Led by a refreshed management team including the return of prodigal son and founder, managing director Jeromy Young, video technology innovator Atomos (ASX: AMS) has posted a remarkable 72.5 per cent year on year improvement in gross profit margin. The company has also confirmed a six per cent lift in sales growth over the previous corresponding period driven by strong uptake of its revamped Ninja and Shinobi II core products.
Much of the margin improvement has come as a result of the refreshed management team’s determination to hit its stated target of cutting fixed costs to $4 million per quarter from previously unsustainable levels a year ago.
Importantly, while most of the cost cutting work is now complete, the company says the results won’t be reflected in the numbers until the second half of the year, after the end of redundancy costs and legacy service contracts expire. Longer term, management expects to maintain gross margins at between 40 and 45 per cent.
Atomos has been able to steady the ship further by settling all outstanding lawsuits in the US and Australia with its former chief executive officer, US-based Estelle McGechie.
In voicing relief at the outcome, management has pointed out that since the associated legal and settlement costs have already been expensed in the 2024 full year numbers, it can finally now close the door on what could have otherwise been a confidence sapping and costly issue.
This quarter we achieved several key milestones further demonstrating our efforts over the past 9 months in repositioning Atomos into the global video technology leader that we know it can be. With a strong product suite now in market, we have recently focused our marketing efforts on reaching a wider demographic of content creators by producing educational and influencer materials that better highlight the power of Atomos’ solutions.
Atomos Managing Director and CEO Jeromy Young
Although Atomos reported total cash receipts for the quarter of $9.6 million, the company still faced an operating cash outflow of $4 million. And while $1.6 million of that was allocated to restructuring and settlement expenses, there was also $3.1 million poured into new product inventory in anticipation of future sales growth.
Despite the current tight cash position with just $1 million in the bank, the company has secured $9.6 million in funding commitments from its major shareholders and directors with $2.5 million drawn by the end of the quarter. The funding is structured, importantly, as an unsecured loan with a 14 per cent interest rate and no financial covenants, reflecting a positive level of confidence in the company’s future ability to kick goals according to the funders.
Operationally, as well as updating its existing products to include new features, the company has also been busy laying the groundwork for the big launch of its two new products, the Ninja Phone and the SunDragon.
Notwithstanding a two-month delay to include new features that will appeal to a greater audience, the company is now shipping the devices globally which started this month in a bid to hit the shelves ahead of the US Thanksgiving holiday and associated Cyber Monday sales blitz.
The Ninja Phone is a device that allows the user to turn their smartphone into a high-end 10-bit recorder, monitor and streamer for pro HDMI video cameras while the SunDragon is a world-first, operating as a mount-anywhere, flexible, wireless and waterproof, five-colour, 2000-lumen lighting strip that provides sun spectrum lighting at any time.
Atomos appears poised for growth with new products driving demand and restructuring efforts creating a leaner operating model. The company’s proactive steps to manage cash flow and the successful resolution of legal issues seems to have bolstered its outlook for the remainder of the financial year. Laser-eyed investors will be keen to see just how well the Ninja Phone and SunDragon fly off the shelves.
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