Announcement PDF 1 ATOMOS LTD ACN 139 730 500 ASX: AMS Appendix 4E – Preliminary Final Report Reporting period Reporting period: Previous corresponding period: for the year ended 30 June 2020 for the year ended 30 June 2019 Results for announcement to the market Atomos Ltd and its controlled entities is referred to as “Atomos”, “the Group” or “the Company” within this report. Revenue and loss after tax for the year ended 30 June 2020 Revenue from ordinary activities Loss from ordinary activities after tax attributable to members Net Loss for the year attributable to members Earnings before interest, tax, depreciation and amortisation (EBITDA) Earnings before interest, tax, depreciation, amortisation and items not in the ordinary course of business1 Loss from ordinary activities after tax attributable to members before items not in the ordinary course of business1 2020 $'000 44,740 2019 $'000 53,716 % change (22,098) (22,098) (1,959) (1,959) 1028% 1028% (17,184) 1,780 (1065%) (7,113) 1,645 (532%) (12,027) (652) 1745% (17%) 1Results have been presented to exclude the impact of items outside the ordinary course of business to allow shareholders to make a meaningful comparison with prior year comparatives. Further details on the material items have been provided in the notes below. Dividends No dividends have been paid during the period and it is not proposed that any dividends be paid. No dividends were paid during the previous corresponding period. Overview of operating results Revenue from ordinary activities in 2020 was down $9.0 million, or 17%, from $53.7 million primarily due to the impact of COVID-19. Following strong 1H’20 growth where the Company delivered revenue of $32.6m, a 35% increase on pcp, 2H’20 revenue was $12.1m. This represents the lowest half of revenue since 2H’14, a clear indication of the impact that COVID-19 has had on the business. Net loss after tax for the year was up $20.0 million, to $22.0m. This was primarily driven by:  Fall in gross profit of $11.3 million;  One-off impairment of assets in 2020 of $6.9 million;  Other gains of $1.0 million included in 2019 results in relation to the revaluation of embedded derivative to fair value on conversion / redemption of convertible notes;  Increased depreciation and amortisation of $2.3 million primarily driven by amortisation of Right-ofuse assets ($1.3 million) and commencement of amortisation of intangibles acquired on acquisition of Timecode Systems Limited ($0.3 million); and 2  Loss incurred by the subsidiary acquired during the year - $0.5million This was partially offset by:  Lower finance charges in 2020 of $1.1 million; and  Lower advertising and marketing spend $1.0 million primarily due to cancellation of trade shows due to COVID-19 Appendix 4E – Preliminary Final Report (continued) Net tangible assets per security Net tangible assets per security 30‐Jun‐20 $0.16 30‐Jun‐19 $0.10 217,665,489 151,957,624 1 Net tangible assets per security Total number of shares on issue at period end 1 Excludes Right of Use Asset Entities over which control has been gained or lost during the period Name of the entity Date on which control was gained Timecode Systems Limited 2 December 2019 $’000 Contribution of entity to the reporting entity's profit/(loss) from ordinary activities before income tax for the period (462) Associates and joint venture entities There are no associates and joint venture entities. Dividend reinvestment plans The Company currently does not have a dividend reinvestment plan. Independent audit report This report is based on the consolidated financial statements that are in the process of final audit completion. The independent audit report will be included within the Company’s Annual Report. 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 30 June 2020 Annual Report (which includes the Directors’ Report) which has not been lodged with this Appendix 4E. 3 Atomos Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020 Revenue Cost of sales Gross profit Other income Other gains/(losses) Employee benefits expense Research and development expense Advertising and marketing expense Finance costs Administration and other expense Distribution expense Warranty expense Royalty expense Occupancy expense Legal and professional services Transaction costs Depreciation and amortisation Impairment of assets 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 30‐Jun‐20 $'000 44,740 (28,640) 16,100 30‐Jun‐19 $'000 53,716 (28,062) 25,654 366 (10) 247 1,018 (9,002) (3,761) (4,635) (384) (2,641) (1,786) (1,256) (475) (471) (1,453) (1,226) (3,773) (6,934) (21,341) (757) (22,098) (8,052) (4,139) (5,604) (1,443) (2,085) (1,585) ‐ ‐ (709) (904) (2,061) (1,469) ‐ (1,132) (827) (1,959) ‐ ‐ (97) (97) (22,195) (205) (205) (2,164) (0.12) (0.12) (0.01) (0.01) 4 Atomos Limited Consolidated Statement of Financial