Atomos is one that I’ve followed for quite some time. While never seeing it as a high quality company, it’s still a global leader in its category - monitor/recorders add-ons for video cameras.

It’s been a really rough couple of years for the company. The initial pandemic stopped sales in its tracks and hit some of their primary customers - those that film weddings, sports, conference events - the hardest.

And the punches to the face didn’t stop. The founder/CEO quit the company, chip shortages, supply chain issues, lockdowns in their Chinese manufacturing plants and then the new replacement CEO was moved on …

The share price was sitting at all-time highs of $1.76 in September 2021 is now just $0.33. Enterprise value is currently around $57m, $82m+ revenue for FY22e, high-40s gross margins, breakeven-ish, and made $4.2m NPAT in FY21.

It’s interesting to me for 3 reasons. 1) It’s cheap. 2) It’s a global leader in its space and 3) I believe it’s now better positioned that it was 2-3 years ago - I’ll elaborate a bit more on this.

At the heart, Atomos’ value proposition is the enabling of the computerisation of video cameras. Japanese camera companies are world class at hardware, imaging and sensor/lens technology - but they suck at software. Atomos monitor/recorders provides a big, bright monitor, with high level software features, time sync, increased storage options, and the ability to record in more editing software friendly file formats.

The company is currently in the process of refreshing its line of devices to have network connectivity (wifi, ethernet, mobile) and cloud services. The latter will enable workflows such as live streaming, remote switching, remote editing, and remote control. It’s really bringing the dedicated video camera kicking and screaming into 2022 level expectations and allow video teams to work where and how they want. Network connectivity and cloud services will add tremendously to the value proposition of Atomos’ products.

There are also some tailwinds with the file format Atomos is backing - Apple’s ProRes and ProRes RAW. ProRes is the recommended file format for Apple’s popular video editing software Final Cut Pro. There are a bunch of other professional video formats such RED’s REDCODE (RAW) and Blackmagic’s BRAW. However ProRes has one key advantage.

When Apple transitioned from Intel to Apple Silicon, they built ProRes hardware accelerators into all their “Pro” range products - anything with a M1 Pro or Max chip. They’ve also built it into their new, recently released M2 chip - so the entire range of Apple computers and the next iPad Pro will have ProRes hardware acceleration! What does that mean? Editing ProRes on Apple machines is much faster than other comparable formats. More film crews may start considering recording in ProRes RAW due to this advantage, and this may lead into the purchasing of Atomos hardware.

Atomos is interesting and worth checking out.