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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Hi, everyone. Well, welcome. My name is David McLauchlan. I'm the CEO of Buddy Technologies Limited, and welcome to our Quarter 2 FY '22 Investor Webinar. I had an e-mail this morning from a shareholder that asked for some camera time. So we're going to try to figure that out as we're using a little bit of new technology here to see if we can do both these things at once. But anyway, for those of you joining us, welcome. We will go through the quarterly report from a couple of days ago. We will have a chat about the state of the business and some of the things that are coming up. And as always, we'll bring in various members of the team from around the world who have dialed in, whether they've been in Dublin, in Australia or where I am right here in Seattle in the United States. We obviously do a quarterly every quarterly. We also -- every quarter. We also do a monthly report. We're not going to dig on that too much. We're going to focus on the quarterly, and then we want to get into the business. We have a lot of slides to get through. We will publish this to the market afterwards and certainly to our website, and we'll also go through recent Q&A. We had a good amount of Q&A that came in during the course of the last couple of days. So with that, let's go to the slides. I'm going to see if I can do this transition seamlessly. I think we are there. Okay. With that, let's jump in. As I said, this slide deck will be made available on our website, and we'll see if we can publish it to the market as well. Quick agenda. Obviously, we'll go through the 4C. We'll talk about the AGM that we just had last Friday. We'll do a very quick review of the business. I'd like to try and do a business review for those that are new to -- new shareholders of the business. But then we'll get into some of the meat of the topics, right, holiday sales, our changing shape of yearly revenue. We'll talk about margins. We'll talk about new products. We'll talk about trade and prosumer, the professional renovators, bulk buying that we're seeing a significant lift in. We'll talk about e-commerce, and we've got our Head of e-commerce in from Australia on the call. And then we'll get to some Q&A that has been submitted by way of e-mail. And we also want to pick up some questions from HotCopper. So we'll get right into all of that. With that, let's jump into the 4C, and let's kick that off with a look at the headlines. So we had customer revenues of just $8 million exactly with cash receipts of $6.6 million. Now one of the questions I often get is, why don't those match? Revenues, obviously, are sales that we land in the quarter, but payment terms from our customers can be anywhere up to 90 days. So it could be up to 90 days where we would see that cash come in later. And as we've said in the commentary with this particular 4C, over the holiday quarter, we do see longer payment terms. So customers that will be paying us in, say, 45 days or 60 days may go as long as 90 days over the course of the holiday quarter. And that's just a function of sort of retail and how things work in the retail world during the holiday period. We were very pleased to report positive EBITDA, adjusted EBITDA of $91,000 and current assets of $17.4 million, of which $4.1 million is trade and other receivables. So that's the amount of money that's owed to us by our customers and then inventories and prepaids of $12 million as well. One of the headlines -- or highlights, I should say, of the quarter was really strong gross margins, 43.1% gross margin, which is a very, very strong number. This is up from the mid- to high 20s in the year ago quarter, so a very substantial lift from there. And as we've reported throughout the course of the half, this number has been consistently in the 40s. We've even been in the higher 40s in some months as well. So we would actually expect this quarter to come down a little bit because of promotions around Black Friday and Cyber Monday and the holiday period. But to hit a 43.1% gross margin figure for the quarter, we were really, really happy with. So revenues, we were $1.5 million lower than the year ago quarter. However, because of those margins, those very, very strong 43.1% margins, our EBITDA was actually $1.1 million better due to that margin growth. So this reflects the goal that management had, and we've talked about this on a number of webinars previously. But our focus has been to prioritize making money, prioritize that EBITDA figure and take the priority or the focus off the top line revenue number. Historically, the business was very focused on growth in top line sales. And frankly, we weren't as successful there as we needed to be. Also, the market matured. Also, the COVID pandemic completely disrupted things. But overall, we said the highest priority right now is to be to reach that positive EBITDA point on the way to profit. And so while we did see a lower revenue figure for the quarter, we actually were very, very pleased that we had a much better EBITDA result. And if you look at the current quarter we're in, quarter 3, and then you look at the year