AUDINATE GROUP LIMITED — Investor Presentation 2018

Aug 26, 2018

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FY18 Results Presentation

27 August 2018

Lee Ellison – Chief Executive Officer Aidan Williams – Co-founder & Chief Technology Officer Rob Goss – Chief Financial Officer

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Record results & successful launch of new products

• Global leader in audio networking, distributing top quality digital audio signals over computer networks

• Exceeded prospectus forecasts for revenue, new product revenue, cash-flows, EBITDA & NPAT

• Strong growth in Dante enabled products, OEM customers, revenue and unit shipments

• Dante Domain Manager, Dante AVIO adapters, and Dante Core IP introduced

• Well positioned to capitalise on market growth and increased penetration

Melbourne Convention Centre Melbourne, Australia

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FY18 exceeded Prospectus forecasts

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3 FY18 Results Presentation

35% growth delivers revenue of USD $15.2m

A$19.7m

Revenue

75%

Gross Margin

A$0.6m

EBITDA

A$1.0m

A$2.5m A$1.0m NPAT up from a Net cash from loss FY17 ($20.2m) operating activities

Sydney Trains Sydney, Australia

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Operational results above plan

39%

38%

58%

OEM product growth in growth in Dante growth to 1,639 chips, cards & software units modules

438 18,000+ OEMs people trained licensed Dante on Dante this year

Westfield Mall Shopping Centre London, England

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Growing network effect

Number of Dante-enabled products drives economic network effect

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1,639
1,292
1,182
973
874
681
553
348
223
2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18
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CAGR 65% in
number of
Dante-enabled
products
available in the
market
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Note: per financial half-year

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Strong growth in revenue and Dante units shipped

Revenue (US$M)

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15.2
2.3
11.3
1.5
8.7
6.7 0.9
6.0
12.5
9.7
7.4
5.5
4.8
FY14 FY15 FY16 FY17 FY18
Chips Cards & Modules Software Other
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Dante units shipped (‘000s)

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398
150
275
95
175
65
248
180
110
73
43
FY14 FY15 FY16 FY17 FY18
Chips Cards & Modules Software
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• Revenue CAGR: 26% (4yrs) – 31% (3yrs) at 75% GP margin

• Chips, cards & modules includes AVIO adapters

• Software includes royalties, retail software & Dante Domain Manager

• Audinate invoices customers & pays COGS in USD

• 38% growth in chips cards & modules units

• Brooklyn growth continues >30% & Ultimo ≈ 40%

• 58% growth in software units

• Royalties growth ≈ 50%

Note: software units not tracked prior to FY16

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FY18 Financials

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FY18 income statement

(AU$’000s)
Year Ended 30 June	FY18	FY17	Change (%)
Sales	19,653	15,063	30%
Cost of goods sold	(5,011)	(3,802)	32%
Gross margin	14,642	11,261	30%
Employee expenses	(8,838)	(7,290)	15%
Marketing expenses	(2,338)	(1,603)	46%
Admin & other opex	(2,907)	(1,584)	84%
Total Expenses	(14,083)	(10,477)	34%
EBITDA	559	784
Initial public offering expenses	-	(1,695)	-100%
Depreciation and amortisation	(1,452)	(1,089)	33%
Other Income	157	153	3%
Change in fair value of CRPS	-	(18,548)	-100%
Profit / (Loss) before tax	736	(20,395)
Income tax benefit/(expense)	3,280	(48)
Profit/(Loss) for the year	2,544	(20,443)

Investing for growth in FY18

• Sales driven by 38% growth in shipments & 58% growth in software units

• Strong gross profit margin (75%)

• Employee expenses increased due to additional 18 FTEs (favourable cost variance to prospectus)

• Marketing spend is weighted to second half tradeshows and new product spend

• Increased admin costs due to public company costs ($0.9m) and system & process initiatives ($0.3m)

• Income tax benefit mainly due to one-time tax benefit $2.4m of entering tax consolidation

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Investing in new product initiatives

Operating costs $ and % revenue AUD$M

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88%
78% 75%
68% 70%
14.1
2.9
10.5
8.9 1.6 2.3
6.4 1.4 1.6
5.7 1.6
1.2
0.9
0.5 1.0 8.8
7.3
5.9
4.3 4.2
FY14 FY15 FY16 FY17 FY18
Employee related costs Marketing expense Administration & other opex Operating costs % revenue
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Research & development expenditure AUD$’000s

