Atomos steadies ship in financial results reveal

A leadership restructure at Atomos and a new product suite has led to a 5.1 per cent increase in sales and lifted run-rate gross margins to 40 per cent by June as part of a solid financial turnaround for the video technology innovator.

Results for the past financial year revealed today show that returned chief executive officer Jeromy Young has overseen a 22 per cent cut in fixed operating costs that have put the company in the box seat to break even for the current financial year on the back of a horror $15 million loss.

The 2023-24 financial year was one that shareholders would rather forget. With sales down and costs up, Atomos was in bad shape by the end of the first half.

But, in a bold move by Young and the company’s biggest shareholder, Domazet, to take control of management in January and recapitalise Atomos by paying off debt and dramatically cutting the fixed operating costs of the business, the ship has been righted and given the chance to sail into calmer seas in 2024-25.

The cost-cutting exercise was immediately implemented by Young in January, which among other things, resulted in the staff head count – which had already been cut from 150 to 90 – being further reduced to 70. Subsequently, a $5.9 million reduction in costs was reported, with the full benefits still to flow through into the current year.

The next step taken by the new management was to raise $16.2 million in fresh capital, including $2 million each from Young and his chief operating officer Peter Barber. The attached options issued at the same time also provide for a further $16.5 million of cash inflow, assuming they are all exercised at 3c before November next year.

With all debt repaid, the company says it is now sitting on $2.9 million in cash.

At the same time as the capital raising, Young’s team also took the difficult decision to reverse an earlier move by previous management to employ discount pricing in efforts to shift residual stock and raise much-needed cash. The net effect has been the improvement in underlying gross operating margins by almost 100 per cent to 40 per cent from the previous six months.

The final piece of the puzzle was to reinvigorate the company’s product pipeline in a bid to drive sales, which had fallen from more than $80 million in 2021 to $35 million for 2023-24.

Atomos has since launched and started shipping its Ninja Phone – a device that is attached to IOS or Android phones to process and monitor high-quality video data. A second product, the Sun Dragon, which is now ready for shipping, is a world-first, flexible 2000-lumen LED lighting “rope” that can be used wirelessly to replicate natural sunlight conditions in any setting.

As a result, management is now forecasting sales of $45 million for this financial year at an underlying gross profit margin of 40 per cent, with fixed costs constrained to $16 million per annum. It is expected to leave the company in a cash-flow neutral position – a far cry from 2023-24’s performance.

But while Atomos’ new products are expected to sell well, they are only just hitting the market … and in the fast-moving sector of technology hardware manufacturing, there is always the possibility of a better product launching onto the scene. There are also always risks associated with a changing global economy and potential reoccurring black swan events such as the Writers Guild of America’s strike or another COVID-like pandemic.

But Atomos is back in fighting-fit condition. A clean balance sheet, cash in the bank, new products to boast about and a management team with a particularly sentimental and personal reason for ensuring success in the future, means that the odds are stacked in its favour.

An interesting and a quite possibly prosperous 2024-25 awaits.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au