AUDINATE GROUP LIMITED — Earnings Release 2017

Aug 20, 2017

Level 1, 458 Wattle St. Ultimo NSW 2007 Australia

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ASX announcement 21 August 2017

Audinate (ASX: AD8) reports record revenue & beats prospectus forecast

• Revenue in AUD $15.1m (2016: $11.9m)

• Revenue in USD $11.3m (2016: $8.7m)

• EBITDA[1] in AUD $0.8m (2016: $0.1m loss)

• Pro forma EBITDA $0.3m better than prospectus forecast

• Statutory NPAT, including an $18.5m non-cash charge

• associated with the restructuring of the company’s capital structure; $20.3m loss (2016: $0.1m profit)

Audinate Group Limited (‘Audinate’ or the ‘Company’), developer of the industry leading Dante® audio over IP networking solution, today released its annual results for the financial year ended 30 June 2017.

Audinate had another outstanding year in 2017, delivering further revenue growth and results that exceeded the prospectus forecast. This was highlighted by USD revenue growth of 30.3% from a 48% increase in the number of units of Dante chips, modules and cards shipped. Growth in shipments of Ultimo chips exceeded 70% and Brooklyn units continued to grow around 30%.

“We are encouraged that the business continues to grow at 30% and in doing so exceeded the prospectus forecast” commented Lee Ellison, Chief Executive Officer. “The launch of our new Dante Broadway chip as well as the initial sales of our adaptor products were significant milestones towards further revenue growth in 2018.”

Mr Ellison also said, “It is clear that our Dante networking technology continues to secure its position as the de facto standard for audio networking solutions for the professional AudioVisual industry, with more than five times the number of OEM partner products of our nearest competitor.”

Financial

During the year revenue increased by 26.5% to AUD $15.1m from AUD $11.9m in the prior year. All revenue is invoiced in USD and increased by 30.3% to USD $11.3m from USD $8.7m in 2016. Gross margin also improved from FY16.

1 EBITDA excludes the one-off impact of IPO costs and the expense for conversion of preference shares

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$12 11.3 100%
90%
$1.6
$10 8.7
80%
70%
$8 $1.3
6.7 60%
6.0
$6 $1.2 50%
$1.2
$9.7 40%
$4
$7.4 30%
$5.5
$4.8 20%
$2
10%
$- 0%
FY14 FY15 FY16 FY17
Chips, Cards, Modules Other Gross Margin
Millions
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Figure 1 USD Revenue and gross margin

Increased headcount and employment costs to support ongoing growth resulted in an increase in operating costs of approximately 17.6% from AUD $8.9m to AUD $10.5m in the current period. This excludes expenses associated with the IPO which were AUD $1.7m and are excluded from the calculation of EBITDA, given their non-recurring nature.

As a result, EBITDA for 2017 amounted to approximately AUD $0.8m, representing a significant improvement from an EBITDA loss of AUD $0.1m for the prior comparable period. Pro forma EBITDA, measured in accordance with the principles outlined in the prospectus, amounted to an EBITDA loss of AUD $0.4m – better than the 2017 prospectus forecast EBITDA loss of AUD $0.7m.

At the date of the IPO the Group converted redeemable preference shares (CRPS) into ordinary shares in the company. The accounting treatment of the CRPS at conversion required a one-off expense to be recorded, amounting to AUD $18.5m, for the difference between their carrying value and market value of the shares received in Audinate at settlement. This is a non-cash transaction that has been excluded from the calculation of EBITDA but significantly impacts upon the Group’s statutory result for 2017. Consequently, net profit after tax amounted to a loss of AUD $20.4 for the year ended 30 June 2017, compared to a profit AUD $0.1m for the prior year.

Operational Highlights

During the year the number of Dante enabled products on the market increased 35% to 1,182 products, compared to 872 at 30 June 2016. The number of original equipment manufacturers (OEMs) adopting Dante also continued to grow, ending the year at 369 up from 310 at 30 June 2016.

In the 4[th] quarter Audinate launched the Broadway networking chip designed for mid-channel count audio products. Strategically this is an important product for the Company as it addresses a segment between the Ultimo and Brooklyn products at a competitive price point.

During the year the company also began shipping its first adaptor product, a Dante Analogue Output Module, that allows for rapid deployment of Dante to existing analog installations. Early sales of this product are a promising indicator for this product family in FY18.

In 2017 Audinate previewed Dante Domain Manager (DDM). DDM is an application platform designed to build upon existing and new installations of Dante-enabled products and allows administrators to provide enhanced system security and improve scalability of audio networks. DDM is now in beta testing at several customer sites.

To expand market understanding and awareness of digital networking technologies Audinate introduced its Dante Certification training program in FY17. The program was an over-whelming success with over 39,000 on-line Dante certification courses delivered to system integrators, consultants, end-users and OEMs during the year. This provides the company with an extensive database to market Dante products, especially DDM.

FY18 Prospectus Forecast reaffirmed

Audinate reaffirms its FY18 outlook as disclosed in its prospectus dated 13 June 2017. Based on an AUD / USD exchange rate of 77c the company expects revenue of AUD $18.6m and an EBITDA loss of AUD $1.2m for the financial year ending 30 June 2018.

Investor Briefing

The Company will host an investor briefing to discuss its 2017 results at 11.30am (AEST) on 21 August 2017. The briefing can be accessed at http://www.openbriefing.com/OB/2632.aspx or by telephone on +61 2 8038 5221 or toll-free on 1800 123 296 (Conference ID is 7218 2245). The briefing is expected to last approximately 30 minutes inclusive of question time.

-ENDS-

For more information on Audinate, please visit:

Investor Centre – www.investor.audinate.com

Website – www.audinate.com

Enquiries

Rob Goss CFO & Company Secretary Audinate Group Limited Ph: +61 2 8599 1893

Forward-Looking Statements

This ASX release includes certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Audinate. These factors may cause actual results to differ materially from those expressed in the statements contained in this announcement.

About Audinate Group Limited

Audinate Group Ltd (ASX:AD8) was founded with a vision to revolutionise professional and commercial audio for the 21st century. Audinate’s award winning Dante audio over IP networking solution is the worldwide leader and used extensively in the professional live sound, commercial installation, broadcast, public address, and recording industries. Dante replaces traditional analogue audio cables by transmitting perfectly synchronized audio signals across large distances, to multiple locations at once, using nothing more than an Ethernet cable. Audinate is headquartered in Australia and has regional offices in the United States, United Kingdom and Hong Kong. Dante technology powers products available from hundreds of leading audio partners around the world. The company's ordinary shares are traded on the Australian Securities Exchange (ASX) under the ticker code AD8.