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 2019 for the year ended 30 June 2018 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 2019 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 2019 $'000 55,681 (1,959) (1,959) 1,780 2018 $'000 35,648 (16,513) (16,513) (10,519) % change 1,645 222 641% (652) (1,811) 64% 56% 88% 88% 117% 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 comparative. 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 2019 was up $20.0 million, or 56%, from $35.6 million driven by the successful launch of the Ninja V and Shinobi products during the period. The revenue includes $1.7 million in respect of the sale of components (at cost) to several third-party manufacturers used by Atomos. These components are included in the cost of products the manufacturer assembles on Atomos’ behalf which are then sold to Atomos. Underlying sales revenue to external customers is therefore $54.0 million, or 51% up on 2018. Net loss after tax for the year was down $14.6 million, or 88% to $2.0m. The improvement was primarily driven by: • Growth in gross profit of $9.1 million; • One-off impairment of intangibles in 2018 of $9.7 million; • Higher finance charges and tax expense in 2018 of $3.0 million; and • Increase in other gains of $1.1 million principally due to the revaluation of embedded derivative to fair value on conversion / redemption of convertible notes This was partially offset by: • Investment in marketing expenses to drive entry into and penetration of the ‘Social’ market segment ($3.3 million); • Costs associated with the IPO of $1.5 million in 2019; • Increased depreciation and amortisation of $1.2 million driven by commencement of amortisation of intangibles; and • Increase in other operating expenses of $2.3 million 2 Appendix 4E – Preliminary Final Report (continued) Net tangible assets per security 30/6/19 30/6/18 $0.10 $0.02 151,957,624 105,722,865 Net tangible assets per share: Total number of shares on issue at year end: Entities over which control has been gained or lost during the period There are no entities over which control has been gained or lost during the period. 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 auditor review. 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 4.3A is contained in the 30 June 2019 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 2019 2019 $’000 2018 $’000 Revenue 55,681 35,648 Cost of sales (29,782) (18,828) Gross profit 25,899 16,820 2 332 Other income Other gains / (losses) 1,018 (58) Employee benefits expense (7,035) (6,004) Share based payments (1,017) (314) Advertising and marketing expense (5,604) (2,322) Research and development expense (4,139) (3,764) Administration and other expense (2,168) (2,878) Transaction costs (2,061) (105) Distribution expense (1,585) (1,233) Depreciation and amortisation (1,469) (278) Interest charges (1,443) (3,961) Legal and professional services (821) (590) Occupancy expense (709) (674) - (9,729) (1,132) (14,758) (827) (1,755) (1,959) (16,513) - - (205) 157 (205) 157 (205) 157 (2,164) (16,356) 2019 2018 Basic earnings (loss) per share ($0.01) ($0.29) Diluted earnings (loss) per share ($0.01) ($0.29) Impairment of intangible assets Loss before income tax Income tax (expense) Loss for the year 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 income for the year, net of income tax Total comprehensive loss for the year Earnings per share 4 Atomos Limited Consolidated Statement of Financial Position As at 30 June 2019 2019 $'000 2018 $'000 Cash and cash equivalents 5,112 1,447 Trade and other receivables 8,024 4,848 Inventories 7,886 5,953 Other current assets 2,995 1,746 Total current assets 24,017 13,994 Assets Current assets Non-current assets Property, plant and equipment 1,673 824 Intangible assets 8,472 7,671 Total non-current assets 10,145 8,495 Total assets 34,162 22,489 Trade and other payables 8,801 8,461 Borrowings 1,500 2,706 Provisions 610 493 - 1,496 10,911 13,156 Provisions 42 47 Total non-current liabilities 42 47 Total liabilities 10,953 13,203 Net assets 23,209 9,286 Issued capital 44,057 28,987 Reserves 2,177 1,365 Accumulated losses (23,025) (21,066) Total equity 23,209 9,286 Liabilities Current liabilities Other financial liabilities Current liabilities Non-current liabilities Equity 5 Atomos Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2019 