Buddy Technologies achieves first EBITDA-positive month

Buddy Technologies ASX BUD LIFX IoT smart light
Buddy Technologies’ consolidated revenue was also up 90% from June and 80% higher than a year ago.

Internet of Things (IoT) technology developer Buddy Technologies’ (ASX: BUD) balance sheet has improved in leaps and bounds with July being the first month of the year to record positive earnings.

The Australia-based developer of smart space and lighting solutions today posted unaudited results for July 2020, including earnings before interest, tax, depreciation and amortisation (EBITDA) of $36,000. This figure signifies a substantial recovery from a $266,000 EBITDA loss in June and an even bigger improvement on the $647,000 loss reported a year ago.

Consolidated revenue grew 90% month-on-month to reach $4.9 million, which also reflects an 80% improvement on July 2019’s $2.7 million.

In addition, government subsidies and rebates related to COVID-19 were down 66% from June to $207,000, meaning customer revenue had grown 138%.

The July results come off the back of the June quarter being Buddy’s best-ever quarter on an EBITDA basis.

Smart light orders reduce margins

In an update to the market, Buddy chief executive officer David McLauchlan said revenue growth reflected the impact of the first shipments of the company’s low-cost smart light, LIFX White.

He also noted the expected large LIFX White shipments pulled consolidated margins fractionally lower to under 30% in July as they are, by design, a lower margin product.

However, the company achieved unexpected higher commercial business margins, led by an improvement in the high-margin services revenue mix.

COVID-19 impacts

Mr McLauchlan said the COVID-19 situation in Latin America and the Caribbean has continued to affect the commercial business with higher margin account wins being unable to compensate for some lower margin account losses.

He also noted that revenue in this area is unable to be accrued until installation of equipment is completed, which in many cases is awaiting the easing of COVID-19 lockdown restrictions.

“The commercial business has newly signed customers ready to deploy their Buddy Ohm systems – if only lockdown restrictions would end. But when they do, installers will be busy. We know this is a ‘when’ not ‘if’, but the timing remains hard to pinpoint,” he said.

Mr McLauchlan also warned retail shopping in the coming holiday period will be “unlike anything we’ve seen before” due to the pandemic.

“Expert opinion seems to agree that online will take a much greater role in the holiday shopping season this year than ever before, which if the case, will ease margins up slightly. This would be particularly welcome given the expected volume of sales in this coming period,” he said.

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