AUDINATE GROUP LIMITED — Annual Report 2021

Aug 22, 2021

23 August 2021

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Overview of Audinate Today

Products

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World-leading supplier of Growing network
digital media networking effect of Dante
for the Professional AV enabled products in
industry market – now 3,255
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Dante comprises software and hardware that resides inside the audio and video products of Audinate’s Original Equipment Manufacturer (OEM) customers

[ For further information on Dante: https://www.audinate.com/meet-dante/what-is-dante ]

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Audinate products OEM customers OEM products
Modules
UK Chips
Germany Japan
USA China
Hong Kong
Mexico
Philippines Software
Cards
HQ
Sydney
Listed on the Australian Stock Exchange (ASX:AD8) in June 2017
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Audinate Confidential | 2

23 August 2021

FY21 Results

Leading Global Supplier of Digital Media Networking

Total audio products per protocol

Highlights

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3500
3,255
Total addressable market [[(1)]]
>A$1bn “Dante continues to be the
3000 dominant force”
RH Consulting
371 OEM brands shipping Dante 2500
enabled products
2000
3,255 Dante enabled products
available on the market 1500
19x Market adoption of closest 1000
competitor
500
33,000 Professionals trained on Dante in FY21 0 17365
34
2013 2014 2015 2016 2017 2018 2019 2020 2021
Dante Ravenna AVB/Milan Others
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>A$1bn Total addressable market[[(1)]] 371 OEM brands shipping Dante enabled products

1) Management estimate of total addressable market of audio, video and Pro-AV software products

• 1) RH Consulting, Networked Audio Products 2021 and Audinate company data

• 2) RH Consulting stopped counting Cobranet products in 2020 and noted that it is impossible to get reliable data on available products, with only a small number of manufacturers selling some equipment

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Audinate Confidential | 3

23 August 2021

FY21 Results

Audinate growth continues

US$0M US$5M US$10M US$15M US$20M	6.2 8.3 11.3 15.0 15.6 19.2 74.3% 74.8% 74.5% 74.4% 76.6% 76.4% 73.0% 75.0% 77.0% 79.0% FY16 FY17 FY18 FY19 FY20 FY21 Financial Years Historical Gross Margin (US$M) Gross Margin Gross Margin %	Financial Highlights Variance PCP %	Financial Highlights Variance PCP %	Financial Highlights Variance PCP %	Financial Highlights Variance PCP %
		A$33.4M	Revenue	10.1%	
		US$25M	US$ Revenue	22.5%	
		76.4%	Gross Margin	(0.2%)	-
		A$3.0M	EBITDA	50.1%	
		A$65.4M	Cash & Term Deposits	$36.1M	

Note: gross margin % calculated using AUD

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Audinate Confidential | 4

23 August 2021

FY21 Results

Another year of consistent execution

	FY21 Objectives	Actions
	Drive designs wins during economic downturn & prime the pump for economic recovery	• Upfront fees replaced by annual subscription pricing model • Record number of design wins for FY21 (#105) • 66 new OEMs added during FY21
	Broaden Dante video product offerings	• Recruitment of Cambridge (UK) team to accelerate product roll-out • 6 new OEM Dante video products launched • New software video product expected in FY22
	Validate new business models	• Completed infrastructure for in-field activation via audinate.com • Successful completion of Blue Note project to showcase audio & video • 3 R&D projects in progress with new flagship customers
	Expand training offerings to include Dante video and a wider range of languages	• 12,000 people trained on Dante video • 59 non-English webinars & >13,000 non-English speaking professionals trained • 47% increase in non-English speakers in contact database
	Build business systems & development capability	• Merchant of record payment facility complete • New billing platform well advanced for delivery in Q1 • Information Security Framework: Phase 1 complete – further roll out CY21
	Explore M&A opportunities to accelerate growth	• Potential to supplement Cambridge (UK) team to build out video business • Dedicated resource for range of corporate development opportunities • Some opportunities have not passed due diligence but pipeline remains full
	Drive short term revenue opportunities	• Modest price increases implemented for AVIO adapters, retail software (DVS & Via) and Ultimo chips
	Manage total net cash expenditure	• Strong financial performance resulted in positive operating cash-flow and negative free cash-flow

