'Tough Shareholder Questions answered by the company'?are located at the bottom of this article.
'June Quarterly (Q4FY21) Appendix 4C Recap'?is located at the end of this article.
The Company?has announced a 1 for 7.5 pro-rata non-renounceable Entitlement Offer specifically for existing investors only, to raise up to $10 million.?
Buddy had recently conducted a?share placement and received firm commitments of $6.5m, from new and existing institutional, professional and sophisticated investors.
Proceeds from the?Entitlement Offer and Placement are intended to primarily be used to provide the company with additional working capital to support its growth, which will include:
- Increased marketing investment to reach new customers while building campaigns and programs to incentivise repeat purchases.
- A strategic promotions strategy to ensure consistent sell-through across all channels.
- As the category continues to grow, clearly positioning LIFX products as bringing the premium smart lighting experience at a competitive price point.
Repay amounts owing to the Company’s Primary manufacturer, Eastfield Lighting (Hong Kong) Limited (Eastfield), and reduce existing debt with Partners for Growth. This is vital to Buddy’s commercialisation efforts because it?further reduces Buddy’s existing liabilities and strengthens their financial position.
- ?LIFX is touted as a fantastic product by consumers as it’s consistently and regularly recognised in the marketplace as being a market leader in quality and performance.?LIFX smart lights consistently win head-to-head reviews with competitors like Philips Hue?and?return rates on our products are well lower than industry segment averages.
- The Power side of Buddy’s business (including Buddy Ohm and their new smart light switches which have Buddy Ohm built into them), while much smaller than their smart lights business, continues to be a steady revenue stream, and an?increase of sites under management by existing customers are expected in the coming months.
- The second Manufacturer commenced production of new 2021 products in June, first light Bulbs to be?manufactured in September in time to supply holiday 2021?(Thanksgiving, Black Friday, Christmas).
- US$17 million in manufacturing orders placed end of 2020/early 2021?(approx. A$40m of retail invoice value),?expected all to be delivered by the end of August 2021.
- A range of new/updated product being introduced:
- LIFX Clean, germicidal, anti-bacterial technology?– now available at Best Buy, Amazon. Further testing 4-5 months to determine whether product may meet U.S. EPA regulations for labelling (effective onSARS-CoV-2/COVID-19.
- LIFX Lightstrip Gamer & TV?–?industry’s first smart black lightstrips?to provide ‘bias lighting’.
- LIFX Switch Glass (AU/NZ +USA) and LIFX Switch (North America)?– Premium glossy 4-button smart switch that?can control non-smart lights as well as LIFX smart lights
- LIFX Downlight (worldwide).
- LIFX Beam?–?unique product with no direct competition, with renewed popularity in 2021 and regularly sold out at Amazon and Best Buy
- LIFX Nightvision?– smart light with infrared illumination to?help security cameras perform far better in low-light?environments.
- 2-packs and 4-packs of LIFX most popular products ->?increasing average order value.
- Working closely with Amazon, Apple and Google to support ‘Matter’, the new smart home and connectivity/control alliance.?Buddy will be amongst the first in the world to support, which could provide opportunities for sales partnerships with these major partners.
- New retailers are expected to come on-board?(Costco, Home Depot, BJ’s Warehouse Club, Air Force Exchange).
- CEO – David McLauchlan & Richard Borenstein (non-exec Chairmain) have over 50 years of technology company experience, both providing established track record for technology innovation and growth.?Richard bringing 40 years of experience as a venture investor, adviser and board member and David providing over a decade in hardware, software and development teams at Microsoft, also as a management consultant for PwC Australia prior to moving to the US.
- In addition, Buddy has replaced three non-executive directors with two interim executive directors, Paul Russell (VP of Software Engineering) and James Nelson (Snr Director of eCommerce). Paul has 17 years consulting globally across different technologies and industries prior to joining Buddy, his role is focused on improving core business systems across different business units. James has over 15 years in?leading digital marketing and eCommerce for leading retailers such as Aesop (valued c.$250M) and Cotton On (group valued at c.$1.5b)
- Directors have skin in the game?– they have invested considerable amounts of their own money in via direct share purchase/rights issues and are committed to the business personally and motivated to see?its success.
