Audinate Group Ltd (ASX: AD8) shares are crashing deep into the red on Tuesday.
In early trade, the ASX tech share was down over 50% to a 52-week low of $6.50.
Its shares have since rebounded a touch but remain down 32% to $9.06 at the time of writing.
This follows the release of the media networking solution provider's preliminary FY 2024 results and its guidance for the year ahead.
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ASX tech share crashes on results
- Unaudited revenue of $91.5 million
- Gross margin of 74.3% (up from 72.1%)
- EBITDA of $19.5 million to $20.5 million (up 77% to 86%)
What happened in FY 2024?
For the 12 months ended 30 June, Audinate expects to report revenue of US$60 million (A$91.5 million). This represents a 28.4% increase on the prior corresponding period.
And with its gross margin improving to 74.3% in FY 2024, its gross profit came in at US$44.5 million. This represents an increase of 33.2% year on year.
Management advised that this reflects a favourable product mix shift to software implementations and realised cost savings in its Brooklyn product. The good news is that it is expecting further long-term margin improvement as customers adopt more software-based Dante implementations. In fact, its gross margin in the second half was 76.8%.
In light of the above, Audinate expects to report EBITDA in the range of A$19.5 million to A$20.5 million for FY 2024.
The ASX tech share's co-founder and CEO, Aidan Williams, commented:
We are pleased to deliver a strong set of unaudited results demonstrating that the business continues to grow profitably – consistent with our FY24 outlook statement.
Why the selling?
The selling today appears to have been driven by Audinate's guidance for FY 2025.
Management has warned that it is facing a number of headwinds that will weigh on its performance in FY 2025.
This includes the preference for software-based Dante implementations increasing during FY 2025. While this will drive the business's overall margin towards 80%, per-unit revenue is lower.
In addition, it notes that shortening order lead times, the re-balancing of inventory holdings across the industry, and the rate at which its manufacturing customers clear raw material inventory will influence its FY 2025 result.
The sum of the above means that Audinate expect FY 2025 revenue and gross profit (in US dollars) to be lower than in FY 2024, before a return to growth and more predictable order patterns in FY 2026.
A range of initiatives are underway to drive FY 2025 revenue. In addition, a range of actions have been completed in marketing, sales and product development to manage the cost base and allow ongoing investment in new products such as Dante Director and Dante Connect.
Commenting on the ASX tech share's outlook, Williams said:
Whilst we expect FY25 to be a transitional year, the long-term strategic thesis for Audinate remains strong. With the challenges of the last few years behind us, we will redouble our efforts to drive audio & video unit growth, a key building block in our long-term strategy. I am delighted by the launch of Dante Director and more generally demand for Dante software implementations which could drive overall gross margins towards 85% over the longer term.
