Audio re-synced, video re-routed

FY26 result (year ended 30 June 2026). Reporting currency: A$ unless marked US$

Audinate (AD8-AX) is back to sales growth.

Pretty good sales growth actually and improving half-on-half (in USD terms…there was a stiff fiscal 2H FX headwind).

Gross profit is the best line to follow: FY1H26 +12% y/y, +17% in 2H.

For those of you not following the story, in a nutshell: COVID drove demand for networked audio, supply chain shortages drove customer over-ordering, channel inventory became overly full, AD8 sales fell sharply when that unwound. Trump tariffs delayed the return to normal trading.

Recent RAM memory shortages required an AD8 price rise but the major de-stock cycle is now clean.

Growth is coming from the core. The video strategy, which a handful of years ago was to drive the next leg of growth, has seen a meaningful pivot.

Per management on the result call: “[Video] turns out to be a tougher proposition because of a variety of reasons... in video world, things like codecs, so the need for the compression technology creates quite a lot of friction in terms of interoperability, and that tends to dilute the value of an interoperable networking technology like we had with Dante Audio.”

That pivot included buying a loss-making business (Iris), which is expected to remain loss-making in FY27. Not an ideal pivot for investors.

But regardless, double digit gross profit growth strikes me as a good number for a company on 2x sales.

It seems ripe for a financial sponsor. Yes AD8 is FCF negative but that’s from investment. The business has 82% GMs, now back to double digit top line, a narrow set of customers to manage (the OEMs), and is indeed a de-facto industry standard. Cashflow could be very high if they managed it for that, and that pivot would best be done in a private setting.

Public equity investor interest is negligible. My sense is once there is line of sight on positive FCF, and hence risk of a painful capital raise is removed (A$65m net cash vs A$16m FY26 FCF burn) a re-rate occurs. But that’s cutting it pretty fine from a liquidity perspective hence investor sentiment where it is.

Current-period guidance introduced

"In FY27, US dollar gross profit growth is expected to be in line with or slightly ahead of the rate achieved in FY26, with gross margins maintained and operating costs held flat, supporting a meaningful improvement in operating profit."

No numeric range was disclosed.

Free cash flow outlook. "Audinate enters FY27 with sustained revenue and gross profit growth momentum, strong gross margins and a pathway to positive free cash flow."

The guide is explicitly not breakeven in FY27: "In terms of cash flow breakeven, the expectation is not that we'll be free cash flow breakeven in FY27."

Iris is named as a component: "Iris is still a business that is young and is still not cash flow positive. And we don't expect that to be the case in FY27 as the business continues to scale subscribers."

Operating cash flow is guided directionally: "We expect materially stronger operating cash flow in FY27, driven by improved revenue and a leaner cost base."

"As we hit in FY28, I think that's an area that we would be targeting a…free cash flow breakeven position."

Operating profit expansion from FY27: "The full benefits of [the FY26 restructure] will flow from FY27, driving meaningful expansion in operating profit as revenue scales." The associated restructuring benefits are described as "expected to be fully realised in FY27".

Iris earn-out: The earn-out was between $10 million and $15 million in revenue after 3 years. The response to whether the earn-out targets are on track: "at this stage, the answer is not on track to hit the earn-out."

Guidance entering the result was set at the 1H FY26 result on 16 February 2026, where gross profit growth and gross margin were reaffirmed and operating cost growth was revised from +25% to +20%; the free cash flow guidance dates from the FY25 result on 18 August 2025 and was not repeated at the half.

Reported EBITDA carries A$5.3m of management excluded items from the underlying result.

Revenue. Reported A$ results were impacted by the AUD strengthening ~6% over the year vs the U.S. dollar. US dollar-denominated expenses cover ~half of revenue.

From an industry inventory perspective, "we're really at the end of the inventory destocking cycle".

Gross margin. “[The GM decline] driven by strengthening of CCM revenue in the second half. Overall margins driven by product mix shift towards higher margin software products."

Operating costs. Employee expenses rose 23% driven by the acquisition of Iris ($2.0 million); stronger performance against short-term incentive targets driving higher variable incentive costs ($3.9 million); and increases in headcount during the second half of FY25.

