"If it’s structural inability to convert platform strength into operating leverage, I'm a holder of stagnation."

Brilliant synthesis @jlozanol. I was a holder and long bullish of $AD8, at first being prepared to look through the supply chain "bull whip" written about at length on this platform.

But when the "whip" didn't snap back, as it should, by August last year, I concluded that there are broader questions about operating leverage and so I exited. I sold my entire position on 18th August following the FY results. Today's result adds further support to that view.

Disc: Not held

@jlozanol, welcome aboard!

I’m seeing AD8 as being in transition year #2.

And #2 seems to be how the market is smelling it right now.

They fact that they are burning cash and aspiring to be SaaS is like a brown rag to a bull these days. Not interested.

Hard to argue with that perception at the moment.

The AI eats SaaS market narrative won’t be helping, especially as CEO Aidan keeps talking about moving towards a SaaS business model…

Show us your AI’s

On the H1 call today, CEO Aidan didn’t do or say enough of the right things re: AI IMO. I hope he’s too busy running his business to have spent a lot of time thinking about how to combat the current market narrative.

Not that he should need to raise cash again for a while, if ever (outside another acquisition but they seem to have their hands full bending their current jigsaw pieces into the right shape).

He did however talk to Dante being the foundation layer on which AI can run. I’d like to see him expand on this but what I took from it is that they are essentially turning Pro AV-hardware into IP connected networks. This opens the possibility for AI to play a role in how Pro-AV signals are delivered, controlled, etc. Before Dante, AI had little to no role as it was all analogue, now the potential of AI is another reason for OEM’s to get on Dante.

Iris Studio is a big bet and holds a lot of possibility, how they execute will determine if they can realise it’s promise, and use it to help tie Audio, Video and Control into a single coherent operating system to rule them all.

I’ve indulged in too much wishful thinking on this business in recent years but I am still here for now.

Disc: Held.

I’m trying to figure out whether AD8 is in the “messy middle” of a platform transition... or stuck in a slow grind.

The jury seems to be out on that one. The result today was OK, but given how anything software has been selling off it's likely that AD8 has just been put into the too hard basket. After all, the last few months have thrown up a lot of much higher quality, profitable software companies at deep discounts.

A few thoughts on why I think this a reasonable risk reward play:

1. It feels as though the business has bottomed. It's possible that they never realise the scale and operating leverage that's possible, but it doesn't feel as though the business will deteriorate from this point.
2. They have plenty of cash, so it's incredibly unlikely they need to raise.
3. Considering this business is basically a monopoly on a globally dominant software protocol, having an EV approaching $200m feels very cheap – especially considering point 2.
4. At some point, either the market reprices this higher or it becomes the target of takeover activity.

This is a stock I'm kind of happy to sit in even in a small way, because the business performance looks very muddled at the moment the balance sheet provides plenty of time and the valuation means that, imo, either the SP goes up because the economics of the business improve or M&A arrives.

The operating leverage question is a good one and we have only glimpsed it for Audinate. I don’t think we’ll be seeing it again for a while.

When this swung sharply into view in 2024, it looked like they had arrived.

It was however a mirage caused by overstocking - a cyclical upswing that looked like structural growth.

Worse mgmt either didn't realise this or didn't explain it until it slammed into reverse.

Since then they have doubled down on video with the Iris Studio acquisition.

Mgmt have said the audio division would be profitable if they carved it out that way.

That's nice but largely irrelevant as they are plowing these profits and remaining cash reserves into Video networking and control.

That needs to work or they will have thrown good money after bad. They’ve really burned the boats with this strategy.

These investments will not likely pay off this year or next but we should start to see evidence of it working or not in the next 6-12 months I hope.

Iris is now in market under its own name so we should start to get some feedback on how well it’s being received.

This was a risky but promising M&A strategy to pursue I believe.

If they get it right it could allow them to fast track their video and control growth and move towards their ambition of becoming the operating system for Pro-AV.

They are also in a bit of a foot race with NDI in video, so there’s some urgency to increase the degree of difficulty (as if they needed it).

Audinate now seem to have most of the tech, cash and expertise in place to do this but it will not be easy.

Disc: Held