When stuff like this happens in the downgrade occurs, it makes me at peace to know that I own a quality macro asset like BTC. Just makes sense to be less at the mercy of all the commentary and of specific centralised actors like board members, customers, directors, short sellers.

You have to become an expert in so many different things just to understand every single individual company on the ASX or abroad, and then luck or misfortune becomes the main contributor anyway.

What the hell is the point. Buy BTC and turn off the markets. Shrugged atlas

@Rocket6 Yes, you are correct, revenue was just below my range. Bullwhip is in line with the "Slow Recovery, but underlying growth is weaker.

What has become clear to me - and Aidan said as much on the call - $AD8 was a major beneficiary of the boom in hybrid working (particularly investments by universities to retool their facilities to accommodate hybrid teaching, which in many institutions is now stantard.) Aidan described this as a tailwind that has now well and truly passed. It drove $AD8 strongly in Fy22 and FY23, and was exaccerbated by "just in case" invesntory policies in FY24 once the chip shortages hit.

That's all unwound now in FY25, and we are left with a business that will grow at 2-to-3 times industry growth. With the Pro AV market expected to grow annually anywhere from 4-5% (excluding some older forecasts that "over-reacted" to growth in investment in hybrid working), then looking out over 5 years, it is reasonable to assume that $AD8 can grow revenues annually anywhere from 8% to 15%.

As others (? @Slomo ) here have discussed before, we have what would be a standalone cash generative audio business that in FY22-23 evolved to invest in video, and before having got that segement cash generative, is now broadening the investment base into control (Director, Iris, etc).

The market doesn't like it because over the 2-3 year horizon, it is seeing cost growth increase, investment increase, and cash generation decline.You need to have a longer time horizon to see the overall business succeed. So for me, conceptually, the thesis remains intact, subject to re-running the numbers.

The market will see as bad news the FY26 cost growth of 25%, and messages that Iris (which is essentially pre-revenue) doesn't make a significant contribution in FY26.

If your time horizon is 3 years, and you compare the next 3 years to what you've have had in your model two years ago, then it looks ugly. But the strategy is a longer term play.

Now I'll put my hand up and admit my thesis is creeping, as I never anticipated the kind of investment the "control" segment would require in terms of both capex and opex. That's why all I can say is that conceptually, the thesis is intact. But I need to re-reun my numbers.

Another positive, is that $AD8 has the balance sheet to succeed. The last capital raising at $13 standing here today, looks like a good move.

I'll write up more when I gone through the detail.

@Slew yes, he was definitely twitchy, and you could see him checking the phone after the market open. And he was visibly shaken. I think it's because he knew he had to try and sell the FY26 guidance story, which was the big unknown.

The market SHOULD have seen this coming, given when Iris was announced they said:

"In addition to the transaction consideration, Audinate will continue to invest in operating and development expenditure to support go-to-market activities and scaling of the Iris business. Depending on the pace of market adoption and execution milestones, Audinate currently expects a material contribution to free cashflow from the investment in Iris within three to four years."

But I don't think the market understood that this invesment would lead to Opex growth of +25% and who know how much more capex. But it shouldn't expect much in FY26 and FY27!

Quick thought on Aidan's phone checking. He may have just been checking questions, because later in the presentation he was reading questions off his phone. It wasn't a great look when he picked up his phone. Still, there's something homely and transparent with Aidan's unpolished presentation skills.

Thanks all for sharing thoughts on AD8, particularly FY26 and the next few years. I sold out at $5 around half an hour ago in my SMSF, and will exit AD8 here on SM as well this evening.

My reason is that my investment thesis no longer holds up in my view, because my investment thesis was all around complete market dominance in Audio and I hadn't expected them to need to increase capex to maintain and increase that dominance. The business is now obviously about video as well and "control" as they put it, so in video they do have serious competition and the outcome is far less clear.

Where my investment thesis is broken is around the timeframe to profitability, where they just start making higher and higher net profit and reward shareholders for their faith and trust in management. That is fairly unclear now, with FY26 guidance for cashflow to be negative because of capex.

As others have mentioned this morning, there is still a good business case here, but over a longer timeframe. My concern is that there is no clear end in sight for the costs being higher than the profits. It's not a concern about them going broke - they have plenty of net cash and a very strong balance sheet. That is not the concern. I had naively assumed that they were set to soon dominate digital audio in their addressable market in a similar way to how Bluetooth dominates wireless audio, and I had not factored in the costs and timeframe blow-out in terms of expanding outside of pure audio within their addressable market. By blow-out, I mean to serious cash building through industry domination without additional expenditure as they added more customers and devices, so to strong and growing profitability.

I also think that with this report underwhelming the market, there may be little in the way of positive catalysts to cause a positive re-rate in AD8's SP in the near term, not before February next year when they report for H1 of FY26 where there's always the possibility that they underwhelm the market again then and are dealt another SP belting.

In short, they have turned from being a growth story into a longer term value play, and in terms of the competition they are facing in video and "control" rather than just pure audio, I know far too little about that to have serious confidence in AD8's progress from here. I therefore have very little conviction in Audinate now in the near-to-mid term and even in the longer term because I just don't know how much money management is going to invest now and where they eventually get to as a result of that. And how long it all takes - in terms of years.

I've made numerous mistakes with my investment thesis around AD8 and the main one was not understanding management's goals and aspirations clearly, and most of my other mistakes stem from that lack of understanding, which is really due to not paying enough attention to what they have been saying including around that recent acquisition. The size of the acquisition wasn't a problem, it's what it meant in terms of their goals and ambitions for the company and their willingness to make the necessary investments to try to achieve those goals and aspirations.

I simply see better shorter term opportunities elsewhere now that I believe I understand better, so I'm taking the loss and moving that capital into some of those other opportunities.

I also think that with this report underwhelming the market, there may be little in the way of positive catalysts to cause a positive re-rate in AD8's SP in the near term, not before February next year when they report for H1 of FY26 where there's always the possibility that they underwhelm the market again then and are dealt another SP belting.

I agree @Bear77. I think this result is a bit of a watershed for the stock. To my mind, AD8 was cheap enough to cop that medium term downgrade to revenue or the opex escalation but not both. I think the messaging from management (and their fortuitously timed share sales) have broken a lot of trust with the market. So I get the feeling it will be hard for the SP to head north from here until they can show tangible results over a few periods. The stock will just go in the wait and see bucket. Ultimately, I think it's a good product, but not a great stock for the time being.

I sold both IRL and on SM this morning.

Great thread. I agree with the general sentiment.

I'm also with @DrPete on the valuation angle. Shares look cheap relative to their high, but not so much if you account for slower and less certain growth (even if it's far from terrible in an absolute sense)

Yes @Bear77 this was the clincher for me too... Still see a future here but it's pushed out so far now that I'd rather be in something with nearer term catalysts... For now

Yeah, that summed up the TL;DR version of my post very well in a single line @GazD:

Still see a future here but it's pushed out so far now that I'd rather be in something with nearer term catalysts... For now

Exactly!

It was a $30K loss that I crystalised in my SMSF this morning however I am sitting on gains that are higher than that from a few of my gold company holdings, so I'm not beating myself up about it. You can't get every call right; nor do you need to. You just need to know when to cut your losses and move on.

I don't like turning a growth company position into a longer term value investing position at the expense of other opportunities. Done it before. Usually doesn't work out too well. Especially when you look back and realise what you might have invested that money in during the same period, and how much better that would have worked out.