Sales and marketing fell 15% following the completion of launch-related investment activities in control produts, in particular Dante Director.

One-off items. Restructure costs of A$1.8m relating to its internal organisational changes which delivered a net reduction of 10% of roles across the Group (inclusive of added Iris headcount). Benefits expected to be fully realised in FY27.

Iris acquisition-related payments of A$3.5m comprise A$0.2m of M&A costs and A$3.2m of AD8 shares which are considered remuneration given they are conditional on continued employment.

Earnings. Weaker earnings partly attributed to increased investment in Iris, Dante Director and broader platform development ahead of their expected revenue contribution

Capex comprised PP&E A$0.7m and capitalised development expenditure of A$12.7m including A$1.3m relating to Iris.

The Iris acquisition payment was captured in July in 1H26. AD8 carries no external debt.

The product reporting has changed somewhat in recent years - see definitions in Exhibit 7 below.

Embedded Components. Continued adoption of embedded software products, including DEP and Dante IP Core, as OEM partners transition from hardware-based implementations to software-enabled solutions. CCM also delivered a strong second half.

Installed Products – Adaptors. Continued expansion of the adaptor portfolio into installation-focused use cases, including corporate meeting rooms, boardrooms and education environments. This included the launch of the 'AVIOs for Installation' range, which features an installer-friendly mounting system and an upgraded Pro S1 chip with audio encryption. On why the category is being pushed: "we've been in the adapter space for many years. But it's an aspect of the business where we still see a lot of potential to do more, particularly in the installed space."

AV System Software & Services. Increased adoption of DVS Pro, an initial US$0.2 million revenue contribution from Iris reflecting its early-stage commercial ramp following launch, and early customer uptake of Dante Director. Maintained a consistent attach rate to Dante-enabled products.

AD8 paid A$33m in cash for Iris and booked US$0.2m of revenue from it. And loss after tax of A$3.0 million. The three year earn-out is not on track to be hit per management.

A pivot to the video strategy has occurred, with the view on building a video component business similar to audio effectively abandoned. In video, "things like codecs...creates quite a lot of friction in terms of interoperability, and that tends to dilute the value of an interoperable networking technology". The model instead is to "provide the technology to manufacturers for free, but then monetize the end user part of that".

The business has been reorganised into three categories with dedicated leadership. Resources are realigned around three core categories — Embedded Components, Installed Products, and Software & Services, recognising the channel and go-to-market differences between OEM sales and installation sales. The restructure delivered a net reduction of 10% of roles across the broader Group.

AD8 argues they are not exposed to AI the way seat-based software is. Revenue is linked to hardware devices installed into physical spaces, which is an infrastructure business model and the interface for AI in the AV industry is networking and APIs.

Component shortages have replaced destocking as the supply constraint. RAM "...does have an impact on our COGS, and we have recently put a price increase through to reflect that". Next are FPGA parts, which are now in tighter supply than they were.

The FY26 FX translation drag almost entirely in the 2H… 1H facing another stiff FX headwind at spot rates. Revenue is 100% US dollar-denominated. USD expenses cover about half of revenue.

Q: Traction across the AV products?
A: "Uptake...continues to be steady...we're continuing to attack that deliberately and really focus on getting the basics right...building products that stick within their workflow". "...early days with both the Director and Iris...focused on ensuring steady attachment to our user base and growing account by account, segment by segment."

Q: When can breakeven be expected against the cash outflow in this result?
A: "...an operating restructure...has taken place in FY '26, and those benefits will flow in FY '27...revenue and gross profit growth in line with what we've had in FY '26, and we're maintaining a flat cost base...an improvement in our operating leverage and...our operating cash flow." "...the expectation is not that we'll be...free cash flow breakeven in FY '27...as we get to the end of FY '27, we should...have much more clarity...as we go into FY '28."