- BUDDY TECHNOLOGIES LTD?(BUD)?is an ASX-listed, IoT (internet of things) company, that makes products which make spaces smarter. Buddy is the world’s #2 vendor of smart, internet connected lighting (under their “LIFX” brand) and also makes energy monitoring systems for buildings. With electricity prices as they are – and not expected to go down – Buddy’s energy monitoring products, along with their extraordinarily energy efficient and smart lights are perfectly timed to meet a growing global demand for energy aware products.
Buddy Technology Ltd – Shareholder Questions & Company Answers
Shareholder Question (Reporting Error) –?27 April 2021 BUD announced a reporting error and retracted an overstatement of revenues for March 2021 (inter-company sales having been accidentally counted as revenue and reported as sold inventory).?Will it happen again, or can it?
- This is a once-off error, audits/checks have shown no other prior occurrence.
- Two additional staff have been added to the finance team and processes put in place to rectify the concern, which included upgraded warehouse tracking systems
Shareholder Question (Critical Component Supply) –?27 April 2021 BUD announced the suspension of manufacturing scheduling, as the Company’s allotment of a critical semiconductor component had been sold by the component’s supplier to another party.?How did this happen? How can you make sure it doesn’t happen again with the new supplier? Do you anticipate further supply issues in the future?
- The worldwide component shortage is ongoing and it would be difficult to suggest that we won’t face similar challenges again.
- That said, like many companies dependent upon electronic supply chains in Asia, we have taken deliberate steps to help mitigate this risk going forward.
- We have made opportunistic spot purchases of critical components when possible.
- We have identified alternative components for use in our core product range.
- We are optimising the design of current and future product lines to reduce cost and increase performance.
- This also includes alternate manufacturing partners that take on greater ownership of finding, purchasing, and storing key components as part of our manufacturing agreement.
Shareholder Question (Board of directors)?–?Three non-executive directors resigned and were replaced with two interim directors.?Why did they resign? Will the two interim directors provide more hands-on value?
- In the weeks leading up to the resignations it became clear they had a view and plan for the business that was not aligned with our top 20 shareholders, company leadership, and the remaining members of the board (the Chairman and the CEO).
- Rather than push a strategic direction without the support of these key parties, the three directors elected to step aside. We are now moving forward with a highly reviewed strategic plan that sets the company on a pathway toward growth and profitability.
- In the meantime, the interim directors are senior members of the LIFX leadership team representing our engineering, digital marketing and e-commerce functions.
- The work to identify, interview and put in place permanent board members is underway, with interviews already having started.
- There is urgency to get these permanent positions filled as soon as possible.
Shareholder Question?–?What is the main business priority to ensure success in the coming months and years?
- With major hurdles cleared in the financial and manufacturing areas of the business, attention must turn to maximising sell-through of LIFX products.
- We have a fantastic product that is consistently and regularly recognised in the marketplace as being a market leader in quality and performance. LIFX smart lights consistently win head-to-head reviews with competitors like Philips Hue and return rates on our products are well lower than industry segment averages. Our products are strong, and so we must focus on getting more of them into customer purchase carts.
- This means being smart in how we take our products to market, determining the best partners and channels to work with.
- It means investing to reach new customers with a clear message of how LIFX can make a positive difference in their life.
- It means providing a premium customer experience in every aspect of our business – the marketing, the LIFX mobile app, our lights, and customer support.
- A tight focus on our customers will improve repeat purchases and develop LIFX advocates.
- Finally, the Power side of our business (including Buddy Ohm and our new smart light switches which have Buddy Ohm built into them), while much smaller than our smart lights business, continues to be a steady revenue stream, and an increase of sites under management by existing customers are expected in the coming months.
- Power also represents an important connection to the LIFX business, as we believe power monitoring and control will continue to be an important element in our offering as climate change and energy management concerns increase around the world.
- The first crossover product to include Buddy Ohm technology in a LIFX product is the new LIFX Switch, and we look forward to leveraging both sides of our business to greater levels soon. In the meantime, we share our energy data with Amazon Alexa, and are engaged with Google and Samsung to the same with them.