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5.7
2.8
3.3
2.8
2.2 2.3 1.1
0.6 1.4
1.5 2.9
2.2
1.7
1.4
0.7
FY14 FY15 FY16 FY17 FY18
Development Research
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• Administration & other opex impacted by one time step up in public company costs ($0.9m) and system & process initiatives ($0.3m)

• Research & development expenditure (‘R&D’) represents amounts claimable with Australian Tax Office, which is allocated between research and development based on timesheets

• Capitalised development costs are amortised over three years

• Investment in R&D represents approximately two thirds ($2.4m) of the remaining increase in operating costs

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FY18 cash-flow summary

(AU$’000s)	FY18	FY17	Change ($)
Cash flows from operating activities
- net IPO impacts - underlyingcash flows from operatingactivities Net cash from operating activities	(897) 1,933 1,036	(797) 2,037 1,240	(100) (104) (204)
Net cash used in investing activities	(2,976)	(1,865)	(1,111)
Cash flows from financing activities
- net IPO impacts - underlyingcash flows from financingactivities Net cash used in financing activities	(3,083) 24 (3,059)	16,191 20 16,211	(19,274) 4 (19,270)
Openingcash Net IPO impacts	18,694 (3,980)	3,108 15,394	15,586 (19,374)
Net underlying cashflow FX impacts Cash at the end of the financial year	(1,018) (65) 13,631	192 0 18,694	(1,210) (65) (5,063)

• Positive underlying operating cashflow of $1.9m for FY18

• Total underlying cashflow for FY18 was ($1.0m)

• Cash used in investing activities primarily represents development costs

• FY18 IPO impacts of $4m consists of a net payment to selling shareholders of $3m (due to 30 June 17 completion date) and $1m of transaction cost paid in current year

• Refer to statutory cash-flow statement for further detail (slide 23).

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Statutory balance sheet

(AU$’000s)	30 June 18	30 June 17	Change ($)
Cash and cash equivalents	13,631	18,694	(5,063)
Trade and other receivables	1,819	2,030	(211)
Receivable from issue of shares	0	4,062	(4,062)
Current tax asset	1,344	902	442
Inventory	1,225	767	458
Other assets	276	246	30
Current assets	18,295	26,702	(8,407)
Property, plant and equipment	691	365	326
Intangibles	3,879	2,001	1,878
Deferred tax asset	1,874	0	1,874
Non-current assets	6,444	2,366	4,078
Total assets	24,740	29,068	(4,328)
Trade and otherpayables	2,165	2,558	(393)
Payable to sellingshareholders	N/A	7,030	(7,030)
Provision for income tax	23	34	(11)
Other liabilities	1,869	1,557	312
Current liabilities	4,057	11,179	(7,122)
Employee benefits	309	305	4
Total liabilities	4,366	11,484	(7,118)
Net assets	20,374	17,584	2,789
Ordinaryshares - fully paid	63,288	63,262	26
Reserves	522	302	219
Retainedprofits/losses - opening	(43,435)	(45,980)	2,544
Total equity	20,374	17,584	2,789

• Cash movement mainly due to $4.0m IPO related impacts (refer slide 11)

• Receivables declined despite sales growth

• Current tax asset is estimated net receivable from ATO for R&D activities

• Inventory growth in finished goods

• Intangibles assets increased due to capitalised development costs

• Deferred tax asset due to tax consolidation including reset of tax cost base of intangibles

• Reserves increased mainly due to LTI amortisation expense ($0.2m)

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Robust core business + new products

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Growth Drivers

• Robust core audio networking business

• Strong historic growth in revenue and units shipped (see slide 7)

• 1639 products shipping from 221 manufacturers, and growing

• Strong pipeline of 217 manufacturers yet to ship first product (see slide 21)

• Plenty of runway for growth – management estimate digital conversion is 7%

• New products to more than double addressable market to AUD $1bn

• Dante AVIO Adapters – connect legacy equipment to Dante

• Dante System Management software

• Video Solution

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Dante AVIO Adaptors – Network Everything

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Dante AVIO
Adapters
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Dante for “brown-field” installations Shipped Q4

Introduced 6 new Dante AVIO products

Online retail & country distributors

“Problem solver” for System Integrators Pull through Dante products

• Rationale

• Add Dante to brown-field AV installations (mostly analogue)

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

• Pull through Dante products and software

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

• 50 resellers and growing

• Strong initial demand with sales performance exceeding FY18 expectations

• Marketing campaign to be rolled out in FY19

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Dante Domain Manager – System Management Software