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Audinate Confidential | 5

23 August 2021

FY21 Results

OEM Design Wins drive future revenue growth

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Pre-sales DESIGN WIN OEM Product Buy Prototype Release New
Design Dante Units Product
Customer OEM OEM sells
use Dante in commits to • New annual subscription model (vs up-front Manufactures more AV enabled AV Dante-
new products technology access fee) has worked well products products
• Record number of design wins for FY21 (#105)
• 66 new OEMs added during FY21
• 62% software revenue growth OEM buys Repeat OEM buys
more Dante Revenue more Dante
• Flagship customer validates in-field activation units Model units
• Design wins are a key step in the OEM sales cycle
• From design win to product release takes 18-24 months OEM sells OEM
more Dante- Manufactures
• Once a new Dante-enabled product is released the OEM keeps buying more Dante enabled AV more AV
products products
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• Once a new Dante-enabled product is released the OEM keeps buying more Dante units as long as they keep selling their product

• Dante units may be in the form of chips, cards, modules or software

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23 August 2021

FY21 Results

Dante video and audio together is now reality

• Six OEM Dante video products released:2 x PTZ Cameras, 4 Encoders/Decoders

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• Enables all-Dante A&V systems to be deployed

• Good number of design wins, with pipeline growing – but COVID has been a headwind

• Recruited experienced video development team (12 staff) in Cambridge (UK) to accelerate video strategy

• Cambridge (UK) team signed first commercial technology in June – key component for first product

• Video software product to be released in FY22 & other partnership opportunities in progress

• 12,000 professionals trained on Dante video

• Live Blue Note concert across 3 venues (New York, Washington DC and Nashville) – showcase of Dante audio and video

• Blue Note Article [ https://www.mixonline.com/livesound/blue-note-audinate-peltrix-latency-danteav ]

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23 August 2021

FY21 Results

First Dante Video products released

Dante AV Module

• “AV-over-IP” networking module , OEM business model

• V+A+Network (1 video + 8 audio)

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• First design win FY20

• OEM products released FY21

Dante AV Product Design Suite

• Full HDMI-over-IP product design

• Accelerate OEM time to market & enable ODM business model

• AV Module + Compression + HDMI + Dante AV Module

• HDCP + Inside USB + …

More background & videos on Dante video: https://www.audinate.com/products/manufacturer-products/dante-av-video

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Audinate Confidential | 8

23 August 2021

FY21 Results

FINANCIAL PERFORMANCE

FY21 Results

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Audinate Confidential | 9

23 August 2021

Software & adapter sales drive revenue growth

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Revenue (US$M) Dante units shipped ('000s)
25.0
756
Software units ↑72%
20.3 20.4
6.8
15.2 3.2 4.2 515 530 326
398
11.3 2.3 163 190
8.7 1.5 275 150
16.6 15.8 17.9 175 95 430
12.5 352 341
7.4 9.7 65 180 248
110
FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY17 FY18 FY19 FY20 FY21
CCM Software Other CCM Software
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• US$ Revenue increased 22.5% from FY20 with GP margin consistent at 76.4%

• Strong growth in units shipped which were up 43% overall, and included a 72% increase in software units

• Significant growth in AVIO adapters (>50%) and good performance from Ultimo (>35%) and Broadway (>35%) have partially offset COVID impacted Brooklyn sales (16% decline)

• Chips, cards & modules (CCM) includes AVIO adapters

• Software includes Royalties, Dante Embedded Platform, Dante Application Library, Dante Domain Manger (DDM), Dante IP Core & retail sales

• Software revenue growth driven by growth in DEP, Dante IP Core & Reference Design royalties (>50%), retail software (>30%) and to a lesser extent DDM sales (>30%)

• Audinate invoices customers & pays COGs in USD

• During FY21 Audinate introduced annual subscription pricing as an alternate to upfront design win licence fees

