AD8 TA, page-110

Hey mate I understand what your doing with extrapolating growth and corresponding FCF to FY30 but your calcs are misleading and do not truly reflect the expected growth in profit and FCF.

Simply extrapolating the current expected FCF is not reflective of the operating leverage of a high growth company that is just coming into profitability (i.e. just built enough scale to cover it's fixed costs and then also its variable costs). Now as it moves into the next stage of its growth every additional dollar earn't will contribute a greater proportion to the bottom line then the previous 90m has, as this was mostly used to cover it's fixed cost's and investments.

Over time Audinate has the ability to produce GP margins of 75%+ and EBITDA Margins of 40%. Consequently the $900m annual revenue would earn in 2030 would result in an EBITDA of around $360m AUD.

I am not sure on how this would translate to FCF however Audinate is a very capital light business in its day to day operations. The FCF is lower now due to the high cash outflows to investing in the pipeline for future growth i.e. the head count, R&D and strategic acquisitions..

So simply looking at an EBITDA multiple looks like a screaming buy however your 900m expected revenue also looks like your extrapolating revenue at a growth rate which is over around 50% which is also misleading. Audinate is going through a catchup phase due to covid so it might have 40% growth over next year but will moderate to more or less 30% in the medium term.

So in essence it more likely they will have a revenue of 40% growth for next two years and 30% till 2030 resulting in revenue of $390m and an EBITDA around $150m.

Of course we would need to work out FCF and discount it to todays dollars but my point is your calcs of simple extrapolation are misleading and creates a picture that is likely to influence casual readers of this site that may not have the financial acumen to come to their own logical conclusion

Please think before posting financial analysis on this site without proper consideration.