Announcement PDF Atomos Ltd Appendix 4D & Financial Statements for the half-year ended 31 December 2019 ACN: 139 730 500 ASX Code: AMS Contents Appendix 4D Directors' report Auditors' independence declaratiion Condensed consolidated statement of profit or loss and other comprehensive income Condensed consolidated statement of financial position Condensed consolidated statement of changes in equity Condensed consolidated statement of cash flow Notes to the condensed consolidated financial statements Directors’ declaration Independent auditor’s review report Company directory Atomos Limited Interim financial report for the six-months ended 31 December 2019 1 3 5 6 7 8 9 10 20 21 23 Appendix 4D – Half-yearly report Reporting period Reporting period: Previous corresponding period (PCP): Half-year ended 31 December 2019 Half-year ended 31 December 2018 Results for announcement to the market Revenue and loss after tax for the half-year ended 31 December 2019 $’000 Revenue from ordinary activities Loss from ordinary activities after tax attributable to members Loss for the period attributable to members 32,628 (2,418) (2,418) Increase/ (Decrease) On PCP 8,380 126 126 VAR% 35% 5% 5% Dividends No dividends have been paid or declared since the start of the financial year (2018: nil). No recommendation for payment has been made. Overview of operating results Atomos reported a strong first half result compared to the same period last year (‘YoY’), with key highlights as follows: • • • Revenue of $32.6m, up 35% YoY led by continued strong sales of Ninja V Gross profit of $13.9m, up 32% YoY Gross profit percentage margin at 42.7% was slightly lower than anticipated due to the impact of tariffs on imports to the US and discounting required to maintain momentum following disruption to production in Q2. For a further explanation of the results above please refer to the accompanying Directors’ Report. Atomos Limited Interim financial report for the six-months ended 31 December 2019 1 Appendix 4D – Half-yearly report (continued) Net tangible assets per security Net tangible assets per security Total number of shares on issue at period end 31-Dec-19 $0.19 31-Dec-18 $0.09 186,704,375 151,957,624 (*) For the purposes of calculating net tangible assets per security, the carrying values of the Right-ofuse assets and the related lease liabilities have been excluded along with other intangible assets. Entities over which control has been gained or lost during the period Name of the entity Date on which control was gained Contribution of entity to the reporting entity's profit/(loss) from ordinary activities before income tax for the period Timecode Systems Limited 2 December 2019 $’000 (55) Associates and joint venture entities There are no associates or joint venture entities. Dividend reinvestment plans The Company currently does not have a dividend reinvestment plan. Independent audit review This report is based on the condensed consolidated financial statements which have been subject to independent audit review by Deloitte. The independent audit review report is included within the Company’s Interim Report which accompanies this Appendix 4D. Accounting standards This report has been compiled using Australian Accounting Standards and International Financial Reporting Standards. Other information required by Listing Rule 4.3A Other information requiring disclosure to comply with Listing Rule 4.3A is contained in the 31 December 2019 Interim Report (which includes the Directors’ Report) which accompanies this Appendix 4D. Atomos Limited Interim financial report for the six-months ended 31 December 2019 2 Directors’ Report The Directors of Atomos Limited (‘Atomos’ or ‘the Company’) present their Report together with the financial statements of the consolidated entity, being Atomos and its Controlled Entities (‘the Group’) for the half-year ended 31 December 2019. Directors The names of the Directors in office at any time during or since the end of the half-year are: Mr Jeromy Michael Young Sir Hossein Yassaie Mr Christopher John Tait Mr Stephen John Stanley Mr Bradley Evan Whitcomb (resigned 16 September 2019) The abovenamed Directors held office during and since the end of the financial year unless otherwise stated. Dividends No dividends have been paid or declared since the start of the financial year (2018: nil). No recommendation for payment has been made. Company Overview Atomos is a global video technology company founded in 2009 and which listed on the ASX on 28 December 2018 (ASX:AMS). Atomos enhances video content creation by producing products that connect the imaging and computer worlds, from the point of capture (camera) through to displaying (monitor), processing and recording of the latest high-quality video onto affordable computer media for creative enhancement and distribution of