Announcement PDF 1H 2020 Results 26 February 2020 Atomos unlocks creativity and profit for video content creators Advanced technology allows faster, higher quality, more flexible productions “Our vision is to invent and deliver ground-breaking and disruptive technologies that enhance, simplify and ultimately democratise video content creation” Agenda 1H’20 Summary 6 Financial Results 8 Outlook 13 Appendices 17 Presenting: Jeromy Young Managing Director & CEO James Cody CFO Target Markets – Current & Future Atomos’ growing product portfolio will address a US$10B camera equipment market1 Content Creation Social Pro Video Entertainment Camera Equipment Phone & PhotoCameras Pro Video Cameras Broadcast, TV & Cinema SHINOBI NINJA Atomos Products SHOGUN SUMO NEON 23% CAGR 18% CAGR NEW MARKETS Social 35% CAGR NEW MARKETS Entertainment Future Markets Expansion into growing Social & Entertainment video content markets 1 CIPA Report, 2017 © Atomos 2020. | 1H’20 Results 4 Atomos – A Snapshot • Global video technology company that enhances video content creation with products that connect the imaging and computer worlds together • Allows video content creators to improve recording quality, save time and maintain greater flexibility and control over the content creation process Capital Structure (as of 25 Feb. 2020) Major Shareholders % Ticker AMS Perennial Value Mgmt 14% Share Price $1.20 Ms Claire Louise Young2 9% Shares on Issue (m) 186.7 Domazet FT3 P/L 9% $224.0 Ellerston Capital Ltd 8% Top 20 73% Market Capitalisation (m) • Advanced proprietary technologies underpin the current product suite and will be used to drive future growth into new markets Net Cash ($m)1 Enterprise Value ($m) • Strategic relationships with leading tech companies such as: Apple, Adobe & camera makers: Sony, Canon, Panasonic, RED & JVC Kenwood 1Calculated from 1H’20 Balance Sheet $14.5 $209.5 2 Related Party to Board Member (Jeromy Young) ($16.0m cash less $1.5m WC facility • Three key market segments: – Pro Video: advertising, events, corporate, broadcast and education – Entertainment: production companies producing high-quality content for TV and cinema usually viewed on subscription streaming platforms Share Price History Share Price ($) – Social: consumers / prosumers who create and share on free, advertisement driven platforms $2.0 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 © Atomos 2020. | 1H’20 Results 5 1H’20 Summary (Half year ending, 31 December 2019) • Revenue up 35% on previous corresponding period (pcp) to $32.6m ($24.2m in 1H’19) Financial • Gross profit up 32% pcp to $13.9m ($10.5m in 1H’19) • EBITDA1 up 35% pcp to $1.0m ($0.7m in 1H’19) • Strong cash position of $16.0m, supporting working capital and capex requirements as sales increase • Demand for Ninja V remains very strong, bolstered by major Global camera companies that are choosing to implement RAW over HDMI capability or higher quality video to Atomos in their product lines; thereby favoring Atomos products supporting Apple ProRes and ProRes RAW professional formats Operational • Shinobi (monitor only) continues to sell well appealing to the Social market, a key new market for Atomos • Neon product launch delayed due to challenges with new suppliers/manufacturer and the impact on factory production due to COVID-19 – now expected to ship Q4 FY20 • TCS technology already being marketed to AMS customers with new licensing discussions gaining traction • In July, raised $7.5m2 to strengthen the balance sheet Corporate • Completed the acquisition of Timecode Systems Ltd (TCS) • In October, raised $22.6m2 via a placement, with proceeds used to fund TCS acquisition and provide growth capital 1. 2. All numbers are Pro forma and exclude transaction costs ($1.2m) and other ($0.1m) Before costs of the offer. © Atomos 2020. | 1H’20 Results 6 Agenda 1H’20 Summary 6 Financial Results 8 Outlook 13 Appendices 17 1H’20 – Financial Snapshot (Half year ending, 31 December 2019) Revenue by Market Segment (FY19 vs. 1H’20) Pro Forma Revenue ($m)1 $60.0m FY19 54.0 $50.0m Pro Video $4.3m $40.0m $30.0m 1H'20 Social 31.1 27.5 35.6 29.7 2H $8.3m $2.6m Entertainment $6.5m +35% 30.5 16.7 2H $20.0m $10.0m 14.4 1H 17.3 2H 18.4 1H 32.6 1H 24.2 1H $23.4m $41.0m $0.0m FY15 FY16 FY17 FY18 FY19 FY20 Pro Forma EBITDA ($m)1 $6.0m H1’20 Revenue by Geography 5.7 $5.0m $4.0m Asia $3.0m 1.6 $2.0m $1.0m 0.2 0.9 0.7 FY18 FY19 $0.0m ($1.0m) FY15 FY16 FY17 ($2.0m) +35% 1.0 1H 1H'20 22% US 44% EMEA 34% ($3.0m) ($4.0m) ($5.0m) (4.6) (4.5) 1 FY15, 1H17, 2H17, 1H18 & 2H18 Unaudited © Atomos 2020. | 1H’20 Results 8 Pro Forma Income Statement P ro F orma ( A$m) 1 H'1 9 1 H'20 ∆ p cp Revenue 