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Audinate Confidential | 10

23 August 2021

FY21 Results

Income Statement

• US$ revenue increased 22.5% to U$25M with A$ revenue negatively impacted by currency impacts

• Gross margin remained consistent at 76.4%

• Employee expenses increased from prior year with headcount increasing from 123 to 135 due to the hiring of 12 employees for the Cambridge (UK) team and the company returning to paying staff bonuses in FY21

• Sales & Marketing expenses decreased due to savings on travel & trade shows as a result of COVID-19 restrictions

• Other income includes $0.8M (2020: $0.5M) from COVID-19 related government grants & interest income

• Depreciation and amortisation is higher than prior year due to increasing development costs capitalised reflecting the expansion of the engineering team

• Income tax expense reflects non-recognition of an asset for Australian tax losses (and prior year write-off)

(A$’000s) Revenue	FY21 33,369	FY20 30,317	Change 10%
Gross profit	25,504	23,208	10%
Gross Margin %	76.4%	76.6%	(0%)
Employee expenses Sales & marketing expenses	(17,811) (1,688)	(15,797) (2,484)	(13%) 32%
Other operating expenses Operating expenses	(2,956) (22,455)	(2,895) (21,177)	(2%) (6%)
EBITDA	3,049	2,032	50%
Depreciation & amortisation	(6,534)	(4,422)	(48%)
Interest expense	(105)	(117)	10%
Foreign currency loss Other income	(590) 1,094	11 823	33%
(Loss)/Profit before tax	(3,086)	(1,673)	(84%)
Income tax	(355)	(2,465)	86%
(Loss)/Profit for the year	(3,441)	(4,138)	17%

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Audinate Confidential | 11

23 August 2021

FY21 Results

Additional revenue drives EBITDA growth

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Gross Margin dollars improved due to extra US$4.6M revenue

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EBITDA (A$M)
3.0
2.8
2.0
0.8 0.6
(0.1)
FY16 FY17 FY18 FY19 FY20 FY21
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A$ strengthening against US$ (FY21: 75.0c v FY20: 67.2c)

Recruitment of video development team in Cambridge (UK) Return to paying staff bonuses in FY21

Lower spend on travel & tradeshows due to COVID-19

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23 August 2021

FY21 Results

Operating leverage supports ongoing R&D

• Ongoing focus on innovation and R&D to maximise future growth opportunities

• A$1.1m in research costs incurred in FY21 by the new Cambridge (UK) team

• Operating leverage in the cost base is once again evident as additional revenue drives EBITDA growth

Research and Development (A$M)

Revenue, Cost Trends (A$M)

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45% 35 80%
10.7
33.4
9.1 40% 30 75% 75%
1.1
5.7 0.8 6.7 7.4 35% 25 70% 72% 70% 25.5 22.3 70%
20
67%
5.9 30%
3.3 2.9 65% 65%
2.8 4.5 15
1.4 2.2 1.1 25% 60%
2.8 10
2.1 2.1
1.4 1.1 1.4
20%
5 55%
FY16 FY17 FY18 FY19 FY20 FY21
Research Research - Cambridge Internal Development
External Development R&D as % of revenue Revenue Gross Margin $ Opex Opex as % of revenue
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Audinate Confidential | 13

23 August 2021

FY21 Results

Cash-flow Statement

• Operating cash receipts & payments are consistent with the income statement and movement in working capital

• Government subsidies relate to COVID (mainly JobKeeper)

• EBITDA converts to cash – Cash Conversion Ratio of >100%

• Payments for intangible assets primarily represent internal employment and overhead expenses capitalised to development costs. Prior period included $0.7M of external spend

• $27M cash invested in Term Deposits over 3 months is included in investing activities as it does not meet the definition of cash

• Financing activities includes $40M from FY21 capital raise

• Adjusting for the impact of the capital raise free cash out-flow was $2.9M (FY20: $4.6M)