content. The Company designs, develops and commercialises, award winning, simple to use and affordable monitor recorder products. They enhance video content creation, ensuring content creators have access to advanced video monitoring, processing and recording technologies, regardless of the camera or production technology they use. By using the processing and recording capability of Atomos products, video creators can achieve enhanced recording quality, on sharp deep colour displays for greater flexibility and control onto lowercost media creating a more streamlined workflow than the camera’s standard functionality is capable of. Review of operations During the first half of FY20 the Company enjoyed strong sales growth which was driven by the continued popularity of the Ninja V product as well as the launch of Shogun 7. Atomos completed a capital raise for $7.5 million at the end of FY19 via an institutional placement which was settled in the first week of FY20. Atomos Limited Interim financial report for the six-months ended 31 December 2019 3 Directors’ Report (continued) In December 2019 the Company completed the strategic acquisition of Timecode Systems Ltd, a UKbased company that has developed unique and patented technology that enables multiple audio and video capture devices to wirelessly synchronise together. The acquisition consideration comprised of GBP 3.02 million (equivalent to A$5.66 million) in cash and 9,237,309 Atomos fully paid ordinary shares. Atomos raised approximately $22.57 million via a two-tranche institutional placement to fund the cash component and to strengthen the Company’s balance sheet. Auditor’s Independence Declaration A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act 2001 is included on page 5 of this financial report and forms part of this Directors’ Report. Rounding of amounts Atomos is a type of Company referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable), or in certain cases, to the nearest dollar under the option permitted in the Instrument. Signed in accordance with a resolution of the Directors, pursuant to section 306(3) of the Corporations Act 2001: On behalf of the Directors Mr Stephen Stanley Director Melbourne 25th day of February 2020 Atomos Limited Interim financial report for the six-months ended 31 December 2019 4 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au 25 February 2020 The Board of Directors Atomos Limited 33-41 Balmain Street CREMORNE VIC 3121 Dear Board Members Atomos Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Atomos Limited. As lead audit partner for the review of the financial report of Atomos Limited for the halfyear ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and (ii) any applicable code of professional conduct in relation to the review. Yours sincerely DELOITTE TOUCHE TOHMATSU Craig Bryan Partner Chartered Accountants Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Liability limited by a scheme approved under Professional Standards Legislation. Member Deloitte Asia Pacific Limited and the Deloitte Network. Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the half-year ended 31 December 2019 Notes Revenue Cost of sales Gross profit 4 Other income Other gains/(losses) 4 Employee benefits expense Research and development expense Advertising and marketing expense Finance costs Administration and other expense Distribution expense Occupancy expense Legal and professional services Transaction costs Initial Public Offering expense Depreciation and amortisation Loss before income tax Income tax expense Loss for the period Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss: Items that may be reclassified subsequently to profit or loss: - Exchange differences on translating foreign operations Other comprehensive loss for the period Total comprehensive loss for the period Earnings per share Basic loss per share Diluted loss per share 7 7 Consolidated Half-year ended 31-Dec-19 31-Dec-18 $'000 $'000 32,628 24,248 (18,694) (13,731) 13,934 10,517 12 (283) 2 1,045 (3,999) (2,485) (2,725) (216) (1,913) (1,005) (291) (360) (1,219) (1,596) (2,146) (272) (2,418) (3,497) (1,745) (1,755) (1,907) (1,464) (691) (331) (434) (1,307) (571) (2,138) (154) (2,292) - - (81) (81) (2,499) (2) (2) (2,294) (1.5) cents (1.5) cents (2.3) cents (2.3) cents Note: This statement should be read in conjunction with the notes to the financial statements. Atomos Limited Interim financial report for the six-months ended 31 December 2019 6 Condensed Consolidated Statement of Financial Position As at 31 December 2019 Notes Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Provisions Lease liabilities Total current liabilities Non-current Liabilities Provisions Lease liabilities Deferred tax liability Non-current Liabilities Total liabilities Net assets Equity Issued capital Foreign currency translation