24.2 32.6 35% COGS (13.7) (18.7) (36%) Gross P rofit 1 0.5 1 3.9 32% Gross Profit Margin 43.4% 42.7% (2%) Wages & Salaries (3.5) (4.0) (13%) Marketing (1.8) (2.7) (55%) General & Administration (2.1) (2.7) (32%) Other (0.7) (1.0) (44%) Op era ting Exp enses ( 8.0) ( 1 0.5) ( 30%) EBITDA ( p re R&D) 2.5 3.5 40% R&D Expenses (1.7) (2.5) (42%) EBITDA 0.7 1 .0 35% Note: All numbers are Pro forma and exclude transaction costs ($1.2m) and other ($0.1m) Key Insights: • 1H’20 sales of $32.6m, up 35% pcp, driven by: – Continued strong sales of Ninja V and Shinobi devices – Launched Shogun 7 (next evolution of the Shogun Inferno) • Gross Profit of $13.9m, up 32% pcp • GP margin of 42.7% was slightly lower than last year due to: – impact of tariffs on imports to the US; and – discounting required to maintain disruption to production in FYQ2’20 momentum following • Increased Marketing and R&D spend reflecting continued investment in future products and technology development • EBITDA of $1.0m, up 35% pcp © Atomos 2020. | 1H’20 Results 9 Balance Sheet Ba la nce She e t ( A$m) Cash and cash equivalents 30-Jun-1 9 5.1 31 -De c-1 9 16.0 Trade and other receivables 8.0 13.1 Inventories 9.6 14.9 Other assets 3.0 4.1 Plant and equipment 1.7 4.1 Right of use asset 0.0 9.4 Intangible assets 8.5 30.1 Tota l a sse ts 35.9 91 .7 Trade and other payables (10.5) (15.1) Borrowings (1.5) (1.5) Provisions (0.7) (0.7) Lease liabilities 0.0 (9.6) Deferred tax liability 0.0 (1.0) Tota l lia b ilitie s ( 1 2.7) ( 27.9) Ne t a sse ts 23.2 63.8 Issued capital 44.1 87.0 Reserves 2.2 2.3 Accumulated losses (23.0) (25.4) Eq uity 23.2 63.8 Key Insights: • Balance sheet strengthened through capital raise, $16m cash – Access to a $5.0m Export Finance Australia working capital facility in place and available to be drawn • Inventory levels increased reflecting: – Inventory buffer to minimise risk of stock outs – Commencement of transition to ocean freight (requires greater inventory holding) • Initial adoption of new accounting standard for leases (right of use asset offset by lease liabilities) • Increase in intangibles principally due to TCS acquisition • $25.2m of tax losses and R&D tax credits unrecognised and available to offset future tax payable © Atomos 2020. | 1H’20 Results 10 Cash Flow Statement C a sh F low Sta tement ( A$m) Op era ting a ctiv ities Receipts from customers Payments to suppliers and employees Interest received Income taxes paid Net ca sh used in op era ting a ctiv ities 1 H'1 9 1 H'20 Key Insights: 23.2 (27.6) 0.0 (0.1) ( 4.5) 27.8 (34.5) 0.0 (0.1) ( 6.7) • Targeted growth in working capital: Inv esting a ctiv ities Payment for PP&E Payments for intangible assets Payment for acquisition of subsidiary Net ca sh used in inv esting a ctiv ities (0.2) (1.0) 0.0 ( 1 .2) (2.9) (1.8) (5.6) ( 1 0.3) – Build inventory buffer; and – Debtors growth resulting from strong sales • Payments to suppliers includes $1.2m of transaction costs • Investment in inventory to continue over 2H’20 • Payments for PP&E relate to development of Neon, new HQ office fit-out F ina ncing a ctiv ities 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 ca sh inflow from fina ncing a ctiv ities 6.0 (1.0) 6.5 (0.0) 0.0 (1.6) 9.8 30.1 (1.5) 0.0 (0.2) (0.4) 0.0 27.9 Net cha ng e in ca sh a nd ca sh eq uiv a lents Cash and cash equivalents, beginning of period C a sh a nd ca sh eq uiv a lents, end of p eriod 4.1 1.4 5.6 1 0.9 5.1 1 6.0 • Payments for intangibles predominantly relate to development costs for future software platform © Atomos 2020. | 1H’20 Results 11 Agenda 1H’20 Summary 6 Financial Results 8 Outlook 13 Appendices 17 Timecode Systems Ltd (TCS) Acquisition Overview • Completed acquisition of 100% share capital of TCS on 2 December 2019 • Share consideration subject to voluntary escrow restrictions of between 6 & 24 months • The Company has focused on the integration of the TCS technology into the Atomos ecosystem of products Recent Activities • The patented TCS technology allows content creators to wirelessly lock/syncronise multiple video and audio sources together at the point of shooting, a critical element in video and audio capture to enable faster and more accurate professional creative finishing • TCS management and engineers have already started integrating with the Atomos teams • Distribution integration and sales promotion will follow post the important US tradeshow, NAB as we migrate TCS partners and sales channels to Atomos management • 12 New Partners have signed implementation agreements through both Hardware and Software SDK’s. Patent Growth • TCS patent portfolio was significantly expanded to include the actual