friction in terms of interoperability and that tends to dilute the value of an interoperable networking technology like we had with Dante Audio. So when we thought about capturing the value from the audiovisual system that ultimately will become networks, we were thinking about different business models and different strategies to go and do that. And one business model and strategy that was out there was the IRIS business model. So the idea there is to provide the technology to manufacturers for free, but then monetize the end user part of that. So IRIS really represents... a vertical slice through a use case involving camera control and production and Iris has been very successful in terms of getting adoption with camera manufacturers. So it's a different model. In the end it achieves a similar result because if you remember my comments about audio visual systems having audio, video and control, IRIS has video transport and it also has control functions so it provides a complementary set of networking technologies that go with our audio solutions. So again I think what I would point you towards is perhaps a shift in the way that we're thinking, a strategic shift in the way that we're thinking about capturing value from audio visual installations and from the technology I guess ecosystem that we've created with Dante. So instead of focusing on video is the next thing or how big is video going to be as a component business, we want to point investors towards thinking about there's a component business but there's also a business selling products into installations like our AVO business that we have today and there's a business involving the coordination, the software, the control and management of those systems to create a lot of stickiness in those audiovisual installations. So when we think about future growth of Audinate, I would be guiding investors to be thinking about how is our component business going to grow? How is our products that we sell into AV installations going to grow? and what does it look like for our long-term strategy in terms of being able to deliver products that enhance the management, control and stickiness of Dante Technologies in audiovisual installations globally. So sorry for the long answer, but I think it's a very significant shift in the way we're talking about future growth and it really represents a fair bit of strategic thinking over the last 18 months, maybe more.

Thanks, Aidan. So our next question is IRAS related as well. So the question is, is IRAS bringing in revenues now? The second part is, is there info on IRAS revenues projections, including timing? So I'll answer the first part and maybe Aidan, Nick, you can answer the second part just around outlook in terms of revenue for IRAS. The first one, yes. So IRIS is bringing revenue now. Disclosing the accounts, we've got $200,000 US worth of revenue in FY26. And then in terms of IRIS revenues and projections?

Well, obviously, as I said before, we're sort of very much focused on getting the basis right in terms of building both the sales motion, the outreach motion to ensure we can generate recurring revenue from our installed base. very much focused on getting the basics for that right. We're obviously not providing guidance at this stage, but we're very much focused on getting the basics right, ensuring that we can support as many of the 20-odd IRIS partner OEMs and go to market alongside them. So we'll say more about this as we move forward, but at the moment we're focused on early adoption, early rollout and getting the basics right.

Thanks Nick. So a question from Lucas just in relation to cost. So FY27 costs are guided as flat excluding one-off restructuring and IRS acquisition payments. What's the expected quantum of those one-off costs in FY27? So the assumption is zero in terms of restructuring costs. In IRS acquisition related costs it will be 1.8 with an expectation of $1.8 million in FY27. That's non-cash, that's just amortisation of shares that were issued as part of the IRS acquisition that are being amortised over three years. Next question from Ryan. Given that the operating expenses are rising despite recent restructuring efforts, what inflection point in revenue or cost reductions is required to reach net profitability and what's your targeted timeframe to achieve cash flow break even. So I think we've outlined during the presentation around the restructure efforts that took place, have been completed in FY26. Guidance in FY27 is to have our revenues increasing and our costs remaining flat. So that, you know, certainly as we head into FY27, we're seeing, you know, a different... different outlook in terms of revenue growth and cost growth for Ordinate. I think in terms of the break-even mark, one of the key elements in achieving that break-even mark, Iris is still a business that is young and is still not cash flow positive and we don't expect that to be the case in FY27 as the business continues to scale subscribers. But as we had in FY28, the expectation is that business will turn around and certainly we'll continue to see more operating leverage in our core business outside of those investment initiatives. Next question from Lucas. With a major platform initiative complete, why is FY27 gross profit only in line or slightly ahead of FY26 at 14.7% rather than accelerating? We've guided the market to our gross revenue and gross profit growth expectations of in line with or slightly ahead of FY26. So I think at this stage, that's our best estimate of what we believe the outlook looks like for Audinate and FY27 in relation to gross profit and revenue.

Yeah, I mean, I would add that I would love it to be You know, I think the word only is interesting in this sentence, but I'd love it to be ahead of 15% for sure. I think one of the reasons is really the overall... The world is not the same as it was, say, three years ago when there was a number of tailwinds in the AV industry. So I think Audinate continues to perform at an underlying multiple of the growth rate of the industry, but the industry itself, the growth rate in the industry has gone from 6.17% down to sort of high 3.9s, high 4s. So this 15% growth rate actually represents a multiple of two to three times the underlying growth rate of the industry. which is healthy. So I think it's a good... So I would say it's consistent, continuing growth for Ordinate, driven largely by our core business. And I would also say that the changes we've made will enable us to do things like grow the AVO products and the things we've sold into AV installations and also for that to be a channel which can actually better... to be structured more appropriately in order to go and have a go to market for those products that we've developed. So that's how I would answer that question.