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(A$'000)	FY21	FY20
Receipts from Customers *	33,484	31,635
Payments to suppliers and employees * Interest received Interest paid	(27,677) 291 (105)	(27,258) 251 (117)
Government subsidies	1,048	285
Income Tax Refund	-	85
Income Tax Paid	(298)	(46)
Operation activities	6,743	4,835
Payments for property, plant and equipment *	(552)	(914)
Payment for intangible assets Investment in Term Deposits Investing activities*	(7,478) (27,000) (35,030)	(7,392) (444) (8,750)
Proceeds from the issue of shares	40,032	4,074
Share issue transaction costs	(1,256)	(299)
Principal elements of lease payments *	(635)	(642)
Financing activities	38,141	3,133
Net increase in cash	9,854	(782)
Free Cash Flow (sum of * )	(2,858)	(4,571)

Audinate Confidential | 14

23 August 2021

FY21 Results

Balance Sheet

• Cash & term deposits of $65.4M, with no debt

• Trade receivables up $1.3M consistent with the improved sales performance

• Inventory balance more than 5x turns impacted by supply chain constraints and increase in demand for CCM products

• Intangibles primarily represent internal development costs capitalised, including $7.4M of development costs capitalised in FY21

• Contract liabilities includes prepaid customer deposits of $1.5M up from $0.2M in FY20

• Increase in employee benefits mainly due to accrual of FY21 staff bonuses

• Contributed capital includes $40M proceeds from FY21 capital raise

• Accumulated losses substantially due to fair value of preference shares at IPO

(A$’000s)	30 Jun 21	30 Jun 20	Change ($)
Cash	38,429	29,285	9,144
Term deposits	27,000	-	27,000
Trade and other receivables	3,199	1,850	1,349
Inventories	1,855	1,645	210
Property, plant and equipment	1,482	1,455	27
Right-of-use assets	1,919	2,481	(562)
Intangibles	14,094	12,051	2,043
Deferred tax asset	68	100	(32)
Other current & non-current assets Total assets Trade and other payables	1,719 89,765 2,524	1,437 50,304 2,821	282 39,461 (297)
Other liabilities Contractliabilities Income tax (receivable)/payable	102 2,278 (41)	220 726 258	(118) 1,552 (299)
Employee benefits & other provisions Leaseliabilities Total liabilities	3,959 2,088 10,910	1,724 2,588 8,337	2,235 (500) 5,334
Net assets Contributed capital Reserves	78,855 126,947 2,261	41,967 87,526 1,353	4,910 39,421 908
Accumulated losses Total equity	(50,353) 78,855	(46,912) 41,967	(3,441) 4,910

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23 August 2021

FY21 Results

OUTLOOK

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Audinate Confidential | 16

23 August 2021

FY21 Results

Increasing demand v global supply uncertainty

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Audinate survey of Dante -enabled
products in development by OEM
customers
N/A
>10 5%
None
11%
7%
6-10
17%
1-5
60%
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• Record backlog of sales orders for future months

• Industry sales sentiment at all time high in July (AVIXA Survey)

• Strong pipeline of new products (based on survey of ~150 manufacturer customers)

• 45% of customers said supply chain issues had a significant impact, including redesign of new products

• 56% had experienced significant impacts due to key component shortages

• Strong July result but Malaysia factory closure pushed fulfillment of some orders to future months

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Audinate Confidential | 17

23 August 2021

FY21 Results

FY22: driving adoption & improving ease of use

FY22 Priorities

1. Drive design wins for Dante video and next generation software products

2. Launch new Dante video software and cloud services products

3. Pursue initiatives to reduce adoption friction, including in-field activation

4. Improve adoption of Dante by non-English speakers

5. Strengthen our products, services & systems against cyber-risk

6. Implement business scalability initiatives

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Audinate Confidential | 18

23 August 2021

FY21 Results

Return to historical revenue growth in FY22

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• Record levels of demand as the AV industry recovers from the impact of earlier COVID lock-downs

• Good trading conditions experienced during the start of FY22

• COVID related risks now relate to global supply chain uncertainty and are impacting both Audinate and our customers in 1H22

