Announcement PDF April 2023 FY23 H1 Results Trevor Elbourne Chief Executive Officer James Cody Chief Financial Officer 1 Atomos at a glance Global Leader in Video Technology Summary • Founded in 2010 • Invented the monitor-recorder with the first Ninja • Customer base has grown to over 450,000 products shipped • Unique ability to partner with some of the largest names in the industry: Apple, Adobe, Sony, Canon • Rich history of award-winning hardware products that make producing high-quality video content more accessible to a wider set of video creators • Now taking the same approach to software and cloud services with the March 2023 launch of Atomos Cloud Studio While the industry makes better cameras, we make cameras better. Began by making beautifully-designed, compact, affordable products that make cameras better Now taking the same approach with software by launching a range of cloud services that will transform how filmmakers work 2 Operations Outlook Building a better business November 2022 AGM status April 2023 update Transform business from being circa $73m revenue break-even (FY22) to circa $60m to break even Business now projected to be breakeven at mid fifties $m – lower than planned Strong focus on profitability Smaller operating footprint and laser-focus on strategic plan has business being far more profitable when “normal” trading resumes This will enable the business to conserve cash in the face of these circumstances Forward forecasts has the business generating cash even before returning to profitability whilst reducing debt at an accelerated rate Reorganization underway Reorganisation complete – simplified operations and right-sizing to suit very clear strategic plans Fixed annual costs reduced by circa 30% by end of FY23 Completed ahead of schedule. Annualised fixed costs are now circa 30% lower than FY22 Total inventory level run-rate ~$15m by end FY23 (42% reduction) Inventory levels coming down. On target to achieve desired levels Avoid large additional spend on production FY22 spend on production at all-time low levels Reorganised, simpler business now well positioned to take advantage of enormous growth opportunities 3 Operations Outlook Cash Management Plan Key Elements Finished Goods Components • Plan for continuing tougher global economic conditions • 30% lower cost base ensures lower breakeven point • Improve product margins to get back into mid-forties • Significant inventory holding reduces cash required for stock • The next $54m of revenue requires only $17m of incremental inventory spend • On a margin structure of 40%, this would normally require a spend of >$32m Inventory management Debt March 23 Cash • Plan provides for repayment of remaining debt by June 2024 • Plan ignores subscription revenues which will be high margin with no working capital Cash management 4 Financial Overview Revenue Analysis Annual Revenue ($m) 1H 78.6 2H 53.7 44.7 35.7 29.5 45.8 18.4 FY18 FY19 • First half sales 48% down on 1H FY22 32.4 • Challenging global economic conditions led to softer Q2 sales and the sales channel began de-stocking as a result 12.1 17.3 24.2 73.3 32.6 32.8 FY20 FY21 40.9 FY22 21.1 • Q2 sales heavily affected by an industry-wide very weak Black Friday sales period 21.1 • Q2 sell through much stronger than sell-in as a result of channel destocking FY23 • Sell-through demonstrates continued underlying demand for AMS products, albeit at lower than historical levels First-half Revenue ($m) 41 -48% -35% Channel de-stocking 27 21 Sell In 1H FY22 Sell Through 1H FY23 5 1H FY23 Group Strategy & Outlook Trevor Elbourne Chief Executive Officer 6 Products & Services Strategy recap Continue to make best-in-class hardware products which enhance the creative process for film makers and augment these products with a suite of connected cloud services that remove obstacles and allow our customers to focus on their art. Get closer to our customers by direct selling hardware and services. Series 2 Products Cloud Services eCommerce Cloud-connected versions of Atomos’ market leading monitor recorders powering cloud services A collection of easy-to-use cloudbased video collaboration tools directly accessible from Series 2 products Atomos hardware products bundled with cloud subscription services available for direct purchase from Atomos website with flexible, innovative payment options 7 Products Connected Series 2 products powering cloud-based workflows Atomos Connect for Ninja • • • USD $399 Shogun Connect • • • • USD $1299 • Zato Connect • • • USD $399 Expansion module designed for existing ~175,000 Ninja customers Makes every Ninja in market cloudconnected Also adds a professional standard SDI connection Small integrated design doesn’t impact Ninja’s already small form factor When combined with Atomos Cloud Studio, Series 2 products will enable collaboration in real-time with Anyone. Anytime. Anywhere. The ability for creators to get content to their audiences in near real-time is game-changing. Replaces previous-gen Shogun 7 Add WiFi 6E and Ethernet networking for cloud connectivity Records in a variety of professiona formats: ProRes, ProRes RAW, DNxHR