ago quarter, the EBITDA numbers in the year ago quarter were even worse than a year ago of last year. So you're going to see us really focus on that, and that's a great opportunity for us to improve substantially on the year-on-year as we move forward into the calendar year. Now we just talked about receipts a little bit earlier. Receipts were a little bit lower in this quarter due to lower Q1 revenue. So it would stand to reason that we have lower Q1 revenue when we have lower receipts in Q2. But likewise, when revenue lifts in this quarter, the Q2 quarter, as it did, then we would see -- expect to see larger receipts in the next quarter. So again, that lag is important to understand. And that lag is more pronounced over the holiday period. Cost of goods sold increased over the prior quarter. You would expect that as more products are sold. So we recognize that as we sell the product. But then we did have a proportionate decrease in COGS over the year ago quarter, particularly as lower cost products were introduced, and we changed the shape of what we were selling and how we were ordering as well. Looking at the year ago quarter comparisons. One of the things that was interesting is Amazon Prime Day, which really has become a very, very important sales period for us, they shifted their dates pretty substantially. A couple of years ago, it was in October. Then last year, they moved into June. And so that really kind of screwed up the year-on-year comparisons in many respects because it's such an important and such a significant sales period for us. When it moves in the calendar, it's hard to do a direct comparison. So where we can sort of compare holiday to holiday, it's hard to compare the other quarters right now anyway because they shifted and moved their Prime period -- their Prime holiday period over the course of those 2 years. The other thing we're seeing right now is that we're seeing some delays in invoice acceptance from customers. So we get paid on terms from acceptance of invoices. Some of those have been delayed due to logistics issues around COVID. Again, it's just part of the environment we're all competing in right now. This is not anything that's particular to us. But we are seeing that, of course, with the recent Omicron spread throughout, especially here in the U.S., there's a lot of impact on logistics. So not so much of an impact on supply chain. We're not seeing that hit us from a parts availability point of view or a manufacturing capacity point of view. Where we are seeing it hit, though, is in shipping domestically. So when we ship from our warehouse to our customers or when our customer wants to ship from their distribution center to their retail locations, there has been an impact on them and, therefore, on getting that product moved. That being said, $4.1 million in ARR as of the 31st of December, that's lifted even further today, so about $5 million today. And we will continue our efforts to bring that in. We have very, very reliable customers in terms of payments. And as soon as we can move that payment time back down as we enter into this quarter and see those terms reduce, then I think we'll be able to collect that cash and with increasing pace. As we look to EBITDA, like I said, very pleased that on a quarterly basis, we were positive. This was a net $1 million improvement over both the prior quarter and the year ago quarter. Of course, EBITDA does include debt principal repayments but does exclude interest. So that's where that difference is between sort of getting to cash profit is to make sure we've got enough EBITDA to service that interest cost. For this reason, margins are super, super important, right? To give you a sense of what the importance of that margin impact is, at year ago margins, we would have needed $13.3 million to achieve the same gross profit as we did this quarter with $8 million. So that just goes to show you the massive impact that margins can have, and we'll talk about that in a little moment. But you will see us continue to apply focus on that margin area across the business, across all areas and all regions. It's a high, high priority for us to maintain that and protect the opportunity that gives us in terms of EBITDA. Our cash on hand at 31 December was $1.3 million. Receivables were $4.1 million, and inventories and prepaids were $12 million. Now to give you a sense, when we disclose an inventory and prepaids number, that's a cost of goods sold figure, which is effectively what we pay the manufacturer for that plus the cost of shipping. That's what cost of goods math looks like. So at current margin, that's about $17 million on a revenue level if we were to sell all of it at current margins. Now of course, we don't sell all of our revenue to 0 and then build back up again. That's not practical or feasible. And of course, we won't sell it all at exactly that margin. But just to give you a sense of what that $12 million turns into, that's sort of the ratio as we look at that current margins. Now we've talked a little bit in recent quarters about this inventory position, and we want to bring that down. It's much more efficient for us to carry less inventory but rotated more