method of Radio frequency (RF) transmission developed by TCS • In addition, the implementation of the TCS RF protocol into a “System on Chip (SoC)” or Camera Sensor System has also been granted in the US and Europe © Atomos 2020. | 1H’20 Results 13 Outlook Existing Products • To date there has been minimal impact to the core selling product range as a result of COVID-19 as the Company invested in sufficient stock levels prior to the Chinese New Year to meet forecast demand COVID-19 Impact • Assuming all factories return to normal production in the near term, and normal market trading resumes, Atomos does not expect any significant impact to the core product lines New Products • The completion and release of new products has seen some delays. The principal factory reopened 10 days ago, albeit at a reduced worker capacity. Atomos expects the two other factories will start coming back on-line shortly and are fully operational in FYQ4’20 • Based on factory production returning to normal, timely new product releases and no ongoing adverse market conditions from COVID-19, the Company expects to maintain strong revenue growth in FY’20, compared to FY’19 Outlook • Management believes that the short-term supply chain disruptions do not reflect the underlying long-term demand for Atomos’ products and have no bearing on the strategy and outlook for the Company © Atomos 2020. | 1H’20 Results 14 Contacts For further information on this presentation, please contact: Key upcoming Tradeshows / Conferences: James Cody Simon Hinsley Name Location Dates Chief Financial Officer Media relations +61 3 9999 5908 +61 401 809 653 Photography Show Birmingham 14 - 17 March james@atomos.com simon@atomos.com Games Developer Conference San Francisco 16 - 20 March NAB Show 2020 Las Vegas 18 - 22 April About Atomos Media Production Show London 13 - 14 May Atomos is a global video technology company delivering award-winning, simple to use monitor-recorder content creation products. These products give content creators across the rapidly growing social, pro-video and entertainment markets a faster, higher quality and more affordable production system. KOBA Seoul 13 - 15 May Cine Gear Los Angeles 04 - 07 June Electronic Entertainment Expo (E3) Los Angeles 09 - 11 June Broadcast Asia Singapore 09 - 11 June IBC Amsterdam 11 - 15 September Atomos’ range of products take images directly from the sensor of all major camera manufacturers, then enhance, record and distribute them in high-quality formats for content creation using the major video editing software programs. Since being founded in 2010, Atomos has established strategic relationships with key technology providers within the ecosystem including Apple, Adobe, Sony, Canon, Panasonic, Nikon and JVC Kenwood. Key Tradeshow Atomos is based in Australia with offices in the USA, Japan, China, UK, France and Germany and has a worldwide distribution partner network. For more information please visit www.atomos.com © Atomos 2020. | 1H’20 Results 15 Agenda 1H’20 Summary 6 Financial Results 8 Outlook 13 Appendices 17 Global Operations Offices in major global locations and strong sales channels 1H’20 Sales by Region • 104 Staff Globally* PORTLAND NEWYORK • 10 Offices in 7 Countries LOSANGELES LONDON PARIS FRANKFURT BEIJING TOKYO Asia 22% US SHENZHEN 44% • Strong Global SalesChannel EMEA 34% • Broad retailer and reseller network in each region MELBOURNE * As of 31 December2019,includingTCS © Atomos 2020. | 1H’20 Results 17 Product Suite 4K Monitor Recorders NINJA + SHINOBI Range • Ninja HDMI only – includes AtomX adaptor range • Broad market application due to portability SHOGUN Range • HDMI & Quad SDI inputs • Broad market application due to portability Production / Studio SUMO Range • Larger format 19” monitor recorder – targeting studio usage • 7” high brightness screen • Quad SDI & HDMI in/out • Record ProRes®, DNxHR at 60p frame rates • Record ProRes, DNxHR at 60p frame rates • Record ProRes/ProRes RAW, DNxHR, among others • AtomHDR monitoring • ProRes RAW capability • Includes recently released 5” Shinobi monitor only • AtomHDR monitoring • Both 5” and 7” screen options NEON Cinema Series Broadcast & Accessories Shogun Studio + Converters + Accessories • HDR Professional monitorrecorder range for on-set and in-studio usage Shogun Studio • Four screen size options – 17”, 24”, 31” and 55” • Dual 7” screens with touchscreen interface • Bluetooth controlled by using Atomos iOS App Converters • Rack mount 4K monitor recorder solution • SDI to HDMI or vice versa Accessories • Cables, Caddies & Adaptors • Touch Screen Switching • Shinobi available in both HDMI & SDI capability