and H.264/5 Monitor up to 8K sources in HDR Compact device to allow streamers to make live shows easily Can be used with older Atomos devices to enable cloud connectivity Low-cost gateway to Atomos Cloud Studio 8 Shrink distances. Expand horizons. Cloud Update 9 Products Cloud Services – what is Atomos Cloud Studio iPad app for control and remote viewing Video from Atomos devices or from Atomos iPhone app can be used with Live or Edit Launched March 2023 Live Production Video production technology is changing faster than ever as it migrates to the cloud. Atomos Cloud Studio (ACS) brings the cloud’s advantages directly to filmmakers, live streaming producers and video content creators. It’s a new and affordable way to embrace the latest advances in video production technology. Atomos Cloud Studio can be accessed from anywhere with an internet connection offering a range of collaboration tools that help creators concentrate of their art, not on the process. Its collaborative features allow multiple users to work on the same project simultaneously, with changes and updates synced in real-time, enabling delivery of content to audiences and customers much faster. Edited Footage can be published straight to social media in real time Edit Sharing camera footage via an Atomos device in real-time with collaborators Live Productions can be streamed directly to social platforms Edit & Live footage can be shared immediately via camera to cloud Camera to Cloud 10 Atomos Cloud Studio Revolutionizing live production Outside Broadcast Vans – Legacy Live Production Atomos Cloud Studio – Live Production SIMPLIFY Easier Cheaper Much Wider Appeal Traditional Live Production • Not scalable • Very expensive • Complicated • Restrictive set of expensive cameras suitable for use Eliminate adoption barriers Switch, Vision Mix, PiP, Overlays, Intercom, Audio Mix & Tally all in the cloud! Atomos Live Production • Scalable (cloud based) • Cost effective (SaaS model) • Simple to setup and use (everything controlled from intuitive iPad app) • Flexible – use ANY camera via ATOMOS monitor/recorder or use iPhone 11 Cloud Pricing Range of options for all budgets and use cases • • • • • • Plans start at as little as $5/month for simple streaming and camera to cloud Ability for higher quality video, and having more connected devices increases on the higher plans Plans include credits for live production, with the ability to purchase additional credits Additional Live production credits are $0.50 each, and are sold in bundles of 100 Three types of Live Production show, ranging from Basic to Advanced, and costing from 5 to 25 credits per hour All plans include demo credits that allow customers free access to the Advanced Live Production 12 Products Transition to offering cloud services Selling hardware devices only Where we’ve come from Hardware products ON SET Atomos devices Ninja, Shogun, Sumo 3rd Parties 3rd Parties 3rd Parties FILE TRANSFER LIVE/POST PRODUCTION DELIVERY Reliant on a variety of solutions provided by industry partners Launch of Atomos Cloud Studio now enables Atomos to provide complete end-to-end solution Where we are going Hardware products ON SET New connected Series 2 devices FILE TRANSFER LIVE/POST PRODUCTION DELIVERY ACS Camera to Cloud ACS Live Production & Editing ACS Live Production & Editing 13 Atomos Cloud Studio Good early momentum with high growth rate Camera to Cloud – Early Adoption Atomos devices using Camera to Cloud Active Atomos user accounts using Camera to Cloud • Private. limited BETA went live May 2022 • Free, open Public BETA went live Sep 2022 • BETA service was only a preview – didn’t have all features enabled • 66% average monthly growth in number of Atomos devices actively connected to ACS • 63% average monthly growth in number of active accounts using ACS • Approximately 3K users signed up in the 6 months the ACS BETA was running, including a host of top-tier broadcasters and US sports leagues • Commercial plans launched March 2023 Total amount of video content uploaded to the Adobe Frame.IO platform has increased 50% since public BETA went live 14 Series 2 & Atomos Cloud Studio Addressing new markets • • Impressive roll-call of early participants in BETA program: Global video studios, Major US sport leagues, Global brands such as Ralf Lauren and Sundance Film Festival to name a few Atomos Cloud Studio is live • Very encouraging take-up of Atomos Cloud Studio BETA with >60% average monthly growth in active users and connected devices – more to come • • Total market is much larger Successful real-world use at important events like Sundance Film Festival and Ralph Lauren fashion show good validation of solution Many new enhancements to Atomos Cloud Studio planned in the months following March launch 25 (Markets sizes in $M) 125 Series 2 products & Atomos Cloud Studio launched despite challenging to end to CY22 • Studio & broadcasting Monitor recorder market 150 Institutions & venues Influencers & freelance creators 323 326 3 72 32 63 Growth markets particularly targeted by Series 2 and Cloud Services: • Brands using video • Institutions & Venues • Studio & Broadcasting 40 Brands using video 58 5 Atomos market share Data source: Global Video Cameras Production Market 2021-2031, SDKI; Management estimates 15 1H FY23 Financial Review James Cody Chief Financial Officer 16 Financial Review Summary Revenue • First half revenue of $21.1m (1H FY22: $40.9m) Margin • Underlying gross margin of 42.9% before impact of promotional pricing & provisioning • Restructured to right-size, >30% of fixed costs removed • Business now breakeven at mid fifties $m (FY22: revenue of $73m / EBITDA of $0.6m) • Underlying EBITDA loss of $10.7m (1H FY22: profit of $3.2m) • Inventory of $27.9m down slightly since June ($28.8m) • Debt reduced from $12.0m at June 2022 to $4.9m at December 2022 • High inventory and low-cost base will enable the company to be cash flow positive even with low sales • Forecast allows for full repayment of debt by June 2024 Costs Earnings Balance Sheet Looking Ahead 17 Financial Review Earnings Analysis GROSS MARGIN BRIDGE (%) EBITDA BRIDGE ($m) Underlying margin : 42.9% • Underlying Gross Margin of 42.9% before impact of discounting to drive sales • Downward pressure on selling prices influenced a 7.2% reduction in margin, this was partially offset by higher margins from new products • Weakening of the AUD provided a 3.2% margin deterioration • Weight of inventory combined with low sales drove increased provisioning • Net fall in gross profit of $14.6m • Variable costs lower due to lower revenue • Fixed opex slightly higher with post restructure run-rate 30% lower • Non-recurring expenses higher due to CEO separation & legal costs ($1.8m) and restructuring costs ($0.3m) 18 Financial Review Income Statement 1H FY23 1H FY22 Δ pcp1 (A$m) Δ pcp1 (%) Non-recurring items (A$m) Revenue 21.1 40.9 (19.8) (48%) Gross profit 4.8 19.4 (14.6) Gross profit margin 23% 47% Variable operating expense (2.2) Fixed operating expense 1H FY23 1H FY22 Founder transition costs - 0.8 (75%) Redundancies (restructuring) 0.3 - n/a (25%) CEO separation and legal claim 1.8 - (3.7) 1.5 41% Impairment charge 30.7 - (15.3) (13.3) (2.0) (15%) Impairment of investment in associate 1.8 - Reported EBITDA (12.7) 2.4 (15.1) NM2 Others (0.1) 0.1 Non-recurring items 2.1 0.9 1.2 (139%) Total non-recurring items 34.5 0.9 Underlying EBITDA (10.7) 3.2 (13.9) NM2 Impairment charges (32.5) 0.0 (32.5) NM2 EBIT (47.3) 0.6 (47.9) NM2 NPAT (48.2) 0.3 (48.5) NM2 A$m • Fixed operating costs have been reduced to a full year run rate of $19m • CEO separation & legal claim expenses incurred / provisioned to date • Impairment charge relates to a reduction in the carrying value of intangible assets and the investment in MAVIS which has been impaired given pre-commercialization of the technology 19 Financial Review Balance Sheet 30 Dec’22 30 Jun’22 Δ pcp1 (A$m) Δ pcp1 (%) Cash & cash equivalents 6.2 5.0 1.2 24% Trade & other receivables 4.6 20.7 (16.0) (78%) Inventories 27.9 28.8 (1.0) (3%) Fixed & intangible assets 7.7 36.8 (29.1) (79%) Other assets 7.0 8.7 (1.7) (19%) Total assets 53.5 100.1 (46.6) (47%) Trade & other payables (16.3) (24.7) 8.4 (34%) Other liabilities (9.3) (9.3) 0.0 (0%) Borrowings (4.4) (11.8) 7.4 (63%) Total liabilities (30.0) (45.8) 15.8 (35%) Net assets 23.5 54.2 (30.8) (57%) A$m Key Insights • Receivables reduced following huge May/June revenues • Inventory balance moderately lower – future purchases limited to immediate production requirement. Balance will reduce progressively through FY23/FY24 • Reduction in carrying value of intangible assets taken as impairment charge • Reduction in borrowings due to amortization in the period 20 Financial Review Cash Flow A$m 30 Dec’22 30 Jun’22 Δ pcp1 (A$m) Reported EBITDA (12.7) 2.4 (15.1) Non-cash items in EBITDA 0.6 (0.2) 0.8 Capital expenditure (2.9) (3.0) 0.2 Investments (1.8) (0.0) (1.7) Movement in working capital 1.9 (9.0) 10.9 Taxation & Interest (0.8) (0.2) (0.7) Cash flow before financing (15.6) (10.0) (5.6) Financing 16.8 0.7 16.1 Total cash flow 1.2 (9.2) 10.5 Key Insights • Deterioration in earnings due to revenue and margin pressure • Capex to drive investment in the future – Series 2 (connected products and cloud services development) • Working capital stabilised: • Future reduction in inventory will release cash to support business until sales recover • Proceeds from capital raise used for debt reduction, investment in MAVIS and funding the operations 21 Corporate Snapshot Pricing Snapshot Ticker Share price Major Shareholders AMS $0.069 Shares on issue (m) 401.8 Market capitalization $27.7m Doma Group 17.6% Ellerston Capital 11.1% Regal Funds Management 11.0% Top 10 Shareholders ~46% Board and Senior Management ~4% Board of Directors Sir Hossein Yassaie Trevor Elbourne Share Price History Non-Executive Director $0.9 Non-Executive Director $0.8 Executive Director $0.7 Senior Management Team $0.6 $0.5 $0.4 Trevor Elbourne Chief Executive Officer James Cody Chief Financial Officer $0.2 Chief Sales Officer $0.1 Stephan Kexel $0.3 $- Volume Share Price 15.0m 12.5m 10.0m 7.5m Volume Megan Brownlow Non-Executive Chair Share Price ($) Paul Greenberg 5.0m 2.5m 0 22 Hardware. Software. Cloudware. 33