Question from Tim. So it's all accelerating gross profit growth in the second half. So first half growth 12 versus second half 17. Can you talk to exit or current gross profit run rate and can we get an update on historical inventory destocking please? Are the top 10 OEMs back to normal ordering? So I'll answer the first part of the question in relation to growth rates. So we certainly saw a positive second half performance in revenue. A lot of that was driven by the chips, cards and modules, embedded components growth in the second half of the year. That's certainly pleasing and for us not necessarily unexpected because we're really at the end of the inventory destocking cycle. As that looks into FY27, we've made an estimate of what we believe our outlook will look like. in FY27, and that's been factored into the outlook.

Yeah, I mean, I would jump in on the OEMs back to normal ordering. So it's a question of what you mean by normal. I think the OEMs are all through the inventory overstocking type stuff that they had in terms of our components and parts. So their propensity to buy Dante technology is no longer gated by them sitting on a pile of chips. by and large. I think that's true of our top 10 for sure. However, I would say that going forward, there's always inventory issues, like there's RAM issues at the moment with all the shortages on things like RAM and costs are going up. So I think those things have really replaced concerns around people sitting on big piles of Dante circuit boards or Dante chips. So it's a different challenge, even if it is in that same supply chain type area.

A question from Jenny just in relation to CapEx for FY27. So we expect somewhere around $13 million in CapEx for FY27, which is in line with 26, and a view on when Ordinate can hit cash break-even. Not in FY27. I think we'll sort of outline this at length. certainly we'll see much stronger operating cash flow that comes through in FY27. As we hit in FY28, I think that's the area that we would be targeting our cash flow, free cash flow break-even position. A question from Jenny just in relation to, I guess, the breakdown of where we see growth coming from across the product pool flow in FY27. Product portfolio growth.

Okay. Yes. So I think we are not providing guidance at that sort of breakdown line type number. I think this is the first time that we have broken down our products in that way. So Yeah, I don't think I have a specific answer to that question. My expectation is that as we have put in place a go-to-market organisation and we have a bunch of new AVO adapters that have hit the market, like the four-channel AVO adapters right at the end of FY26, my expectation is that there should be healthy growth on the AVO adapter side of it, consistent growth around the Dante ecosystem, which is very much a law of large numbers thing, and I expect also to see consistent growth around the AV systems, software and services. So things like Dante Virtual Soundcard tend to be pretty stable in terms of their attached rate to underlying AV installations and I would like to think that things like Dante Director and Dante Domain Manager would benefit from the organisational changes that we have made as well. Overall, there's always a question of what you think the end of the whole financial year will look like. We're not without our headwinds. So I think I already mentioned things like RAM shortages. There are things like chip shortages potentially out there on things like FPGAs that we have to navigate. So there are always pluses and minuses. But that's probably how I would answer that question.

Related question, Aidan, so any impacts from chaining, which is any impact from memory prices and availability?

Absolutely. So one of the things that our manufacturing team has been spending a lot of time on is getting redundancy in supply for things like RAM chips of various sorts. so we've been shaking the trees and finding paths all over the place. That does have an impact on our COGS and we have recently put a price increase through to reflect that. So I think generally speaking the industry is as a whole dealing with the same thing because our manufacturing customers have the same issues with their products. So RAM I think is one of those things where it's just more expensive now than it was. but I think it's a tractable problem even though we have to be honest. The next kind of tab off the rank is other chips where it's more the upstream manufacturing of things like FPGA parts which are now inside a supplier than they were. So that's the next thing that we have to manage. this is one of these gifts that keeps on giving uh it's it's not the same as like in the middle of uh the the pandemic or you know when we had that giant chip shortage um so it's not the same as that but it is still an ongoing issue because of the pressures associated with uh the desire to build out truckloads of data centers uh next question is just in relation to capitalized costs so we we capitalized 12.5 million in tangibles and 26 12 in

in 25, what's the guidance for 27? I think I've previously said I think that's going to be around that $13 million mark in FY27 is our expectation. Another question again just around achieving positive free cash outflow, which I think we've sufficiently answered. Somewhat of a double up for you Nick, but just how is Iris tracking relative to your expectations?

