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.