Atomos Limited (AMS) Earnings Call Transcript & Summary

Hi, everyone. I'm Peter Barber, and I joined Atomos in early 2024. And in May this year, I stepped into the role of CEO. Today, I wanted to directly share an update on the progress we have made and where we were heading. We have just posted a business update to the ASX, and I encourage you to take a look. We have an updated, focused and modernized strategy and have now started to make clear progress. While we still have work to do, I wanted to share some changes that we have already successfully implemented and those that are still underway. Over recent years, Atomos' performance has not been where it needed to be. In the early 2020s, during the pandemic, the company experienced rapid top line growth and expanded its workforce and cost base to match. Unfortunately, when the pandemic subsided and conditions and revenue normalized, the fixed cost also required normalizing. The turbulent conditions also created other challenges, including supply chain challenges unique to the COVID years, which were followed by external factors such as the prolonged U.S. writer strike that impacted customer demand. When I joined in February 2024, our first step was to immediately undertake an urgent business review to course correct the strategy and rightsize the cost base. We rationalized our headcount, reduced our global office and warehouse footprint and exited legacy contracts. We negotiated settlements on significant open purchase orders that arose from component shortages and long lead times during COVID. As of 1st July this year, our monthly fixed costs have been reduced from well over $2 million to just over $1 million. This means our revenue breakeven point has more than halved. We have reduced our global headcount from almost 100 at the beginning of 2024 to fewer than 50, motivated and focused people. We have consolidated logistics into modern 3PL partners in both Europe and the U.S., moved out of expensive and unnecessary facilities and resolved legacy payment plans, onerous contracts and legal claims. Second, while putting these costs behind us and refocusing on our strengths, we also recognized that our offering was due for a refresh. Atomos has exceptional brand equity and a loyal customer base built over 14 years as a pioneer in monitors and recorders for content creators and filmmakers. But when I joined, we had some aging core product lines and a real exciting opportunity to take our core offering to the next level. With a renewed focus on innovating our core monitor ranges, we have been investing in next-generation products that Atomos is famous for. To that end, on 23rd of July, we announced the Ninja TX, a reengineered brand-new modern addition to our flagship Ninja range. And it's the most advanced monitor recorder we have ever built. It's packed with new features, including both HDMI and SDI professional video connectivity, RAW and standard recording formats, it's brighter, quieter, cooler and now has built-in camera cloud capability. That means it connects natively to platforms like Frame.io from Adobe and our own ATOMOSphere cloud storage without the need for additional accessories. Every Ninja TX come with a free ATOMOSphere account that includes 20 gigabytes of cloud storage and users can upload directly from their devices, manage and share content through the platform. And if they need more space or collaborative tools, they can upgrade their memberships to more cloud storage, editing and AI features. This integration between device and cloud gives creators a powerful seamless workflow while also giving Atomos a platform for earning future recurring subscription revenue. The Ninja TX is the first next-generator core monitor product announced with our engineering and R&D teams laser-focused on more additions to our range. Thirdly, back in April at the NAB trade show held in Las Vegas, we started to introduce our new ecosystem products, including professional headphones, microphones, wireless video transmitters and more. These are the types of tools that our users were already buying from other vendors for their production workflows. And while content creators are free to mix and match whatever gear they want, it makes sense that we offer high-quality integrated solutions that complement our core products and fit neatly in our production workflows. These products are complementary to our core monitors and recorders and have increased our product portfolio. Fourth and finally, we have modernized how we reach and engage with our customers. Complementing our long established and nurtured wholesale channels and trade show presence, we have launched a direct-to-customer online ordering to convert and retain more customers. We have also launched a growing digital marketing capability, enabling us to reach and engage with more and more potential customers where they are. As you can see, there's been a huge amount of work happening behind the scenes across product, operations and technology. But none of this has been without its challenges. Earlier this year, the U.S. tariffs created unexpected headwinds. We were unable to ship products into the U.S. in April and May, which impacted our performance during that period. But we moved quickly, adjusting pricing and adapting our supply chain. And by June, orders picked up again and started flowing steadily, giving us a strong end to the financial year. And this gives us confidence heading into the next quarter. So the message here is this. We still have work to do, but we are making progress, and we're in a stronger position to move forward. We have done the heavy lifting. We have reset the cost base, cleaned up the operational structure and laid the groundwork for a much more scalable and product-focused business. I believe in this company and its amazing team, and that's why I have backed it personally, both as a shareholder and a lender. And I will continue to support it as we push ahead. I would like to thank our customers, shareholders and supporters for standing with us. Your continued support means a great deal to me and everyone here at Atomos. We have more to do, and I look forward to showing you what's coming next. And if you have any questions, feel free to connect with me on LinkedIn or send me an e-mail. I will keep sharing updates like this on a regular basis as we continue to build Atomos into the company that delivers great products and outcomes for our customers, partners and investors. Thanks again, and I look forward to talking to you soon.