• Continued long-term perspective sees a target headcount of >170 staff (up from 135 staff at 30 June 2021) to support ongoing growth and drive development of video and cloud services

• US$ revenue growth expected to return to the historical range in FY22

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Audinate Confidential | 19

23 August 2021

FY21 Results

Investment Highlights

• Global Market Attractive Financial Innovative Leader Profile Products • Dominant position as de• Gross margins >75% • Broad intellectual property facto standard in audio supported by strong IP portfolio developed in networking • Consistent historical Australia

• • 19x market adoption of its revenue growth from repeat • Extensive investment in R&D closest competitor orders • $65M cash & term deposits

• Large Market Strong Customer Experienced Opportunity Base Management • AV just starting digital • Existing customer base of • Strong executive team with networking conversion leading global AV extensive industry

• • Audinate is just entering a companies experience fragmented video market • Customer base is broad and • Built Audinate into a market

• • Balance sheet capacity for expanding leadership position strategic M&A

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Audinate Confidential | 20

23 August 2021

FY21 Results

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QUESTIONS

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Appendices

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23 August 2021

FY21 Results

Audinate is Driving the Transformation of AV

• Networked digital connectivity is replacing traditional, point-to-point analogue cabling in the AV industry

Audinate Total Addressable Market (‘TAM’)[*]

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The TAM for digital
audio networking is
A$400m annually Audinate share of
for chips, cards, Audio Market
modules & software estimated at 7-8%
Audio
Networking
Video Software
Networking Services for
Pro-AV
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• Software-based AV systems are replacing hardware AV systems, in the next wave of industry transformation

• Transformation analogous to the impact of VOIP on the telecom industry

* Management estimate total addressable market exceeds A$1bn

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23 August 2021

Audinate Confidential | 23

FY21 Results

Accelerating OEM Adoption: Pipeline Growth

OEM Brands shipping Dante-enabled Products

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23%
CAGR
371
growth in
328
OEMs
270
221
194
158
106
FY15 FY16 FY17 FY18 FY19 FY20 FY21
Audinate has grown to 371 OEM brands have 129 OEM brands are
529 OEM brands announced products in currently developing their first
the market Dante-enabled products
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During the period the Group added 66 new OEMs brands who are currently developing their first Dante products. A periodic review removed 60 OEM brands who are no longer considered likely to develop a Dante product for a variety of reasons including COVID, acquisition, bankruptcy, cancelled projects etc.

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FY21 Results Audinate Confidential | 24

23 August 2021

Consistent Growth in Product Ecosystem

• Product ecosystem includes 3,255 Dante-enabled products and growing, with 529 OEMs

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3,255
529 OEMs
2,804
2,134
1,639
1,182
874
553
FY15 FY16 FY17 FY18 FY19 FY20 FY21
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• 34% CAGR in product ecosystem

• 19x number of products than the next digital audio networking technology

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23 August 2021

FY21 Results

Dante Controller

Dante Controller

• Free system setup tool

• Downloadable from Audinate homepage

• Registration required

• Makes virtual wires

• 250,000 downloads

• Manages audio and video signals

• Simple & easy to use

• Standard industry matrix view

• Training provided via Dante Certification

• Devices appear automatically

• Intuitive device names

• No magic numbers, MAC or IP addresses

• Devices remember configuration

• No need for Dante Controller to remain connected to the network

• Provide performance logs

• Details of each device on the network for trouble-shooting

• More background on Dante Controller: https://www.audinate.com/products/software/dantecontroller

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Dante Controller is the free configuration tool integrators use to create the “virtual wiring” between transmitting devices (e.g. microphones) and receiving devices (e.g. speakers)

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Audinate Confidential | 26

23 August 2021

FY21 Results

Dante Audio and Adaptors

Brooklyn

Broadway

Dante Audio

• Hardware based implementations for a range of product counts and price points

• • Transports uncompressed audio signals across standard computer networks

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Dante Adaptors

• Connects legacy equipment to Dante (mostly analogue)