Shareholder Question?–?How will you select the new board and ensure the competency of board members?
- All board members go through a thorough vetting, and they must also meet the requirements set out in the Corporations Act.
- Buddy Board members do not earn a salary, they are instead paid in company stock which vests over a three-year period.
- We are looking for candidates that have supply chain, manufacturing, marketing, or retail experience.
Shareholder Question?–?Where is Buddy’s ohm business going? How has it been progressing?
- The Power side of our business (including Buddy Ohm) continues to be a steady revenue stream, and an increase of sites under management by existing customers is expected in the coming months.
- Power also represents an important connection to the LIFX business, as we believe power monitoring and control will continue to be an important element in our offering as climate change and energy management concerns increase around the world.
- The first crossover product to include Buddy Ohm technology in a LIFX product is the new LIFX Switch.
Shareholder Question?–?Has a shortage in stock negatively disrupted LIFX resellers and distributors to sell in the future?
- For many consumer electronics companies, managing the supply chain, manufacturing and component shortage issues of the last 18 months has been a challenge and we have been no exception.?
- While a challenging period, LIFX did maintain a close dialogue with our retail and distribution partners to tackle some of these issues together.
- As we emerge from these challenges, LIFX is in a strong position with our partners, and they are showing their support and interest by submitting orders for products.
- We have seen strong results in the past quarter, but we know there is more we can do with increased investment in marketing and focus on improving the customer experience.
Shareholder Question?–?Is there a plan for Buddy to turn cashflow positive in the near-term? (1-3 years)
- We have made substantial reductions in expenses, while looking to invest in key growth areas of the business such as marketing, with the sole aim of being EBITDA positive as soon as possible.
- We have a plan in place that was thoroughly reviewed inside LIFX and by outside third parties that maps out a path to positive quarterly EBITDA and then profitability. We can’t provide forecasts, but investors should understand that this remains the highest priority of the board and management of the company.
Buddy Technologies Limited June Quarterly (Q4FY21) Appendix 4C - Recap
- Revenues of A$6.7 million?including government rebates and subsidies of A$158k.?
- Customer revenues were up 32% over the prior quarter and up 21% over the prior year (Q4FY20)
- Cash receipts of A$9.1 million, including A$158k of government rebates and subsidies
- Customer cash receipts were up 117% from the prior quarter and up 29% from the prior year
- Adjusted EBITDA: negative A$1.9 million?for the quarter (compared to negative A$2.3 million for prior quarter and negative A$688k for the year-ago quarter)
This means that losses for the quarter were reduced from the prior quarter
- Current assets of A$21 million
- Cash on hand at 30 June 2021 totalled A$2.1 million?(excluding any cash from the July 2021 fundraise)
- Trade and other receivables?totalled?A$5.0 million
- Inventories?(and prepayments) totalled?A$13.9 million
This is our biggest buffer against future parts shortages – a significant amount of inventory (double what we’d normally carry at this time of the year)
- Q4 FY21 was?net cashflow positive
- In July 2021, the Company completed a placement of shares to sophisticated and institutional investors to raise A$6.5 million (before costs) and has launched an entitlement offer to existing shareholders to raise up to A$10.0 million
- A debt refinancing has been agreed whereby (amongst other matters) a debt forgiveness of US$3.02 million has been agreed, such that the Company will pay US$2.75 million to its primary manufacturer, Eastfield, in full and final settlement of a line of credit facility and historical accounts payable (from prior to the LIFX acquisition, with such amounts totalling ~US$5.77 million). Further, PFG (Buddy's secured lender) has also agreed to restructure its existing term debt facility and, if required, fund part of the payment to Eastfield (refer to ASX announcements dated 16 July 2021 for further details).
*Adjusted EBITDA is equal to revenues (not including other income) less cash-based operating expenses (which excludes any non-recurring items such as acquisition or restructuring costs, costs relating to finance facilities and any share-based expenses).
Shareholder Engagement? Email?[email protected]?or call Stevan on 0401 639 114
