News: BUD Buddy Platform Posts Loss For Year Of $13.9 Million, page-19

While operating revenues (excluding interest/grants) doubled from $1.05m to $2.08m for the year, its losses remain high at $13.87m (excluding revaluations) although down from ($16.96m) the previous year. A closer look however revealed that Employee expenses grew from $4.36m to $6.44m and the share based expenses alone were $3.46m which is 166% of the entire year's revenues. This is similar to that in some other tech stocks where you do not see prudence in managing cost and issuance of shares (diluting holders) relative to revenues earned.

In addition, all the fanfare about appointment of world class distributor Ingram Micro has fallen flat and it appears that North American sales failed to gain much traction.

"In North America, while missing the gravitas of Ingram Micro’s distribution of Buddy Ohm (as previously disclosed, this is simply running behind schedule, to the regret of Ingram Micro as much as Buddy!) the Company saw initial success in schools, supermarkets and corporate locations across the US and more recently has seen that expand to universities, the hospitality sector and even now museums. Buddy’s direct sales team in the United States is progressing several bids for the purchase of Buddy Ohm into large property portfolios in the hospitality sector, and across the Company there remain further significant bulk-purchase opportunities that continue to progress well (but are long-lead time opportunities, which investors are urged to recognise and exercise patience)."

Still BUYING TIME ....I have never seen other stock announcements asking investors to exercise patience!

I had previously pointed this out in my example with another IoT stock where Ingram was also appointed to distribute their drones which failed. Buddy Ohm is only one of many millions of products being sold by Ingram Micro, if it failed to gain traction they are more likely to abandon it especially in this competitive marketplace where Buddy Ohm is no longer uniquely placed to be the only offering with the solution they provide. Other competitors which have a much better control optimiser rather than just monitoring platform had better market traction but still proved difficult because it takes a lot of time to gain entry especially large accounts. And this is why people should look at the revenue model of the business - if it takes a long time to penetrate a building account and if successful the amount of revenue earned is not significant (<$1m per deal), it doesn't take much to recognise that the path to profitability will be difficult ahead.

Even assuming that BUD can grow its revenues by 100% each year, it would take them no earlier than 3 years before they can reach breakeven at the rate at which they are spending. Once it gets to $5m revenues or so, and still bleeding, market would look at them the same way as it did for a number of other similar stocks in the energy optimisation solution space- 'ok good revenue growth but when can it be profitable?'. So much for the CEO's earlier indication of an EBITDA positive soon and its lofty revenue forecasts.