reserve Share based payments reserve Accumulated losses Total equity 8 9 10 11 11 13 Consolidated as at 31-Dec-19 30-Jun-19 $'000 $'000 16,022 13,085 14,867 4,139 48,113 5,112 8,024 9,606 2,995 25,737 4,116 9,421 30,074 43,611 91,724 1,673 8,472 10,145 35,882 15,079 1,500 428 949 17,956 10,521 1,500 610 12,631 263 8,640 1,043 9,946 27,902 63,822 42 42 12,673 23,209 86,979 66 2,220 (25,443) 63,822 44,057 147 2,030 (23,025) 23,209 Note: This statement should be read in conjunction with the notes to the financial statements. Atomos Limited Interim financial report for the six-months ended 31 December 2019 7 Condensed Consolidated Statement of Changes in Equity For the half-year ended 31 December 2019 Notes Balance at 1 July 2018 Transactions with owners Share-based payments Conversion of convertible notes Issue of new share capital Transaction costs relating to issue of share capital Total transactions with owners Comprehensive income Loss for the period Other comprehensive income Total comprehensive income Balance at 31 December 2018 Balance at 1 July 2019 Transactions with owners Share-based payments Issue of new share capital Transaction costs relating to issue of share capital Total transactions with owners Comprehensive income Loss for the period Other comprehensive income Total comprehensive income Balance at 31 December 2019 $'000 28,987 $'000 (21,066) Foreign currency translation reserve $'000 352 9,457 6,000 (387) 15,070 - - 536 536 536 9,457 6,000 (387) 15,606 44,057 (2,292) (2,292) (23,358) (2) (2) 350 1,549 (2,292) (2) (2,294) 22,598 44,057 (23,025) 147 2,030 23,209 44,442 (1,520) 42,922 - - 190 190 190 44,442 (1,520) 43,112 86,979 (2,418) (2,418) (25,443) (81) (81) 66 2,220 (2,418) (81) (2,499) 63,822 Issued capital Accumulated (Ordinary losses shares) Share based payments reserve Total equity $'000 1,013 $'000 9,286 Note: This statement should be read in conjunction with the notes to the financial statements. Atomos Limited Interim financial report for the six-months ended 31 December 2019 8 Condensed Consolidated Statement of Cash Flows For the half-year ended 31 December 2019 Operating activities Receipts from customers Payments to suppliers and employees Interest received Income taxes paid Net cash used in operating activities Notes Consolidated Half-year ended 31-Dec-19 31-Dec-18 $'000 $'000 28,903 (35,546) 12 (84) (6,715) 23,156 (27,551) 2 (114) (4,507) (2,905) (1,766) (5,617) (10,288) (216) (976) (1,192) Financing activities Proceeds from issue of equity instruments in the company Payment for equity raise costs Proceeds from issue of convertible notes Interest paid Repayment of lease liabilities Repayments of borrowings Net cash inflow from financing activities 30,090 (1,520) (216) (441) 27,913 6,000 (1,003) 6,455 (13) (1,592) 9,847 Net change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 10,910 5,112 16,022 4,148 1,447 5,595 Investing activities Payments for property, plant and equipment Payments for intangible assets Payment for acquisition of subsidiary Net cash used in investing activities 12 Note: This statement should be read in conjunction with the notes to the financial statements. Atomos Limited Interim financial report for the six-months ended 31 December 2019 9 Notes to the Condensed Consolidated Financial Statements 1. General information Atomos is a public company limited by shares, incorporated and domiciled in Australia. Atomos is the Group’s ultimate holding Company. The Group listed on the ASX on 28 December 2018 (ASX:AMS). The principal activities of the Group were the manufacture and wholesaling of video equipment. There have been no significant changes in the nature of these activities during the year. The address of its registered office and principal place of business is 33-41 Balmain Street, Cremorne, Victoria 3121. The Consolidated Financial Statements for the half-year ended 31 December 2019 were approved and authorised for issue by the board of Directors on 24th February 2020. 2. Significant Accounting Policies Statement of compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half year report does not include the type of notes normally included in the annual report. This should be read in conjunction with the most recent financial report. Basis of preparation The condensed consolidated financial statements have been prepared on the basis of historical costs. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2019 annual report for the financial year ended 30 June 2019, except for the impact of the new accounting policies and the Standards and interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. Business Combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively; Atomos Limited Interim financial report for the six-months ended 31 December 2019 10 2. Significant Accounting Policies (continued) Business Combinations (continued) • • liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date (see below); and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The directors have provisionally accounted for the acquisition in the manner described and therefore expect potential adjustments to the fair value of net assets acquired in the 30 June 2020 financial statements. Goodwill Goodwill is initially recognised and measured as set out above. