AUDINATE GROUP LIMITED — Earnings Release 2019

Aug 22, 2019

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Level 7, 64 Kippax St. Surry Hills NSW 2010 Australia

ASX announcement

23 August 2019

Audinate continues strong revenue growth

• FY19 Revenue up 34% to US$20.3 million (2018: US$15.3 million)

  • In A$ terms, revenue was up 44% to A$28.3 million (2018: A$19.7 million)

• FY19 EBITDA up 395% to A$2.8 million (2018: A$0.6 million)

• FY19 Operating cashflow up 249% to A$3.6 million (2018: A$1.0 million)

• Total Dante-enabled products up 30% to 2,134 (2018: 1,639)

Audinate Group Limited (ASX: AD8), developer of the professional AV-industry leading Dante® media networking solution, today announced its results for the 12 months ended 30 June 2019 (FY19).

Commenting on the Company’s operating and financial performance in FY19, CEO Lee Ellison said: “Audinate delivered another strong financial performance in FY19. Both earnings and operating cashflows grew substantially more than revenue as Audinate’s operations began to scale with our Dante-enabled products further penetrating key market segments. These results reflect the success of the passionate team at Audinate that is executing on our growth strategy.”

Continued strong growth in revenue and EBITDA

Revenue growth of 34% (in US$ terms) reflected a 29% increase in shipments of Dante chips, cards, modules and software. Gross margin at 74% was flat compared to FY18.

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----- Start of picture text ----- Revenue US$m & Gross Margin% 20.3 100.0% 20.03.2 95.0%15.2 15.0 90.0%2.311.3 10.0 8.7 1.5 16.6 85.0%0.9 12.580.0%9.7 5.0 7.474.4%75.0% - 70.0%FY16 FY17 FY18 FY19Chips, Cards and Modules Software----- End of picture text -----

In A$ terms, revenue was up 44% to A$28.3 million.

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Total operating expenses increased 30% to A$18.3 million, primarily driven by further investment in people, with 19 new roles primarily related to sales and engineering, a second year of Long-Term Incentive expenses and costs associated with the Company’s new Sydney office, to support ongoing growth.

The strong growth in revenue unpderpinned a 249% increase in EBITDA to A$2.8 million (FY18: A$0.6 million) as the growth in gross profit flowed through to earnings.

NPAT for FY19 amounted to A$0.7 million which represented a $0.6 million improvement after adjusting for the one-off tax benefit received in the prior year. In FY18, Audinate received a benefit of A$2.4 million from entering tax consolidation, which resulted in NPAT of A$2.5 million for FY18.

Strong balance sheet following successful capital raising

Audinate successfully completed an oversubscribed A$20 million placement on 6 June 2019, with an additonal A$4 million raised via an oversubscribed Share Purchase Plan that was completed after year end, on 10 July 2019. The funds raised have further strengthened the Company’s balance sheet, allowing it to pursue product and growth opportunities.

Significant expansion of Dante product offering

The number of Dante enabled products available for sale was up 30% to 2,134 products at 30 June 2019 (from 1,639 at 30 June 2018). The number of Original Equipment Manufacturers (OEMs) adopting Dante continues to grow and the number of OEMs shipping Dante enabled products was up 22% to 270 at 30 June 2019.

Dante Domain Manager (DDM) and a range of Dante AVIO adapters were launched in late FY18 and both exceeded our expectations for FY19.

Audinate also made its entry into the video market with the release of its Dante AV Module and the introduction of Dante AV Product Design Suite in June 2019. The Group secured a first design win in July 2019 and the Dante AV Product Design Suite is expected to be shipped to OEMs by the end of calendar year 2019.

At the InfoComm tradeshow in June 2019 Audinate also released two new software products.

• 1. Dante Application Library™ (DAL) allows software developers to seamlessly integrate Dante functionality directly into their PC & Mac applications. Zoom Video Communications Inc, a leader in video-first unified communications, has teamed up with Audinate to integrate the Dante Application Library into its Zoom Room application for video meetings. Zoom was announced as the initial customer for DAL in June 2019 and commercial launch of the new enhancement is anticipated to be in late 2019.
• 1. Dante Embedded Platform™ (DEP) enables manufacturers to implement Dante in software running on Linux for Intel and ARM processors. QSC is the first DEP customer to deploy the product within the Q-SYS line of digital signal processors and is expected to be rolled out by the end of calendar year 2019.

Both solutions offer substantially more flexibility than dedicated hardware, with the potential to add Dante support to third party AV products already in the field and the potential for system integrators and end-users to add new features and more Dante channels to products, as their systems grow and change.

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Transition to new CEO

Commenting on the retirement of CEO Lee Ellison on 13 September 2019, Chairman David Krall said: “Yet another set of great results for Audinate is testament to the fantastic job that Lee has done over many years and the exceptional leadership team that he has developed. We have a natural successor in co-founder Aidan Williams, and we are excited about the next chapter under his leadership and vision.”

Audinate is well positioned to pioneer the future of AV

Audinate has historically delivered financial year US Dollar revenue growth in the range between 26% to 31%, and it is anticipated that this trajectory will continue. Economic conditions and US tariffs may impact the nearterm results, but this will not impact on the Company’s focus to grow long-term shareholder value. Revenue split is expected to revert to historic H2 bias in FY20, as the company focuses on design wins for newly launched products to drive future incremental revenue growth.

In FY20, Audinate will commence:

• Investing to double the engineering and R&D functions over the next two years;

• Putting in place the business infrastructure platform to support long term growth;

• Developing next generation Dante audio and video software implementations;

• and, will continue to:

• Make Dante AV the technology of choice for OEMs;

• Expand its Total Addressable Market with the addition of video & software products.

Commenting on the outlook for Audinate, CEO-elect Aidan Williams said: “Audinate is well placed to drive innovation throughout the AV industry. Our business is well capitalised and has the foundations in place to accelerate our product development and support the software transition of the AV industry.”

Investor Briefing

The Company will host an investor briefing to discuss its 2019 results at 10.00am (AEST) on 23 August 2019. The briefing is expected to last approximately 30 minutes inclusive of question time. To pre-register for the briefing and avoid a queue while calling, please register at the following:

https://s1.c-conf.com/diamondpass/audinate-10001352-invite.html

If you are unable to pre-register, at the time of the call please dial one of the numbers below and provide the conference ID: 10001352 to an operator.

Australia Toll Free: 1800 558 698 Australia Local/International: +61 2 9007 3187

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For more information on Audinate, please visit:

Investor Centre – www.investor.audinate.com Website – www.audinate.com

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Investor and media enquiries:

Rob Goss CFO & Company Secretary P: +61 2 8090 1000

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 pioneering the future of AV. 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.

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