This year has no doubt been tough for DM and the Buddy team....

This year has no doubt been tough for DM and the Buddy team. They kicked off 2021 with an accounting error by the CFO which cascaded into an ASX suspension and then required a $6.5m CR to reduce debt to PFG. Then there was the global chip shortage to try and navigate. Then finally omnicron hit the USA and Europe in the December quarter with death rates and hospitalization at record levels, stores closed, retail sales went into a tail spin and the Fed indicated an intent to raise rates due to inflation.

Under those conditions, I am moderately pleased with this 4c and that Dave and Rick stood firm when the other 3 board members insisted on a obviously different pathway and subsequently resigned. The team needed to make some changes to their original push for revenues at any cost. They needed to cut staff to a minimum and reduce manufacturing costs via a second manufacturer. They needed to redirect sales efforts away from the traditional bricks and mortar. They needed to adjust the SKU promotion and consolidate their inventory position.
IMHO, they have done that.

The EBITDA of 91k is obviously a little disappointing, but Best buy was effectively closed for the entire final quarter. They were bud largest customer. Covid stopped people shopping at best buy. Their numbers are down over 85% across the board.

The positive from the report are:
(1) Despite $8m ( $26m for the CY) in revenue for the quarter being slightly lower than expected, BUT the EBITDA is a $1m better than last Dec 4c. Stock closed at 5.8c ( 02/02/21) ( approx $170m MC ) after that report. Current MC approx $40m.
(2) Margins of 43% is impressive and up from 26%. There were sales going through without discounting and this made sense as the bricks and mortar stores were empty.
(3) $17.4m in assets, includes $4.1m in cash to come in, in the next 4-6 weeks.
(4) $14m in inventory that has never been available for sale in Q1 in previous years. This inventory will be run down during the next two quarters.
(5) USA downlight is now selling into commercial/property developers. OHM is ticking along in the background with 1-2 sales people Parcels are 8X on the usual retail basket and being a direct sale the margin is the highest of all the LIFX SKU's.
(6) Debt to PFG continues to repaid ( $641k ) and with 4 consecutive months EBITDA positive, there should be an opportunity to renegotiate a lower rate than 12.5% or to refinance to another party.
(7) E-commerce business grew to compensate for some of the bricks and mortar fall. Retail shopping with return to some form of in shop purchases and Best buy will be back ordering again.
(8) With current margins and cost reductions, EBITDA losses like in previous years are a thing of the past and with $2.2m shipped in Dec the next few months should continue the trend of EBITDA positivity.
(9) Amazon remains as committed to the LIFX brand as ever and the continual Echo dot/ white bulb bundle continues in 2022.
(10) IMO, the much more competitively price colour downlights, combined with switch, promoted into the commercial and building sector will provide LIFX will a significant uplift in revenues this year, whilst maintaining the margin and result in continued positive EBITDA and hopefully NPAT.


IMHO, this sets up a better foundation for 2022 than has ever been in place. At such a low market cap and being EBITDA positive for the last 4 months and moving forward in 2022, plus a 43% margin on sales, there would be interested parties taking note.

Lets see what the webinar holds on Thursday.