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Atomos Limited Interim financial report for the six-months ended 31 December 2019 11 2. Significant Accounting Policies (continued) AASB 16 Leases The Group as lessee The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The incremental borrowing rate determined for the Group ranges from 0.1% - 3.1% depending on country and specific risk premium. Lease payments included in the measurement of the lease liability comprise: • • • • • Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; The amount expected to be payable by the lessee under residual value guarantees; The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related rightof-use asset) whenever: • • The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). Atomos Limited Interim financial report for the six-months ended 31 December 2019 12 2. Significant Accounting Policies (continued) AASB 16 Leases (continued) • A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The Group did not make any such adjustments during the periods presented. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy (as outlined in the financial report for the annual reporting period). Amendments to Accounting Standards and new interpretations that are mandatorily effective for the current reporting period The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current half year. New and revised Standards and amendments thereof and Interpretations effective for the current halfyear that are relevant to the Group include • AASB 16 Leases • Interpretation 23 Uncertainty over Income Tax Treatments and AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax Treatment The Group has adopted the new lease accounting standard AASB 16 Lease from 1 July 2019. AASB 16 introduces significant changes to lessee accounting by removing the classification of leases as either operating or finance leases as required by AASB 117 and instead introduces a single lessee accounting model. Atomos Limited Interim financial report for the six-months ended 31 December 2019 13 2. Significant Accounting Policies (continued) AASB 16 Leases (continued) Amendments to Accounting Standards and new interpretations that are mandatorily effective for the current reporting period (continued) Applying that model, a lessee is required to: • Recognise assets and liabilities for all leases with a term of more than 12 months in the Consolidated Statement of Financial Position initially measured at the present value of the future lease payments, unless the underlying asset is of low value; • Recognise amortisation of lease assets separately from interest on lease liabilities in the Statement of Profit or Loss; • Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the Consolidated Cash Flow Statement. The Group has elected to apply the modified retrospective approach for leases. For leases, which were classified as operating leases under AASB 117, the Group has recognised right-of-use assets and lease liabilities as at the transition date (1 July 2019). The Group did not have any leases previously classified as finance leases on the adoption date. The Group has elected to apply the recognition exemption for leases of any low-value assets or shortterm leases. The effect on 1 July 2019 of the recognition of the new right-of-use assets and lease liabilities is disclosed below. The Group has applied option 2B to measure the right-of-use asset to match the lease liability. The difference on adoption relates primarily to make good which is recorded in accordance with IAS137. Increase in right-of-use assets Increase in liabilities 1-Jul-19 $'000 574 574 3. Segment reporting The Group operates in one segment being the manufacture and sale of video equipment. No operating segments have been aggregated in arriving at the reportable segment of the Group. The Company reports revenues from external customers attributable to the following geographic regions: • North America • Europe, the Middle East and Africa (EMEA) • Asia Pacific (APAC) • Other Atomos Limited Interim financial report for the six-months ended 31 December 2019 14 4. Revenue – at point in time Consolidated Half-year ended 31-Dec-19 31-Dec-18 $'000 $'000 Revenue Sale of goods Other revenue Total revenue Other income Interest Total other income Total revenue and other income 32,108 520 32,628 23,984 264 24,248 12 12 32,640 2 2 24,250 5. Change in