AMS released a response to an AFR article in which former CEO Estelle McGechie has accused the company of "rampant illegality".

AFR article here

Atomos have responded this morning with an announcement

I have no idea if what she's alleging is true or not but as the old saying goes "where there's smoke, there's fire". I am exiting my position today and copping the loss.

Disc: Was holding IRL and Strawman but will be exiting today.

Change of CEO

Atomos announced that Estelle McGechie appointment as CEO has ended. Her appointment was only made in Sept 2021 and the expectation was that she would return to Melbourne, Australia from the US to lead the business. Estelle has not yet relocated back to Australia and thus her term as CEO has concluded.

Trevor Elbourne who has been the CTO for the last 6 years will be the interim CEO whilst the board search for a new CEO.

Revenue guidance was also reaffirmed at $95m+ and EBIDTA margins of 12-15%.

Link to their Announcement : 2924-02510534-3A591749 (markitdigital.com)

Not sure what to make of this just yet, sounds like the board had a falling out with Estelle because she did not want to relocate back to Australia. Her credentials were very well regarded and was seen as a very positive appointment by Atomos at the time to further their growth. This doesn't change my thesis but will be watching to see who they appoint in the near future.

Disc: Held IRL and on Strawman.

Atomos today released their 1H FY22 results. From their announcement:

• Record revenue of $40.9m, up 25% on pcp (previous corresponding period)
• Proforma EBITDA of $3.2m (7.8% of sales) up 33% on pcp, 1H FY21: $2.4m (7.3% of sales)
• Inventory investment protecting against supply chain interruptions
• Atomos expects new product launches to drive sales growth in 2H FY22 and maintains revenue guidance of $95m+ for the full year as well as EBITDA of 12-15%

Overall a decent result given current supply chain issues. Management have stated they are launching new products in 2H FY22 which will likely increase revenue so that guidance is met.

Looking through their cash flows I was actually surprised that they were not operating cash flow positive this half with outflows of over $5m. I suspect this may be related to higher distribution expenses as stated in the presentation. May be something to keep an eye on with $17m in cash and $5m debt facility available. Will review at full year results as 2H is expected to be stronger.

I will likely need to adjust my valuations as profitability was not as high as previous year given an increase in expenses and also several one off items.

Disc: Held IRL and on Strawman

Directors Buying

2 directors have bought shares in the recent pull back:

• Chris Tait (Non-executive Chairman) purchased 100,000 shares
• This was after he sold shares at near the peak in October
• Stephen Stanley (Non-executive director) purchased 183,946 shares

Disc: Held IRL and on Strawman

Update on guidance an AGM

Atomos confirmed guidance of $95 million + this morning at their AGM and also reconfirmed that they were on track to hit their target of 12-15% EBITDA margins set out at their FY21 results.

$95 million of revenue would be an increase of around 21% compared to FY21 Revenue. And would give them EBITDA of between $11-14 million. They also mentioned there would be around $1m opex costs resulting from their investment in Videogram (also announced today) giving them final EBITDA of around $10-13 million.

Market has had a bit of a sell off today maybe due to a decreased amount of top line growth (FY21 had growth of 77%). I'll admit I didn't tune in to the AGM so not sure if anything else was mentioned there but in their presentation they did mention some supply chain issues impacted 1H22 sales which should be resolved in the 2nd half of the year. They also mentioned there would be a release of some new products which may increase revenue to beyond $95 million as guided.

Disc: Held IRL and on Strawman.

Atomos released a 3Y a few days ago showing directors exercising options, and then selling in the case of one director.

Copied from their release:

• Sir Hossein Yassaie sold 750,000 shares and exercised 870,722 options resulting in a net increase of 120,722 shares; with a remaining balance of 1,954,579 shares.
• Chris Tait sold 636,260 shares (500,000 held personally and 136,260 held indirectly) and exercised 217,679 options, resulting in a net decrease of 418,581 shares; with a remaining balance of 894,882 shares. 

Hard to read into the effect of this on the overall company as the directors actually have quite limited ownership of the business (less than 10% of the business between 4 directors)

They did add on underneath which I found somewhat interesting:

"Atomos wishes to advise that despite the well-publicised global challenges with component supply, the Board remain comfortable with full year Broker consensus in relation to FY22."

I guess time will tell in regards to whether chip shortages will overall also impact Atomos as has been well publicised for Audinate.

DISC: Held IRL and on Strawman