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Dante AVIO
Adapters
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Secure Control Shipped Q3

Scale beyond a LAN

Sales Channel Established (System Integrators)

Logging & Auditing

Sold to Installed Base

• Commercial launch Feb 2018 at Integrated Systems Europe (ISE) tradeshow

• Approaching 100 resellers (System Integrators) signed to date

• DDM depends upon new Dante firmware features

• Top 25 manufacturers by volume are rolling out firmware (existing and new products)

• Offered in Silver, Gold and Platinum Editions

• Majority of DDM installs are Platinum and Gold Edition

• Management software more than doubles the revenue opportunity associated with the core business

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Dante Video: Distribute video signals across an IT network

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Common management for Lower installation and audio and video cabling costs Prototype Demonstrated Displaces expensive June 2018 matrix switches

Lower installation and cabling costs

Independent routing of Audio and Video signals Integration with Dante Domain Manager

• Dante AV – audio and video signal distribution

• E.g. HDMI video across an IP network

• Same familiar Dante management tools for audio and video

• Audinate Video Prototype shown at Infocomm tradeshow June, 2018

• Solution targeted for OEMs (step/repeat audio business model)

• Expected product launch to OEMS targeted end of FY19

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Key Priorities to drive ongoing growth in FY19

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• Geographically expand of sales and support teams

• Broaden our suite of core Dante products to accelerate penetration within OEMs

• Invest in the development of our Dante video solution by end of FY19

• Continue the roll-out of Dante Domain Manager and Dante AVIO adapters

• Audinate will continue to invest in growth initiatives to drive future revenue

• Reliable ongoing execution of the Group’s strategy

• Revenue growth in a range consistent with historical performance

• Further investment in R&D and expanding the sales footprint

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Appendicies

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Core business growth strategy

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Increase the number of OEMs adopting Dante

Increase market awareness of Dante products

Educate end users, system designers and integrators so that they install more Dante products in their AV systems – driving growth in chips/modules sales

Increase penetration of Dante throughout each OEM brand’s product portfolio

Encourage existing OEM customers to Dante-enable more of their product range – some manufacturers make many hundreds of products

Continue to sign new OEM partner brands and help them to get Dante enabled products to market

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Increasing OEM customer adoption: pipeline for growth

OEM customers shipping Dante-enabled products

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438
392
346
217 Mfrs
258 Yet to ship
221
189 180 192
160
144
120
109
93
73
52
1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18
OEM Customers shipping Dante-enabled products Total OEM Customers
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Audinate has grown to 438 OEM customers at end of FY18

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221 OEM customers have announced products in the market

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Built in revenue growth as new OEM customers bring products to market

Note: per financial year quarter

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Competitive landscape – Networked Audio Products

Total products per protocol[(1)]

Audinate is the clear global market leader compared to competing audio networking solution providers.

Dante has nearly five times the adoption of its closest competitor

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1800
1639
1600
1400
1200
916
1000
800
618
600
391
400
343
200 288 166
124
128
0
2013 2014 2015 2016 2017 2018
Dante Cobranet Ravenna Others AVB
Number of Products
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1) RH Consulting, Networked Audio Products 2018 and Audinate company data

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Statutory cash-flow statement

(AU$’000s)	FY18	FY17	Change ($)
Cash flows from operating activities
Receipts from customers	19,679	15,079	4,600
Payments to suppliers and employees	(19,166)	(14,407)	(4,759)
Interest received	251	52	200
Interest and other finance costspaid	-	(2)	2
R&D incentive(research activities)	334	599	(265)
Income taxespaid	(62)	(80)	18
Net cash from operating activities	1,036	1,240	(204)
Cash flows from investing activities
Payments for PP&E	(627)	(139)	(488)
Payments for intangibles	(3,029)	(2,308)	(721)
R&D incentive(development activities)	680	581	99
Net cash used in investing activities	(2,976)	(1,865)	(1,110)
Cash flows from financing activities
Proceeds from issue of shares	4,086	16,988	(12,902)
Payments to sellingshareholders	(7,030)	-	(7,030)
Payments for capital raisingcosts	(115)	(777)	662
Net cash used in financing activities	(3,059)	16,211	(19,270)
Net increase in cash	(4,998)	15,586	(20,584)
Openingcash	18,694	3,108	15,586
FX impacts	(65)	-	(65)
Cash at the end of the financialyear	13,631	18,694	(5,063)

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Important notice and disclaimer

Disclaimer

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.

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.

Past performance

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.

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. 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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