So I think any time you put a new product into the market, you always have to go in expecting a wide variety of outcomes. I'd say across a couple of buckets we've been really pleasantly surprised by what we've seen in terms of great adoption by PTC, Camera OEMs, so it's been really positive continuing engagement and partnering with Camera OEMs. In terms of prosumers and enterprise clients, there's really sort of engagement with the core proposition and sort of validation of the need and the opportunity to do things better. Where we're being very deliberate is ensuring that we take the time to get the alignment on product and market fit and how we sell it and how we scale it right. So we're deliberately moving forward fairly deliberately separately here, as you have to do with recurring revenue models. So, well, customers are always better, but at this stage, we're making sure we get stickiness and fit right so that the recurring revenue will flow fairly naturally from there.

A question from Michael just in relation to what drove revenue growth in the second half of the year. What gives you confidence around your future increase in revenue given your guidance for FY27? I think Aidan has answered that in terms of the components and certainly Nick has answered that in terms of where we're focused on FY27 in terms of our areas of growth. The only comment to add to that is that we are, pleasingly we've seen all of our categories of products growing in FY26 which is positive, so that provides some diversity. The other part there is that, you know, in terms of our markets, 40% of our markets, 40% of our revenues from the US, 35% from EMEA, 10% from other markets. And again, we've got diversity with our customers as well. So top 15 customers, you know, accounts for around 40% to 50% of our revenues. So, you know, overall, you know, our guidance is based on what we can see and, you know, based on the second half growth, which was driven by chips, cards and modules, we expect to... We've outlined the guidance for FY27. The question from Arlan which we've answered just in relation to the IRIS launch and second half key metrics and also revenue make-up as well. So I think we've answered those questions in relation to IRIS. A question from Sinclair, which Nick is probably one for you to take on, so can you please provide some more comments on the increased strategic focus on adapters? Is it a necessary step to enhance the competitive strength of Dante?

Yeah, I think, just to be clear, we've been in the adaptive space for many years, but it's an aspect of the business where we see, we still see a lot of potential to do more, particularly in the installed space. They continue to be, you know, obviously there are many, many thousands of Dante networks out in the world. The opportunity for us, though, is to extend those networks into sort of AV equipment that our customers have that are non-Dante. So every time you extend the networks, you make the Dante-enabled network more controllable, in a more modern way, you increase operability, etc., etc., and we continue to see lots of ways we can do that better across segments and really as we think about the broader picture of having an overall platform. So the bottom line is we think we can do more both from getting products out into the market but also in terms of new products that help us extend Dante Networks into customers' AV networks.

Yeah, I might just add one other piece. It's an interesting question, like is it a necessary step to enhance the competitive strength of Dante? I would say it's a necessary step for us to achieve our long-term vision, which is actually to deliver that software platform, because we need to provide audio. Great, we've got that one solved. We need to provide video. We're on the way with things like Iris and the video ecosystem that we have, and we also need the control function. So those are those sort of three parts of the stool. And things like AVO adapters, if we can create the right kind of AVO adapters, then that allows us to provide all three legs of the stool and then to start to deliver more of our software and platform technologies. So they don't necessarily enhance the component business or the historical strength of Ordinate with the Dante technology business, but I would say they actually are a quite important component for us to be able to deliver on our long-term strategy to be able to capture more of the value of the audiovisual installation and particularly the platform software parts. Plus, as you can see in the numbers, they're actually pretty good from a sort of revenue point of view. So I think it's a win-win.

Justin Sinclair as well. So can you please provide some more commentary just around the overall AV market? Some commentary has suggested that corporate offerings installation market remains remains weak.

Yeah, I think that's right. One of the things that has happened is that the organisation that used to provide these kinds of statistics for the industry, Avixa has kind of downscaled its data in that area. So it's once again a bit more diffuse to figure out what's going on. However, I think, you know, from talking with people in the industry, things like trade show attendance, stuff like that, I think the AB industry, generally speaking, is not immune from the overall cost of living increases. People are thinking about, you know, when they're thinking about doing upgrades for things like offices and offices the corporate installation market, I think there was a big burst of activity with the post-COVID return to office. So I think we're in a bit of a lull with respect to that particular segment. That's probably also true of things like higher education, but on balance, Dante applies across a number of different segments, and so swings and roundabouts. So I think we kind of take an Law of Large Numbers kind of view of that with respect to the component business and with respect to the AV project side of things. I think there are projects out there. They're not necessarily in those corporate and office installation areas. There are fewer of those.

I know we're getting to the end of time, so I think we'll just go through some quick ones. So I think, again, just it's possible to provide an update on the launch of Dante Director Professionals.