Q: Update on the strategy for Iris?
A: "...the acquisition of Iris actually represents a pretty significant strategic shift for Audinate in how we think about monetizing our networking technology". Previously "we can just do that again with video. And that turns out to be a tougher proposition...in video world, things like codecs...creates quite a lot of friction in terms of interoperability, and that tends to dilute the value of an interoperable networking technology". "...the idea there is to provide the technology to manufacturers for free, but then monetize the end user part of that." "Iris really represents a vertical slice through a use case involving camera control and production and Iris has been very successful in terms of getting adoption with camera manufacturers."

Q: Is Iris bringing in revenue now?
A: "...USD 200,000 worth of revenue in FY '26."

Q: Iris revenue projections, including timing?
A: "...not providing guidance at this stage...focused on...getting the basics right, ensuring that we can support as many of the...20-odd Iris partner OEMs and go to market alongside them...focused on early adoption, early rollout".

Q: Expected quantum of the one-off costs excluded from the flat FY27 cost guide?
A: "...0 in terms of restructuring costs. In Iris acquisition-related costs, it will be $1.8 million...That's non-cash...just amortization of shares that we issued as part of the Iris acquisition that are being amortized over 3 years."

Q: What inflection point in revenue or cost reductions is required to reach net profitability?
A: "...the restructure efforts that took place have been completed in FY '26. Guidance in FY '27 is to have our revenues increasing and our costs remaining flat."

Q: Targeted time frame to cash flow breakeven?
A: "Iris is still a business that is young and is still not cash flow positive. And we don't expect that to be the case in FY '27...as we head into FY '28, the expectation is that business will turn around and...we'll continue to see more operating leverage in our core business".

Q: With the major platform initiatives complete, why is FY27 gross profit growth only in line with or slightly ahead of FY26 rather than accelerating?
A: "...that's our best estimate of what we believe the outlook looks like". "I'd love it to be ahead of 15% for sure...the world is not the same as it was, say, 3 years ago when there was a number of tailwinds in the AV industry...the growth rate in the industry has gone from 6-point-something percent down to...high 4s. So this 15% growth rate actually represents a multiple of 2 to 3x the underlying growth rate of the industry, which is healthy."

Q: Exit or current gross profit run rate?
A: "...a positive second half performance in revenue. A lot of that was driven by the chip, cards and modules, embedded components growth in the second half...we're really at the end of the inventory destocking cycle...we've made an estimate of what we believe our outlook will look like in FY '27, and that's been factored into the outlook."

Q: Update on the historical inventory destocking?
A: "...the OEMs are all through the inventory overstocking type stuff...their propensity to buy Dante technology is no longer gated by them sitting on a pile of chips."

Q: Are the top 10 OEMs back to normal ordering?
A: "...that's true of our top 10 for sure. However...there's always inventory issues like there's RAM issues at the moment with all the shortages...and costs are going up. So...those things have really replaced concerns around people sitting on big piles of Dante circuit boards or Dante chips."

Q: Capex for FY27?
A: "...somewhere around $13 million in CapEx for FY '27, which is in line with '26."

Q: When can Audinate hit cash breakeven?
A: "Not in FY '27...we'll see much stronger operating cash flow come through in FY '27. As we hit in FY '28...that's an area that we would be targeting a...free cash flow breakeven position."

Q: Where is growth coming from across the product portfolio in FY27?
A: "...we are not providing guidance at that sort of breakdown line type number." "...there should be healthy growth on the AVIO adapter side of it, consistent growth around the Dante ecosystem, which is very much a law of large numbers thing. And I expect also to see consistent growth around the AV system software and services...we're not without our headwinds...RAM shortages...chip shortages potentially out there on things like FPGAs".

Q: Any impact from memory prices and availability?
A: "...getting redundancy in supply for things like RAM chips of various sorts...That does have an impact on our COGS, and we have recently put a price increase through to reflect that...RAM...is just more expensive now than it was...The next kind of cab off the rank is...FPGA parts, which are now in tighter supply than they were."

Q: Guidance for capitalised costs in FY27?
A: "...around that $30 million mark in FY '27".

Q: How is Iris tracking relative to expectations?
A: "...we've been really pleasantly surprised by what we've seen in terms of great adoption by PTZ camera OEMs...In terms of prosumers and enterprise clients, there's...good...engagement with the core proposition...Where we're being very deliberate is ensuring that we take the time to get the alignment on product and market fit and how we sell it and how we scale it right."

