@Slomo I didn’t mean to come across as negative as I did about Audinate’s chances in video networking. For what it’s worth (not much), I think Audinate is very well positioned from a competitive standpoint.
If we assume that the video and audio networking markets are of similar size and that the number of products is a proxy for market penetration*, then NDI would be where Dante was on the adoption curve back in 2015. Perhaps with something like 1.5% of the addressable Video Networking market. So it’s still very very early. I also see Audinate’s dominance in audio having a huge pull in Dante AV adoption, particularly in markets where the company has been traditionally very strong - physical spaces, stadiums, house of worship, etc.
Live broadcasting - mixing video streams from multiple sources for broadcasting - is a use case that’s a bit different from Audinate’s usual strengths. Especially video streams over wireless networks or across the Internet. So it would be good to see some tangible progress in this space so NDI is not allowed to fester in the niche unencumbered.
* Product numbers might be a very poor way of comparing the adoption curves between video and audio networking. Eg for outputs, while it makes sense to have Dante enabled speakers, not sure the same can be said for displays because they’re bulkier, more expensive and difficult to replace. So it may consolidate down to a few Dante AV decoder boxes rather than display manufacturers all adopting it.
While on the topic of NDI, Audinate has just on boarded a 13 year NDI/Newtek C-level product guy.
@TEPCapital I haven't put much thought into this, so others may have some better answers. Not a big fan of EBITDA margins, because what a company capitalises is very discretionary, so will use EBIT margins instead. Capitalised dev/R&D shouldn't be far off D&A when the company reaches scale.
Dolby is running at an EBIT margin of low-20s right now. Audinate will probably never get to high-80s gross margins considering the hardware element will always be there. R&D % might end up being similar - AD8 has simpler engineering problems to solve but there's probably more things to work on for the ecosystem. Other operating expenses might end up being a bit lower for AD8 because Dolby has more brands to deal with as it's an end-consumer product.
So perhaps Audinate at scale ends up with an EBIT margin in the high-teens. One can also argue Dolby is not "at scale" with some of their major products in Dolby Vision and Dolby Atmos still in their infancy. It'll also be highly dependent on how successful AD8 is in video. If they get a lot of video, then costs can be spread over more revenue and there's more "synergies" in the cost base.
Dolby is the closest comparison I can think of. Thanks to @Slew for linking to the Business Breakdown podcast ep. Lots of similarities - solving interoperablity problems for premium audio/video features, makes money by charging hardware manufacturers a license fee for Dolby playback, helps manufacturers differentiate products, bread and butter is audio but moving into video.
The small remaining parcel I sold off at some recent highs has finally dipped below my initial entry cost. Literally a $500 minimum position to keep an eye on it. How are you all feeling and fairing with general stability at this point? Sentiment might be driving lower over the new year IMO.
Awaiting another chance to average down and gain a better margin of safety.
Mid-day, markets been open for 2 hours and no trades on AD8... odd. Large spread on Buy/Sell 8.34/8.42.
Not normally a high trade in AD8 but this is ridiculous.
Does anyone know if any research analysts have upgraded AD8 recently with the large spike that happened on the release of AGM results?