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Atomos Limited - Investor Presentation - Oct19 Final
Atomos Limited - Investor Presentation - Oct19 Final
Smartphones Wearable / DSLRs Monitor recorders Broadcast & Bodycams Audio recorders
Action cameras Cinema cameras
Capital Raising 16
Key Risks 19
Appendices 22
Presenting:
Jeromy Young
Managing Director & CEO
James Cody
CFO
Executive summary
Transaction Details:
Atomos Limited (“Atomos” or the “Company”, ASX: AMS) is proposing a strategic acquisition of Timecode Systems Ltd (“TCS”)
• TCS is a UK based company that has developed unique IP which delivers multi-device synchronisation applications for video and audio capture devices
• The acquisition is expected to be signed on or around 25 October with completion to occur in early December
• Consideration is to be paid in $5.68 million cash and 9,237,309 Atomos shares (escrowed for between 6 - 24 months)
Strategic Rational:
Strengthened market position Technology advantage Growth, revenue and cost synergies
• Expand and strengthen current core partnerships • TCS technology allows content creators to wirelessly Atomos expect the TCS acquisition to deliver financial
lock multiple video and sound sources together at benefits in three distinct areas:
• Broaden market segments, to enable Atomos to
the point of shooting
cover all video and audio capture markets • product commercialisation through new and
• Critical element in video and audio capture as any enhanced existing products
• Enhancing Atomos’ technology offering to allow for
sync/frame timing issue leads to inconsistences in
TCS’ leading wireless technology - enabling reliable • increased sales of the existing TCS product range via
post-production editing
performance over long distances and crowded rebranding to Atomos and utilising Atomos’ sales and
environments • Traditionally, timecode synching has been achieved distribution channels
by linking cameras and sound recorders via cables.
• With Atomos’s capabilities, relevant products, • cost synergies from transitioning to Atomos supplier
Wireless is the new evolution for the industry and
partners and channels, the acquisition can propel arrangements and manufacturing processes
TCS have a number of patents over the IP
this technology to be adopted industry-wide as
demand for multi-device content creation grows
TCS has a disruptive and protected technology acknowledged as a world-class solution for multi-device synchronisation
© Atomos 2019 | Strategic Acquisition & Capital Raising 6
Executive summary
Financial impacts:
• TCS current revenue is growing as the technology is being commercialised
• TCS’ leading technology under Atomos control is expected to drive significant growth in revenue within 12-18 months
• Significant synergies through 30% reduced production costs and sales uplift from rebranding and leveraging Atomos’ distribution channel and marketing
• TCS is expected to be earnings accretive in FY21
Risk mitigation:
• TCS hold a number of patents over their developed IP providing protection from the introduction of similar competitor offerings
• TCS has a proven track record of performance, in addition to Atomos being a current licensee
• TCS tech is already working on complex multicamera shows for TVs and movies with the following:
Capital Raising 16
Key Risks 19
Appendices 22
Background
Synchronising footage from multiple video and audio sources is
difficult, expensive, time consuming & you need to be a pro!
How do you sync the huge Hours can be spent during the Solutions available are
volumes of footage captured edit process manually lining expensive and cumbersome &
during multiple camera and up video and audio Not suitable for consumers
audio shoots?
How sync put the crew back in Synching an arena- Streamlining the workflow of a self-
the driver’s seat based game show shot show
Synching feature film
action sequences © Atomos 2019 | Strategic Acquisition & Capital Raising 10
Opportunity
Make multiple capture device productions mainstream by enabling wireless timecode synchronisation
Smartphones Wearable / DSLRs Monitor recorders Broadcast & Bodycams Audio recorders
Action cameras Cinema cameras
SOLUTIONS FOR
• Currently the video camera and audio capture market are addressed • TCS’ acquisition will enable Atomos to cover all video and audio
by separate products capture markets
Capital Raising 16
Key Risks 19
Appendices 22
Offer details
Details
Placement • Two tranche placement offer to institutional and sophisticated investors to raise approximately $22.56 million via the issue of
approximately 17.36 million fully paid ordinary shares (‘Placement’). The Placement will settle in two tranches:
• Tranche 1: issuing approximately 15.3 million shares to raise approximately $19.9 million pursuant to the Company’s
available placement capacity under ASX Listing Rules 7.1
• Tranche 2: issuing approximately 2.06 million shares to raise approximately $2.68 million, subject to shareholder
approval at the Annual General Meeting to be held on Friday, 29 November 2019
• Issue price of $1.30 per share, representing:
– 8.1% discount to the last close price ($1.415)
– 12.1% discount to the previous 5-day VWAP ($1.479)
– 15.7% discount to the previous 15-day VWAP ($1.541)
• Capital raising costs $1.0 million freight (~$2 million annual saving)
Timetable
Company announces capital raising details and signing acquisition agreement Friday, 25 October 2019
Allotment and quotation of Securities under tranche 1 Placement Thursday, 31 October 2019
Proposed completion date of the acquisition subject to shareholder approval Monday, 2 December 2019
Allotment and quotation of Securities under tranche 2 Placement Wednesday, 4 December 2019
Note: times and dates above are based on AEDT (Sydney, Australia). The above timetable is indicative only and may change without notice.
