In the high-stakes world of high-tech, Atomos had not so long ago lost its way. But with a new product suite and a new-old boss, the company appears to be surging back towards a healthy financial future. It comes on the back of returned managing director Jeromy Young’s restructuring of the company and its share price is now riding high on the promise of elevated sales.
When video technology innovator Atomos first hit the Australian bourse –two days after Boxing Day in 2018 – one could have been forgiven for quietly thinking, “Are these guys completely mad?”
The stock market had endured its biggest slump in three years, falling 12 per cent in a quarter, with brokers and clients alike simply happy to take a break during Christmas to get away from all the doom and gloom.
But Atomos was unfazed by what it considered little more than market white noise as it pushed forward with its plans to list on the ASX. And in an incredible piece of timing, the company happened to jag the bottom of the market slump on its exact listing day.
Then, by day three, the company’s share price had rocketed 210 per cent up to 62c. Within nine months, its stock had jumped a stunning 400 per cent to 98c a share.
The overall market, meanwhile, put on 31 per cent in the next 12 months before COVID served up its unhealthy dose of global pandemic reality.
Atomos was founded in 2010 after Jeromy Young, who – along with co-founder Ian Overliese – developed and launched a versatile video recorder and monitor. The device, named the “Ninja”, was designed to record directly into popular editing formats such as Apple's ProRes and Avid's DNxHD digital imaging by decompressing data from memory size-restricted cameras onto the device and allowing users to work with high-quality video files.
Young and Overliese noticed that comparable products were already available, but believed they had the right market knowledge and technical expertise to create a strong competitor. Identifying several key features that competitors were lacking – such as device size, power consumption, usability and most importantly, a decent screen – the duo launched the Ninja at the International Broadcasting Convention in 2010.
It is history that Young later found himself out of the company and has now returned, but more on that later.
Atomos managing director and chief executive officer Jeromy Young said: “There is a lot to clean up, the job is not done and I’m here to get this show back on the road.”
The genesis of Atomos goes back to Young’s earlier years in 1995, when he found himself seconded to Nippon Steel in Japan as part of a bi-company exchange program while serving as an intern in BHP’s managerial cadet program in Wollongong.
While in Japan, it wasn’t long before his aptitude for technology was noticed and his ability to also quickly pick up the local language led to a seriously serendipitous relationship with none other than Sony co-founder, Akio Morita. The now-late Morita became Young’s technology mentor and encouraged him to join Japan-based company Canopus as a product manager focused on international markets.
Canopus had a reputation for manufacturing video editing cards and software and was Young’s first exposure to the nascent enthusiast video production market during the early 2000s. A few years later, the company climbed some heady heights to become the No.3 manufacturer worldwide.
While Canopus was later bought out by United States firm Grass Valley, Young took the opportunity to set up his own venture, looking to capitalise on the ideas he had thought about during his tenure at the company. And there was another fateful meeting with a renowned global business giant to come.
On the other side of the world, Apple was enjoying a growing reputation as its Apple Mac desktops became the go-to destination for creative professionals looking for editing and graphic software. By 2010, Apple was a clear winner in the personal computer space for creative retail and small-to-medium enterprise consumers.
But it took an enterprising Young – who by then, along with Overliese, had designed Atomos’ first product – to pitch Apple and its co-founder Steve Jobs, personally, in the hope of incorporating that company’s digital Apple ProRes codec into the Ninja.
Apple, always looking for a new growth market, saw that creative editing was driving a rapid growth in its Mac computers sales, so its interest in Atomos’ product was unsurprising. Jobs was so delighted with the idea that he provided the software for free to Atomos, punting on the fact that anything that could suck compressed data from a digital camera and into a decompressed state compatible with the ProRes format would be good for his own PC sales.
By 2010, video editing software had become a burgeoning US$5 billion (AU$7.36 billion) industry, driven by an explosion in smart phone sales and the development of social media sites such as YouTube and Facebook. Suddenly, everyone had a smartphone in their pocket with photo and video capabilities and a plethora of social media sites on which to post their content.