Social / Pro-Video Segment Pro-Video / Entertainment Pro-Video / Entertainment Entertainment Various © Atomos 2020. | 1H’20 Results 18 Acquisition of Timecode Systems Ltd (TCS) Case Studies / Customers • Completed acquisition of 100% share capital of TCS on 2 December 2019 Overview • Share consideration subject to voluntary escrow restrictions of between 6 & 24 months The Grand Tour Technology Rationale • Developed unique and patented technology that allows content creators to wirelessly lock/syncronise multiple video and audio sources together at the point of shooting - a critical element in video and audio capture • Traditionally, timecode synching has been achieved by linking cameras and sound recorders via cables - wireless is the new evolution for the industry • TCS has a proven record of performance, in addition to AMS being a current licensee Avengers 2: Age of Ultron 1. Growing product commercialisation through new & enhanced existing products Financial Rationale 2. Increased sales of existing TCS range via rebranding & utilising AMS’ sales channels 3. Cost synergies by transitioning to AMS supplier & manufacturing arrangements Expected to be earnings accretive in FY21 as technology is further commercialised © Atomos 2020. | 1H’20 Results 19 The TCS Opportunity… The Problem The Opportunity The Solution Synchronising footage from multiple video & audio sources is difficult, expensive, time consuming & you need to be a pro! Democratise multiple capture device productions across all market segments – Social, Pro Video & Entertainment Enable multi-device wireless timecode synchronisation capability into EVERY video and audio capture device Expanding the Atomos Ecosystem – Via either direct product sales or licencing Smartphones Wearable / Action cameras DSLRs Monitor recorders Broadcast & Cinema cameras Bodycams Audio recorders © Atomos 2020. | 1H’20 Results 20 Partnerships – Continuing to build a global ecosystem of partners • Strengthened partnership with Nikon allowing RAW video output and Apple ProRes RAW video capture • Established license agreement with Dolby Vision – 1st globally with access to Dolby algorithm for incorporating into recording and playback device – Atomos users can see at point of capture what viewer will see at home • Finalised license agreement with RED.com LLC © Atomos 2020. | 1H’20 Results 21 Disclaimer The information contained in this document (“Document”) has been prepared by Atomos Limited ACN 139 730 500 (referred to as “Atomos” or “Company”). This Document is current as at the date of this Document and should be read in conjunction with other Atomos periodic and continuous disclosure announcements filed with the Australian Securities Exchange (ASX), available at www.asx.com.au. The information in this Document is not intended to form the basis of any investment decision in relation to the Company or its assets and should not be considered as a recommendation to the Recipient to acquire securities in the Company. This Document is not a prospectus, profile statement or disclosure document and does not constitute an offer or invitation to acquire securities or otherwise invest in the Company, and no agreement to subscribe for securities will be entered into on the basis of this Document. 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The non-IFRS financial measures do not have standardised meanings under AAS, and therefore may not be comparable with similarly titled measures presented by other entities, nor should these be interpreted as an alternative to other financial measures determined in accordance with AAS. Investors are cautioned not to place undue reliance on any non-IFRS financial information, ratios and metrics included in this Document. Non-IFRS information descriptors: • EBITDA (before R&D expenditure) is earnings before research and development expenditure, interest, taxation, depreciation, amortisation and impairment charges; • EBITDA is earnings before interest, taxation, depreciation, amortisation and impairment charges; • EBIT is earnings before interest, taxation and impairment charges; • Working capital is defined by the Company as trade and other receivables, inventory and other current assets less trade and other payables and other current liabilities; • Net cash flows from operations: the operating cash flows generated by the Company calculated as EBITDA excluding non-cash items and allowing for changes in working capital; and • Net cash flows before financing activities: being net cash flows from operations less capital expenditure and other investing expenditure. © Atomos 2020. | 1H’20 Results 22 © Atomos 2020. | 1H’20 Results