Capital Raising 16
Key Risks 19
Appendices 22
Risks associated with the acquisition of TCS
The TCS acquisition is reliant on Atomos raising funds under the Placement to fund the cash component of the consideration. The capital raising is not being underwritten, so there is a risk
Conditions to that Atomos may not raise sufficient funds from the capital raising to complete the acquisition if any investors were to default on settlement. If this was the case, Atomos will consider
acquisition other funding options. Atomos may seek to obtain alternative funding by issuing additional shares or borrowing money. Any additional equity financing may be dilutive to shareholders
and any debt financing (if available) may involve restrictive covenants, which may limit Atomos’ operations and business strategy.
TCS is currently loss-making but expected to be earnings accretive in FY21. Atomos has undertaken financial, tax, legal and commercial analysis on TCS in order to determine its
Analysis of attractiveness to Atomos and whether to acquire it. It is possible that despite such analysis and the best estimate assumptions made by Atomos, the conclusions drawn are inaccurate or
acquisition are not realised (including assumptions as to synergies from increased scale of the group following the TCS acquisition). To the extent that the actual results achieved by the acquisition of
opportunities TCS are different to those indicated by Atomos’ analysis, there is a risk that the profitability and future earnings of the operations of Atomos may be materially different from the
profitability and earnings expected as reflected in this presentation.
The acquisition of TCS involves the integration of TCS’ business, which has previously operated independently to TCS. As a result there is a risk that the integration may be more complex
Integration risk than currently anticipated, encounter unexpected challenges or issues (including maintaining the current culture of the TCS business and the successful integration and reliance on TCS key
personnel), take longer than expected, divert management attention or not deliver the expected benefits.
Uncovered Atomos may suffer a loss as a result of conduct of the vendors of TCS for which the representations, warranties and indemnities negotiated by Atomos in its agreement to acquire TCS turn
warranty and out to be inadequate in the circumstances. Atomos has put in place warranty and indemnity insurance to support the warranties and indemnities received from the vendors of TCS,
indemnity however, that policy will not respond on all matters and is subject to a maximum liability cap, and therefore may provide no coverage on a particular liability for Atomos. Such uncovered
breaches liability may adversely affect the financial performance or position of Atomos post acquisition.
Atomos has prepared (and made assumptions in the preparation of) the financial information relating to the acquisition of TCS included int this presentation in reliance on financial
information and other information provided by TCS. If any of the data or information relied upon by Atomos in its due diligence process and its preparation of this presentation proves to
Reliance on
be incomplete, incorrect, inaccurate or misleading, there is a risk that the actual financial position and performance of Atomos may be materially different to the financial position and
information
performance expected by Atomos. Investors should also note that there is no assurance that the due diligence conducted by Atomos and its advisors on TCS was conclusive and that all
provided
material issues and risks in respect of the acquisition have been identified, Therefore there is a risk that unforeseen issues and risks may arise, which may also have a material impact on
Atomos.
The development and release of new products, including those utilising TCS technologies, or the adoption of these new products by OEM licensees and end users, may take longer than expected or such new
Launch of new
products may not be well received by customers as a result of various reasons including (amongst others) the new products not being well priced when compared with competing products or the new
products
products lacking a strong feature that resonates with customers.
Atomos does not have formal written contracts in pace with a majority of its distributors who order and purchase products from Atomos on an ad hoc basis with no minimum purchase order obligations. This
Reliance on key
represents a risk of current sales revenue not being replicated. Atomos’ customers and distributors may decide not to continue to place purchase orders in the future or at the same level as in prior periods.
distributors
As a result, Atomos’ operating performance may vary from period to period and may fluctuate significantly in the future.
There are certain components for which Atomos has a single or limited source of supply. Accordingly, there is a risk that if the supplier was to cease supply, this could cause a disruption to Atomos’ ability to
Supply chain risk
deliver its products. Further to this, Atomos would have difficulty in sourcing alternative suppliers for certain of these components which are only available from a single source.