So what happened during the financial year with that was that we invested in developing a number of features for the enterprise version of Dante Director. So we had something like 20 enterprise customers going through an alpha trial process. We built a bunch of features that connected with those customers and looked for their requirements. We did things like ISO 27001 certification during the year, so it ticked off a whole bunch of things. So that side of it went well. The realisation ultimately of sort of building that product is that that product naturally wants to be sold through a channel into the audiovisual installation market. And so the organisational changes that we've made to create a focus on selling audiovisual products like adapters and AV system and software and services into AV installations that Dante Director is going to benefit from that and so we're expecting to see increased opportunities coming from our standing up of that organisation and the focus on the go-to-market element of that product.

Question from Rhys. Nick, any more acquisitions you're looking at?

I think the short answer is I think we're really well placed in terms of what we have from a technology, in terms of capability across the business. I think we've got really all the key elements from a product and a tech perspective to be really successful to execute our strategy. So from that perspective, there's nothing obvious that we need and there's nothing obvious on the horizon. It's probably the best answer I can give at this point. Yes, we're not shopping. is potentially something interesting to come up. I'm always wary about saying never, never, never, but there is nothing that we need to execute on the plan we have, and really the challenge for the next 24 months is just to get on and use the assets we do have to deliver on our strategy.

A couple from Owen. So what percentage of your guidance is from new revenue lines versus your core chips, cards and modules software sales The overwhelming growth is coming from our core business is the answer to the question. Next one is that can you quantify the cost out? Does flat OPEX include capitalised costs? So in terms of quantifying the costs out, that's been factored into the guidance for FY27 and we are expecting flat CAPEX. in FY27 as well. A question from Rhys, what percentage of revenue are you expecting to expend on R&D in the next few years? Certainly R&D is important for a business like Ordinate, but in terms of the percentage of revenue, we don't have a target in mind. It's more around the cost of developing the particular products. I think it's remained flattered around that. for the $12 to $13 million mark over the last couple of years. But, yeah, there's no fixed percentage. It's more around what we're building and what we see as a return on those development costs as well. Question around, do you expect the group margin to tend higher with the increase in embedded software and SaaS take-up? I think we've seen a step change in our gross margin percentage really from, you know, between 24% and 26, you know, moving to the 82% mark now. I think at this stage, you know, 82% we've guided next year is, you know, feels like a reasonable margin. The answer is it depends on the strength of our chips cards and modules business, which is still... And probably... And adapters, which is part of our make-up. So it feels like it's a good balance at the moment in terms of a combination of both hardware and software and software products. The IRS acquisition had an earn-out subject to achieving certain targets. Are those on track? So at this stage the answer is not on track to hit the earn-out. So the earn-out was between $10 and $15 million in revenue after three years. So at this stage, no, but that will be reassessed every reporting period. question from Tom just in relation to what strategies does the company have to allay investor concerns regarding potential AV write-downs or the need for a capital raise?

Yeah, so I think the answer to that is related to perhaps the longer statement I made earlier about strategic changes and thinking about ordinate growth opportunities differently. So in particular, I think you're referring to the potential, the change in terms of how we think about the video networking or the video component part of our business. So what I would say is we have been working through over the last 18 months a number of strategic changes, both in terms of acquisition, different business models for how to monetise something like video, and we have been onboarding... We've been bringing into the company specific talent from people that have done control-related product developments. So we've been making strategic moves both on the business model, video side of things, the talent side of things in terms of our long-term strategy to build out all of those three legs of the stool. And so, again, I would say that the opportunity is that the strategic shift is that the opportunity is not so much to build out a video component business, which is a rough approximation of our audio component business today, but really the opportunity for ordinators How do we take our existing ecosystem position, the brand, the interoperability, all those people we've trained in the AV industry, and how do we capitalise on that ecosystem and footprint to capture more of the audiovisual installation value? and the way to do that in our view is not so much to try and figure out how to get a video component business up and running as an ingredient that goes into everybody's product but to actually think about the overall audio-visual market and opportunity and so that means different business models for things like video, like Iris, but also building out that third leg of the stool so that we have the audio, video and control functions that ultimately we can monetise in the audio-visual installation itself. So I hope that answers that question. I know it's been something that we've been talking about perhaps over the last couple of results series and I imagine we'll come back to it again.

I think we've got through all questions. The final two just relate to IRIS, which I think have been covered off during the Q&A.

So that's all for the questions. Well, thank you very much for joining us on the call today. I think it's been a great result. I think it's been a lot of hard work this year and a lot of thinking as we think about the implications of IRIS. We've done the acquisition. We've done some organisational change and I'd like to think that Audinate has been operating in a disciplined fashion and that as we head into FY27 that really is going to set us up on a path to a return to free cash flow positivity as we move forward. So thank you.