Q: What drove revenue growth in the second half?
A: "...we've seen all of our categories of products growing in FY '26...based on the second half growth, which was driven by chips, cards and modules".

Q: What gives you confidence in the FY27 revenue guidance?
A: "...40% of our revenues from the U.S., 35% from EMEA, 10% from other markets...top 15 customers accounts for around 40% to 50% of our revenue...our guidance is based on what we can see."

Q: More comment on the increased strategic focus on adaptors?
A: "...we've been in the adapter space for many years. But it's an aspect of the business where we...still see a lot of potential to do more, particularly in the installed space...The opportunity for us...is to extend those networks into...AV equipment that our customers have that are non-Dante...we think we can do more, both from getting products out into the market, but also in terms of new products that help us extend Dante networks into customers' AV networks."

Q: Is that a necessary step to enhance the competitive strength of Dante?
A: "...it's a necessary step for us to achieve our long-term vision, which is actually to deliver that software platform because we need to provide audio...We need to provide video...and we also need the control function...if we can create the right kind of AVIO adapters, then that allows us to provide all 3 legs of the stool...Plus, as you can see in the numbers, they're actually pretty good from a...revenue point of view."

Q: Comment on the overall AV market, given suggestions the corporate installation market remains weak?
A: "...AVIXA has kind of downscaled its data in that area. So it's once again a bit more diffuse to figure out what's going on...the AV industry, generally speaking, is not immune from the overall cost of living increases...there was a big burst of activity with the post-COVID return to office. So...we're in a bit of a lull with respect to that particular segment. That's probably also true of things like higher education...there are projects out there. They're not necessarily in those corporate and office installation areas."

Q: Update on the launch of Dante Director Professional?
A: "...we invested in developing a number of features for the enterprise version of Dante Director. So we had something like 20 enterprise customers going through an alpha trial process...We did things like ISO 27001 certification during the year...that product naturally wants to be sold through a channel into the audiovisual installation market...Dante Director is going to benefit from that."

Q: Any more acquisitions?
A: "...we've got...all the key elements...from a product and a tech perspective". "...there's nothing obvious that we need, and there's nothing obvious on the horizon." "I guess we're not shopping." "...there is nothing that we need to execute on the plan we have...the challenge for the next 24 months is just to get on and use the assets we do have".

Q: What percentage of guidance is from new revenue lines versus core chips, cards and modules and software?
A: "The overwhelming growth is coming from our core business".

Q: Can you quantify the cost out?
A: "...that's been factored into the guidance for FY '27".

Q: Does flat operating expenditure include capitalised costs?
A: "...we are expecting flat CapEx in FY '27 as well."

Q: What percentage of revenue will be spent on R&D over the next few years?
A: "...in terms of the percentage of revenue, we don't have a target in mind...it's remained flat at around that sort of $12 million to $13 million mark over the last couple of years...there's no fixed percentage."

Q: Do you expect group margin to tend higher with increased embedded software and SaaS take-up?
A: "...we've seen a step change in our gross margin percentage really from between '24 and '26 moving to the 82% mark now...82% we've guided next year is...a reasonable margin. The answer is it depends on the strength of our chips, cards and modules business". "And probably adapters business." "...it feels like it's a good balance at the moment in terms of a combination of both hardware and software products."

Q: The Iris earn-out was subject to targets — are those on track?
A: "...the answer is not on track to hit the earn-out. So the earn-out was between $10 million and $15 million in revenue after 3 years...that will be reassessed every reporting period."

Q: What strategies allay investor concerns about potential AV write-downs or the need for a capital raise?
A: "...we have been working through over the last 18 months, a number of strategic changes, both in terms of acquisition, different business model for how to monetize something like video...bringing into the company specific talent from people that have done control-related product developments...the opportunity is not so much to build out a video component business...But really the opportunity for Audinate is how do we take our existing ecosystem position, the brand, the interoperability...to capture more of the audiovisual installation value."