Balance at 1 July 2017 Issued capital (Ordinary shares) Issued capital (Class A shares) Retained earnings Foreign currency translation reserve Share based payments reserve Total equity $’000 $’000 $’000 $’000 $,000 $’000 8,595 292 (4,553) 195 - 4,529 1,013 Transactions with owners Share-based payments - - - - 1,013 Conversion of Class A shares 292 (292) - - - - Conversion of convertible notes 13,567 - - - - 13,567 Issue of new share capital 7,000 - - - - 7,000 Transaction costs relating to issue of shares (467) - - - - (467) - - - - - - 20,392 (292) - - 1,013 21,113 Loss for the year - - (16,513) - - (16,513) Other comprehensive income - - - 157 - 157 Total comprehensive income - - (16,513) 157 - (16,356) Balance at 30 June 2018 28,987 - (21,066) 352 1,013 9,286 Balance at 1 July 2018 28,987 - (21,066) 352 1,013 9,286 Income tax benefit relating to transaction costs Total transactions with owners Comprehensive income Transactions with owners Share-based payments - - - - 1,017 1,017 Conversion of convertible notes 9,457 - - - - 9,457 Issue of new share capital 6,000 - - - - 6,000 Transaction costs relating to issue of shares (387) - - - - (387) - - - - - - 15,070 - - - 1,017 16,087 Loss for the year - - (1,959) - - (1,959) Other comprehensive income - - - (205) - (205) Total comprehensive income - - (1,959) (205) - (2,164) 44,057 - (23,025) 147 2,030 23,209 Income tax benefit relating to transaction costs Total transactions with owners Comprehensive income Balance at 30 June 2019 6 Atomos Limited Consolidated Statement of Cash Flows For the year ended 30 June 2019 2019 $’000 2018 $’000 Operating activities Receipts from customers 52,868 34,944 Payments to suppliers and employees (56,363) (37,846) Interest received 2 1 Income taxes paid (158) - (3,651) (2,901) Net cash used in operating activities Investing activities Payments for property, plant and equipment (1,325) (724) Payments for intangible assets (1,794) (3,629) Net cash used in investing activities (3,119) (4,353) Proceeds from issue of equity instruments in the company 6,000 7,000 Proceeds from issue of convertible notes 7,000 1,112 Interest paid (114) (432) Payment for transaction costs (2,013) (410) Proceeds from borrowings 1,500 - Repayments of borrowings (1,950) (110) Net cash inflow from financing activities 10,423 7,160 Net change in cash and cash equivalents 3,653 (94) Cash and cash equivalents, beginning of year 1,447 1,548 Financing activities Exchange differences on cash and cash equivalents Cash and cash equivalents, end of year 12 (7) 5,112 1,447 7 Notes to the Consolidated Financial Statements Condensed Review of Operations The 2019 year was a pivotal period for the Company which saw the completion of a multi-year investment in a new technology platform (the Ninja Platform) which will underpin future Atomos products for the next few years. The first product developed on this new platform, Ninja V, was launched in September 2018 and has been extremely successful. In December 2018 the Company was successfully listed on the ASX. Summary of results for 2019 compared to prior period Consolidated Income Statement 2019 2018 Change $ $'000 $'000 $'000 Change % Revenue 55,681 35,648 20,033 56% Cost of sales (29,782) (18,828) (10,954) (58%) Gross profit 25,899 16,820 9,079 47% 47% (24,119) (17,610) (6,509) (34%) - (9,729) 9,729 100% EBITDA 1,780 (10,519) 12,299 117% Finance costs (1,443) (3,961) 2,518 65% Depreciation and amortisation (1,469) (278) (1,191) (428%) Loss before income tax (1,132) (14,758) 13,626 92% (827) (1,755) 928 53% (1,959) (16,513) 14,554 88% Gross Margin % Operating expenses Impairment of Intangibles Income tax (expense) / benefit Loss for the year 54% (0%) Included in the above results are certain items which were not incurred in the ordinary course of business and are fully detailed in the normalised earnings section overleaf. The impact of excluding those items on the Consolidated Income Statement is as follows: Normalised Consolidated Income Statement 2019 2018 Change $ $'000 $'000 $'000 Revenue 53,961 35,648 18,313 Gross profit 24,049 17,302 6,747 45% 49% (22,404) (17,080) (5,323) (31%) 1,645 222 1,423 641% Gross Margin % Operating expenses EBITDA Change % 51% 39% (4%) Revenue Normalised revenue of $54.0 million was 51% higher than in 2018. This was driven by strong performance of the Ninja V, launched in September 2018 and the Shinobi devices, launched in March 2019. These products represent the successful start of Atomos’ push into one of its key growth areas, the ‘Social’ market segment. The 2019 normalised revenue was 28% higher than the prospectus forecast. Gross Profit Normalised gross profit was impacted by higher than anticipated component costs associated with the Ninja V. Management addressed these component cost issues which saw the second half margin increase from 43.4% to 45.3%, resulting in 44.6% for the full year. This compares with the prospectus forecast of 47.1%. 