Position As at 30 June 2020 Consolidated as at 30‐Jun‐20 30‐Jun‐19 $'000 $'000 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 18,768 4,668 16,808 2,613 42,857 5,112 8,024 9,606 2,995 25,737 2,663 8,963 25,096 36,722 79,579 1,673 ‐ 8,472 10,145 35,882 10,708 139 567 1,107 12,521 10,521 1,500 610 ‐ 12,631 318 8,288 1,043 9,649 22,170 57,409 42 ‐ ‐ 42 12,673 23,209 101,538 50 944 (45,123) 57,409 44,057 147 2,030 (23,025) 23,209 5 Atomos Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2020 $'000 28,987 $'000 (21,066) Foreign currency translation reserve $'000 352 ‐ 9,457 6,000 (387) ‐ 15,070 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,017 ‐ ‐ ‐ ‐ 1,017 1,017 9,457 6,000 (387) ‐ 16,087 ‐ ‐ ‐ 44,057 (1,959) ‐ (1,959) (23,025) ‐ (205) (205) 147 ‐ ‐ ‐ 2,030 (1,959) (205) (2,164) 23,209 44,057 (23,025) 147 2,030 23,209 ‐ 58,362 (2,230) 1,349 57,481 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 263 ‐ ‐ (1,349) (1,086) 263 58,362 (2,230) ‐ 56,395 ‐ ‐ ‐ 101,538 (22,098) ‐ (22,098) (45,123) ‐ (97) (97) 50 ‐ ‐ ‐ 944 (22,098) (97) (22,195) 57,409 Issued capital Accumulated (Ordinary losses shares) 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 Transfer to issued capital on issuance of shares for services, exercised options, settled performance rights Total transactions with owners Comprehensive income Loss for the period Other comprehensive income Total comprehensive income Balance at 30 June 2019 Balance at 1 July 2019 Transactions with owners Share‐based payments Issue of new share capital Transaction costs relating to issue of share capital Transfer to issued capital on issuance of shares for services, exercised options, settled performance rights Total transactions with owners Comprehensive income Loss for the period Other comprehensive income Total comprehensive income Balance at 30 June 2020 Share based payments reserve Total equity $'000 1,013 $'000 9,286 6 Atomos Limited Consolidated Statement of Cash Flows For the year ended 30 June 2020 30‐Jun‐20 $'000 30‐Jun‐19 $'000 Operating activities Receipts from customers Payments to suppliers and employees Interest received Income taxes paid Net cash used in operating activities 49,541 (63,129) 26 (124) (13,686) 52,868 (56,036) 2 (158) (3,324) Investing activities Payments for property, plant and equipment Payments for intangible assets Payment for acquisition of subsidiary Net cash used in investing activities (3,191) (3,196) (5,617) (12,004) (1,331) (1,794) ‐ (3,125) 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) Net cash inflow from financing activities 44,010 (2,230) ‐ (384) (664) (1,361) 39,371 6,000 (2,448) 7,000 ‐ ‐ (450) 10,102 Net change in cash and cash equivalents Cash and cash equivalents, beginning of period Exchange differences on cash and cash equivalents Cash and cash equivalents, end of period 13,681 5,112 (25) 18,768 3,653 1,447 12 5,112 7 Notes to the Consolidated Financial Statements Condensed Review of Operations FY20 started strongly with a continuation of growth from FY19 which resulted in 1H’20 revenues of $32.6 million, a 35% increase on the pcp. However, the onset of the COVID pandemic in early 2020 brought about a sharp drop in demand for Atomos products and a corresponding fall in revenue with 2H’20 being approximately 60% down on 1H’20. As the full impact on the business (and the broader industry) from the COVID pandemic became clear, the Company was forced to make a number of changes. In order to sustain such a fall in revenue, a comprehensive review of the cost base was undertaken with significant savings realised across all cost categories, especially salaries and wages and marketing. With a reduced cost base and a significant inventory holding, the company was able to sustain itself without additional funding. However, management also recognised the opportunity to accelerate the development of certain new products to capitalise on the increase in remote working and chose to raise additional capital in order to assist in bringing these products to market. Summary of results for 2020 compared to prior period Consolidated Income Statement Revenue Cost of sales Gross profit Gross Margin % Operating expenses Impairment of assets EBITDA Finance costs Depreciation and amortisation Loss before income tax Income tax expense Loss for the year 2020 $'000 44,740 (28,640) 16,100 36% (26,350) (6,934) (17,184) (384) (3,773) (21,341) (757) (22,098) 2019 $'000 53,716 (28,062) 25,654 48% (23,874) ‐ 1,780 (1,443) (1,469) (1,132) (827) (1,959) Change $ $'000 (8,976) (578) (9,554) Change % (17%) 2% (37%) (12%) 10% (2,476) (6,934) (18,964) 1,059 (2,304) (20,209) 70 (20,139) (1065%) (73%) 157% 1785% (8%) 1028% Included in the above results are certain items which were significant and/or not incurred in the ordinary course of business and are fully detailed in the normalised earnings section