Why this ASX tech share has rocketed 13% higher today

The Atomos Limited (ASX: AMS) share price has rocketed 13.30% higher today, following a very favourable market reaction to the release of its results for the half year ended 31 December 2019.

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The Atomos Limited (ASX: AMS) share price has rocketed 13.30% higher today, following a very favourable market reaction to the release of its results for the half year ended 31 December 2019.

What does Atomos do?

Atomos is a global video technology company that creates products for the social, pro-video and entertainment markets. Atomos monitors transfer images captured by cameras to a hard drive, which enhances the quality of the video. The monitor can be added to phones, tablets, or video recorders.

Strong revenue and earnings growth

Atomos reported revenue growth of 35% for the first half of FY20, with revenues coming in at $32.6 million. Gross profit reached $13.9 million, up 32% on the prior corresponding period. Pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) growth was also strong, up by 35% to $1 million.

Demand for the company’s Ninja V product was reported to remain very strong, underpinned by major global camera companies.

During the period, Atomos completed the acquisition of Timecode Systems (TCS). TCS is a UK based company that has developed patented technology enabling multiple audio and video capture devices used by professionals and consumers to wirelessly link together.

The company also raised $30 million, before costs, via 2 institutional placements.

Commenting on the results, Atomos CEO Jeromy Young said:

We are pleased with the continued growth in revenue in the first half, particularly as there were no new product launches during the period. The growth in our existing range demonstrates the continued demand for our technology ecosystem. We are excited to enable growth through increased deployment into video and audio devices with TCS. We are also very pleased to see Apple ProRes RAW support announced for Adobe and Avid software this half.

Delay of new products

The company has reported that there have been some delays in completion and release of its range of new products. Atomos’ principal factory reopened 10 days ago, although, it noted, at a reduced worker capacity. Atomos expects its 2 other factories will start coming back on-line soon and will be fully operational in the final quarter of FY20.

Outlook

Atomos expects to maintain strong revenue growth in FY20, compared to FY19, based on the company’s factory production returning to normal, timely new product releases, as well as no observed ongoing adverse market conditions from the coronavirus.

The company commented that it believes its current short-term supply chain disruptions do not reflect the long-term demand for its products.

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Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Atomos Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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