  • 8 & 16 audio channel counts

• 32 & 64 audio channel counts

• Adds Dante to existing audio products (analogue, USB and AES3)

   - Used in networked Amplifiers and Ceiling Microphones
  

  • Used in Mixing Consoles & Signal Processors

• Pulls through other Dante products and software

• Established a global distribution channel of online retailers and country distributors

• 80 resellers and growing

• Strong initial demand with sales performance and repeat orders

• Adapter modules sold direct to OEMS

Ultimo Adaptors

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• 2 & 4 audio channel counts

• Used in networked Speakers and Microphones

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23 August 2021

FY21 Results

Software Products

Dante Application Library (DAL)

• Dante for PC/Mac applications

• Simple way for software developers to add Dante to their products

Software products enable:

• Wider proliferation , thru lowered marginal cost of adding Dante

• Launched June 2019, commercially available

• Retro-fit and upgrade of products already in the field

• Initial customer with Zoom, conferencing application

• Continue to drive adoption, revenue commenced 1H21

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Dante Embedded Platform (DEP)

• Dante for Linux OS, targeting manufacturers (OEMs)

• Supports Intel/x86 & ARM processors

• Launched June 2019, commercially available

• Initial customer with QSC (x86)

• Initial partner with Analog Devices, ARM-based DSP chips

• Drive adoption & partnerships, ~~revenue commenced 1H21~~

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Ceiling Microphone Dante IP Core (today) / Dante Embedded Platform

Room Processor Dante Embedded Platform

Conferencing Software Dante Application Library

Networked Speakers Ultimo (today) / Dante Embedded Platform

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23 August 2021

FY21 Results

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Dante Domain Manager

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Dante Domain Manager Complete Network Management System

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• Security

• Usernames/passwords identify users

• Roles control access to the system

• Scalability

• Create Dante systems spanning campus networks

• Group Dante devices into logical managed systems

• Visibility

• Centralise Dante system management

• Monitor system status and changes from anywhere

Management software could more than double the revenue opportunity associated with Audinate’s audio business

Audinate Confidential | 29

23 August 2021

FY21 Results

Important notice and disclaimer

Past performance

Disclaimer

Past performance information, including past share price information, given in this presentation is given for illustrative purposes only and should not be relied upon as an indication of future performance.

To the maximum extent permitted by law, none of the Audinate Group Limited or its subsidiaries or their directors, employees or agents accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation. In particular, no representation or warranty, express or implied, is given as to the accuracy, completeness or correctness, likelihood of achievement of reasonableness of any forecasts, prospects, statements or returns contained in this presentation. Such forecasts, prospects, statements or returns are by their nature subject to significant uncertainties and contingencies. Actual future events may vary from those included in this presentation.

Future performance

Forward-looking statements, opinions and estimates provided in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions.

Financial information

Certain financial data included in this presentation is 'non IFRS financial information.' These measures are used internally by management to assess the performance of the business and make decisions on the allocation of resources and are included in this presentation to provide greater understanding of the underlying financial performance of the Group's operations. When reviewing business performance, this non-IFRS information should be used in addition to, and not as a replacement of, measures prepared in accordance with IFRS. Readers are cautioned not to place undue reliance on any non-IFRS financial information and ratios included in this presentation. The non-IFRS information has not been subject to audit or review by Audinate's external auditor.

Summary information

This presentation is for information purposes only is not a recommendation or advice in relation to Audinate or any product or service offered by Audinate or any of its subsidiaries. The information in the presentation is of a general nature only and is not intended to be relied upon as advice to investors or potential investors.

Currency

All amounts in this presentation are in Australian dollars unless otherwise stated.

The non-IFRS measures do not have any standard definition under IFRS and may be calculated differently by other companies.

Market share information

All market share information in this presentation is based on management estimates and internally available information, unless otherwise indicated.

No offer of securities

Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell Audinate securities in any jurisdiction.

Reliance on third party information

The views expressed in this presentation contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This presentation should not be relied upon as a recommendation or forecast by Audinate.

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23 August 2021

FY21 Results