overleaf. The impact of excluding these items from the Consolidated Income Statement is as follows: Normalised Consolidated Income Statement Revenue Gross profit Gross Margin % Operating expenses EBITDA 2020 $'000 44,447 17,683 40% (24,796) (7,113) 2019 $'000 53,716 23,804 44% (22,159) 1,645 Change $ $'000 (9,269) (6,121) Change % (2,637) (8,758) Revenue Normalised revenue of $44.4 million was 17% lower than 2019 due to the impact of COVID-19. (17%) (26%) (5%) 12% (532%) 8 Review of Operations (continued) Gross Profit Normalised gross profit was impacted by higher than normal levels of discounting and product promotions to continue to drive sales during the COVID-19. This impacted the second half of the year. Operating Costs Normalised operating costs of $24.8 million were $2.7 million or 12% up on 2019. This cost increase reflects a reclassification of warranty and royalty expenses from cost of goods sold of $1.7 million, the additional operating costs from Timecode Systems ($0.6 million), full year public company costs and higher employee costs. EBITDA The normalised EBITDA loss for 2020 was $7.1 million as compared to EBITDA of $1.6 million in 2019. This was primarily due to reduced Gross Profit of $8 million. Finance Costs Finance Costs for 2020 of $0.4 million (2019: $1.4 million) were significantly reduced reflecting the fact that the convertible notes were redeemed or converted to equity at the IPO (December 2018). Depreciation and Amortisation Depreciation and amortisation increased by $2.3 million primarily driven by amortisation of Right-of-use assets ($1.3 million) and commencement of amortisation of intangibles acquired on acquisition of Timecode Systems Limited ($0.3 million). Income Tax Expense Income tax expenses incurred of $0.6 million during the period relate to non-Australian 100% subsidiaries where a taxable profit was reported and $0.2 million due to a tax differential within the Australian tax consolidated Group relating to Research and Development grants. Net Profit / Loss (After Tax) The consolidated loss of the Group for the financial year after providing for income tax amounted to $22 million (2019: loss $2 million). 9 Reconciliation of normalised earnings Earnings before interest, tax, depreciation and amortisation (EBITDA) is a non-IFRS term which the Group uses to measure performance. Additionally, the reported result includes a number of items that were significant and/or not considered to be in the ordinary course of business and the table below quantifies these to provide a view of the underlying trading result. Items that were significant and/or not in the ordinary course of business1 44,740 (293) 1,876 (28,640) 16,100 1,583 36% (24,796) 8,488 (8,488) (17,184) 10,071 (3,773) ‐ ‐ (384) (21,341) 10,071 ‐ (757) 10,071 (22,098) 2020 Reported $’000 Revenue Cost of sales Gross profit Gross Margin % Operating Expenses – ongoing Operating Expenses – one‐off EBITDA Depreciation and amortisation Finance costs Loss before income tax Income tax expense Loss for the year Underlying Result 44,447 (26,764) 17,683 40% (24,796) ‐ (7,113) (3,773) (384) (11,270) (757) (12,027) 1 Items that were significant and/or not in the ordinary course of business (2020) $’000 Revenue Incremental discounting on inventory clearance Revenue (293) (293) Cost of sales One off Inventory write‐off / clearance Third party production cost write‐offs Custom Fees Refund Cost of sales 1,083 918 (125) 1,876 Operating Expenses Impairment of assets Transaction costs Restructuring costs Operating Expenses 6,934 1,226 328 8,488 Total Items not in the ordinary course of business 10,071 10 Reconciliation of normalised earnings (continued) 2019 Reported $’000 Revenue Cost of sales Gross profit Gross Margin % Operating Expenses – ongoing Operating Expenses – one‐off EBITDA Depreciation and amortisation Finance costs Loss before income tax Income tax (expense) / benefit Loss for the year 53,716 (28,062) 25,654 48% (22,159) (1,715) 1,780 (1,469) (1,443) (1,132) (827) (1,959) Items that were significant and/or not in the ordinary course of business1 (1,850) (1,850) 1,715 (135) ‐ 1,442 1,307 ‐ 1,307 Underlying Result 53,716 (29,912) 23,804 44% (22,159) ‐ 1,645 (1,469) (1) 175 (827) (652) 1 Items that were significant and/or not in the ordinary course of business (2019) $’000 Cost of sales One off Inventory write‐off/clearance Resolution of European Customs duty dispute Cost of sales 1,277 (3,127) (1,850) Operating Expenses Revaluation of embedded derivative and other financial instruments IPO & other transaction costs Accelerated vesting of pre IPO share options Costs associated with resolving European customs dispute Operating Expenses (1,018) 2,033 535 165 1,715 Interest on convertible notes 1,442 Total Items not in the ordinary course of business 1,307 -End of Appendix 4E – preliminary final report-