8 Review of Operations (continued) Operating Costs Normalised operating costs of $22.4 million were $5.3 million or 31% up on 2018 and $2.8 million or 14% higher than the prospectus forecast. This cost increase principally reflects higher marketing expenditure of $2.3 million. The additional investment in marketing was to support Atomos’ entry into the emerging Social segment in 2019 and to support further growth. EBITDA The normalised EBITDA for 2019 was $1.6 million which compares with 2018 of $0.2 million and the prospectus forecast of $0.3 million. Finance Costs Finance Costs for 2019 of $1.4 million (2018: $4.1 million) were significantly reduced reflecting the fact that the convertible notes were redeemed or converted to equity at the IPO. Depreciation and Amortisation Depreciation and amortisation increased by $1.2 million. This increase represented the initial amortisation of previously capitalised development costs as the Company commenced commercialisation of the development effort. 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 Loss (After Tax) The consolidated loss of the Group for the financial year after providing for income tax amounted to $1.96 million (2018: loss $16.5 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. This includes a number of items which are not in the ordinary course of business, these have been excluded in the table below to provide a view or normalised earnings. $’000 Items not in the ordinary course of business1 2019 Reported Underlying Result Revenue 55,681 (1,720) 53,961 Cost of sales (29,782) (130) (29,912) Gross profit 25,899 (1,850) 24,049 Gross Margin % 47% 45% Operating Expenses – ongoing (22,404) (22,404) Operating Expenses – one-off (1,715) 1,715 EBITDA 1,780 (135) 1,645 Depreciation and amortisation (1,469) 0 (1,469) Finance costs (1,443) 1,442 (1) Loss before income tax (1,132) 1,307 175 (827) 0 (827) (1,959) 1,307 (652) Income tax (expense) / benefit Loss for the year 1 Items not in the ordinary course of business (2019) 0 $’000 Revenue Sales to suppliers: supplier pass through sales at no margin (1,720) Revenue (1,720) Cost of sales Sales to suppliers: supplier pass through sales at no margin 1,720 One off Inventory write-off/clearance 1,277 Resolution of European Customs duty dispute (3,127) Cost of sales (130) Operating Expenses Revaluation of embedded derivative and other financial instruments (1,018) IPO & other transaction costs 2,033 Accelerated vesting of pre IPO share options Costs associated with resolving European customs dispute 535 165 Operating Expenses 1,715 Interest on convertible notes 1,442 Total Items not in the ordinary course of business 1,307 10 Reconciliation of normalised earnings (continued) Items not in the ordinary course of business2 2018 Reported Underlying Result Revenue 35,648 Cost of sales (18,828) 482 (18,346) Gross profit 16,820 482 17,302 Gross Margin % 35,648 47% 49% Operating Expenses - ongoing (17,080) (17,080) Operating Expenses – one-off (10,259) 10,259 (10,519) 10,636 EBITDA Depreciation and amortisation (278) 0 222 (278) Finance costs (3,961) 3,961 0 Loss before income tax (14,758) 14,702 (56) Income tax (expense) / benefit (1,755) Loss for the year (16,513) 2 Items not in the ordinary course of business (2018) (1,755) 14,702 (1,811) $’000 Cost of sales One off Inventory write-off 482 Cost of sales 482 Operating Expenses Asset impairment charges 9,993 Transitional costs 878 Incremental listed company costs (210) Revaluation of embedded derivatives (377) Employee share plan costs (153) Transaction costs 128 Operating Expenses 10,259 Interest on convertible notes 3,961 Total Items not in the ordinary course of business 14,702 -End of Appendix 4E – preliminary final report-