As the market developed, so did the demand for better-quality images for editing, which had only really become possible through devices such as the Ninja.
And so it was that Atomos found itself in exactly the right place at the right time. Not only were the major camera manufacturers such as Nikon, Sony and Canon in an arms race to shrink their devices – which inevitably led to the poorer quality memory storage that the Ninja was specifically designed to address – the social media market was growing at a phenomenal rate, driven by an unquenchable desire for content.
Since those technology pioneering days just 18 years ago, the market has continued to grow and evolve. Apple’s ProRes “visually lossless” codec developed an alternative superior offering in 2018 with ProRes RAW, predominantly for the entertainment industry (think Netflix). The picture quality from camera manufacturers has also evolved from high-definition (HD) to ultra-HD, 4K and now 8K resolution.
And software editing suites such as Adobe, Apple’s Final Cut Pro and more recently its iMovie offering, have simplified and amplified the use of video as a format across the whole spectrum from social, pro-video and the entertainer market.
The Ninja was front-and-centre for this video renaissance and Atomos evolved its product suite to suit the newer technology needs, with add-ons such as Wi-Fi, bigger screens and generally a higher-quality offering to meet an increasingly professional market and stay ahead of the curve.
But it was in September 2021, after a stellar start to its listed life three years earlier and while riding a tsunami-sized wave of content creation, that Atomos suddenly found itself without its founding member and chief executive officer after Young was ousted from his position in a boardroom stoush.
Inevitably, stories will differ as to why the seismic shift in management took place, but a fair amount of the disquiet may have been as a result of slower sales in the previous half, almost entirely due to COVID, which drove global GDP to plummet 3.5 per cent in less than three months. Additionally, Atomos’ business model relied heavily on a considerable research and development budget to stay ahead of the evolution curve and remain relevant to its consumers – and that ate into cash flow.
An aggressive push to bring out new products, coupled with stalling sales because of the coronavirus pandemic was always going to put a strain on the balance sheet.
The new CEO and board’s decision to cut research-and-development (R&D) to better manage the company’s cash flow at the time probably saved it from an inglorious demise. But the lack of new products hurt sales and a 50 per cent revenue decline to just $40 million per annum was registered during that period.
Wind forward and with the board thinking about selling the business as a strategic option last year following a disastrous set of annual financial numbers, it took a proposal from Young to reposition and restructure Atomos – with the backing of the company’s major share and debt holder – to convince them that there was an alternative route.
In January, Young was invited back in through the front door and assumed the role of managing director and CEO ... and it didn’t take him long to get stuck back in.
By April, the company had been completely restructured. Two new products, the Ninja Phone and the Sun Dragon, had been launched and the company concluded a successful a $16 million capital raising with Young and Atomos’ new chief operating officer Peter Barber committing $2 million each.
The Ninja Phone, Atomos’ latest offering, 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.
The Sun Dragon, a world-first, is a high dynamic range (HDR), 2000-lumen, five-colour LED that provides sun spectrum light at any time. As a mount-anywhere, flexible, wireless and waterproof lighting strip, it is likely to set the tongues of content creators wagging.
In May, the company, whose shares had been suspended from trading for 15 months, relisted at 2c on the ASX. In the three months since, the price has rallied by up to about 130 per cent, suggesting that Young and his new team’s strategy is on the right track.
While sales of the Ninja Phone and the Sun Dragon only started in June, the quarterly results in September should make for fascinating reading.
In much the same way that a phoenix arises from the ashes, Atomos appears to be riding high on promises of a renewed focus to bring new products to market to drive sales revenue. With a steady $35 million in sales from existing products for the past year expected to repeat itself in the current year and the cash burn now becoming more and more under control, a successful launch of the Ninja Phone and the Sun Dragon could be just the tonic needed for restoring much needed shareholder faith in the company after its rollercoaster ride.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