The loss of key members of the management team or members of the design and engineering teams, or any delay in their replacement, may adversely affect Atomos’ ability to implement its strategies and
Ability to retain or
may also adversely affect Atomos’ future financial performance. Atomos performance and future success depends on its continuing ability to identify, hire, develop, motivate and retain highly skilled
attract key personnel
personnel for all areas of the organisation. Competition for qualified employees in Atomos’ industry is intense.
Failure to manage Atomos will need to continue to invest in sales and marketing and other systems and processes to support the development of its business (including post acquisition of TCS) if Atomos gains significant market
growth share over and above its current short-term expectations. If this is not done in a timely, robust and efficient way to handle projected growth it may negatively impact on Atomos’ financial performance.
The value of Atomos’s products is dependent on Atomos’ ability to effectively identify, protect, defend and in certain circumstances keep secret, its intellectual property (including the intellectual property of
Intellectual property
TCS post acquisition). Actions Atomos takes to protect its intellectual property may not be adequate or enforceable and therefore may not prevent the misappropriation of its IP and proprietary information.
Inability to pay There is no guarantee that dividends will be paid on shares in Atomos in the future, as this is a matter to be determined by the Board in its discretion and the Board’s decision will have regard to, amongst
dividends other things, the financial performance and position of Atomos, relative to its capital expenditure and other liabilities.
Atomos may in the future elect to issue new shares or engage in capital raising to fund ongoing working capital requirements of Atomos or acquisitions that Atomos may decide to make. While Atomos will be
Risk of shareholder
subject to the constraints of the ASX Listing Rules regarding the percentage of its capital that it is able to issue within a 12-motnh period, Shareholders at the time may be diluted as a result of such issues of
dilution
shares and capital raisings.
Atomos may need to raise additional funds from time to time to finance ongoing development and growth and meet its other longer-term objectives. Directors can give no assurance that future funds can be
Availability of funding raised on favourable terms, if at all. If further funds are required but cannot be raised, this may force curtailment of product development initiatives, operations and may adversely impact Atomos’ financial
position. © Atomos 2019 | Strategic Acquisition & Capital Raising 20
Agenda
Executive Summary 6
Capital Raising 16
Key Risks 19
Appendices 22
Current Timecode systems current offering
Broadcast &
Radio Cinema cameras
Wireless Receivers
Radio Sync
Generator Monitor recorders
Radio to
Wifi/Bluetooth All devices can be used
Converter for one production
** Patented
4cm
Bulletproof signal Pro Cameras
Wearable
Low bandwidth
for accuracy
300m Smartphones
Audio recorders
Range
© Atomos 2019 | Strategic Acquisition & Capital Raising 22
Post Acquisition -→ More Supported Devices
Broadcast &
Radio Cinema cameras
Receivers
Atomos Devices
become touch
screen
Monitor recorders
Wireless Radio Sync
Generators
Radio to
Wifi/Bluetooth All devices can be used
Converter for one production
** Patented
+
Pro Cameras
Wearable
300m Smartphones
Audio recorders
Range
© Atomos 2019 | Strategic Acquisition & Capital Raising 23
TCS key management
• TCS’s leading wireless sync technology is unique, allowing reliable performance over long distances and in crowded environments.
• TCS can transmit timecode at a longer range and lower more robust radio frequency due to the use of 900MHz shorter wave which is a very
stable wave band. There is little to no interference from congestion or other channels (such as 2.4GHz or 5.0GHz). Competitors use 2.4 or 5.0.
• TCS addresses the issue of being compatible with wireless standards like Bluetooth and WiFi by providing a bridge between their proprietary
sub-gigahertz network and these other standard wireless networks.
• The timecode and sync data is transmitted to receiving OS X, iOS, Windows and Linux devices.
• This way, you get the best of both worlds: a reliable and long range "backbone" which works in any environment but can interoperate with
prevailing wireless network standards. TCS products are the only system to offer the dual transmission method (stable radio frequency +
consumer protocols) and this is patented.
Lower
quality
monitor
Despite the advanced technology of modern digital
cameras, users are limited by:
From the sensor of Atomos products enhance content creation, quality and Edit, Colour Grade, Titles, Graphics
all major camera manufacturers creativity Finish in Post
Camera Equipment Phone & PhotoCameras Pro Video Cameras Broadcast, TV & Cinema
SHINOBI
NINJA
Atomos
Products SHOGUN
SUMO
NEON
23% CAGR 18% CAGR 35% CAGR
1 CIPA
© Atomos 2019 | Strategic Acquisition & Capital Raising 29
Report, 2017
© Atomos 2019. | Strategic Acquisition