frequently, and that's a general truth of retail and shipping and supply chain. We got into the situation of having so much inventory because we were -- a year ago, we were at next to no inventory. We refinanced and bought as much as we could. And of course, that was the beginning of -- well, I guess it was 2 years ago now, I think, but it was the beginning of COVID when that began and that cycle began. Over the course of the time that we did that refinancing in the beginning of last year and the impacts of COVID that lasted through 2021, we found that, that inventory took a long time to arrive. So we ordered a lot of inventory, expecting it to come in sort of the March time frame or even earlier. But it really didn't come in entirely until sort of that August, September time frame. So as a result, we were selling through what had come, but there was still a substantial amount that was arriving pretty late in the game. So we got into a situation where we had a mismatched set of inventory. We had ordered a bunch over a year ago. We had substantial delays in that arriving. And so what's happened is we've got a large inventory position than we would otherwise normally carry. And so now we're in the process of working through that. Now when we talk about things like aged inventory, we're not talking about a 3-, 4-, 5-year-old product that we can't sell. A lot of this product is high moving product. We just have more of it than we would ordinarily need for the current period. So it's a product we actually can sell, and we'll keep a focus on that in the coming quarter. Of that $12 million, about $5.6 million is over 90 days. But of course, this inventory is paid for. This is cash sitting in a warehouse on pallets that we are paying a warehouse to store for us. All we need to do is turn that into cash. And we can get that back into the business, turn it again into new inventory. But we want to get that number down. So over the course of the next 6 months, you'll see us really apply a lot of focus to bring that inventory level down to about $8 million. That's where we want to sort of try and end the fiscal year if we can. As a result, we're going to invest some efforts in getting that inventory sold down over the course of that period of time. That will mean that some of that inventory will move at lower margins than other parts of that inventory. But overall, we do expect to maintain substantially better margins than the year ago period. Costs, this is a great slide. Costs are substantially down in the year ago quarter. We have managed to reduce our R&D costs by about 44%. We did a restructuring of the business in the middle of last year. That took until about the October month, maybe even during November, to really come through in terms of the impact on the financials. But staff costs are now down 32%, and G&A costs are down about 42%. So very happy to keep driving those efficiencies in the business and get the business into a more sustainable position moving forward. Turning now to some of the regions that we sell in. Europe and Australia and New Zealand, both very important regions. And we are joined on the line by both Matt Lau, who is our General Manager for Asia Pac; and Martin Carroll in Dublin, who is our General Manager for Europe. Let's start with Europe. Martin, can I throw it to you and get some comment here? You've obviously had a pretty significant period of shutdowns, and different countries had different rules. Perhaps you can talk us through the situation over there right now.
Yes. So look, in Europe, we've had probably the most stringent lockdowns right through the period. They have varied, as you said, country-by-country. Obviously, the U.K., in a post-Brexit environment, just slightly different set of rules with the rest of Europe. And even individual countries within Europe, there's a general set of rules. Individual countries had to make certain health decisions on behalf of their public. So we've seen a huge amount of lockdowns, ups and downs and, yes, open ups and things tightening up with Delta, things tightening up again with Omicron. And so as we came through Q4 calendar, so the lead into holiday and Christmas, we continued through those lockdowns and shutdowns and everything else right through the period. So retail did suffer quite badly. What we've planned and what we did through 2021 in anticipation of that retail footprint being hurt and footfall being down is we pivoted a lot of our attention towards more digital and online platforms. So we've invested heavily with Amazon. We've ramped up our sell-through there against the backdrop of improving margins and reducing the amount of promotions that we're running. A lot of the focus has been on driving better content, driving better pricing and driving sales. So that has delivered a result. And beyond that, we're doing the same across other digital platforms and building out the business. Looking forward, most countries in Europe have now almost completely backed out the restrictions. So here in Ireland, for example, 1 week after Christmas, our government made an almost about-turn. Having been completely locked down over Christmas, we've gone to completely open, and all the restrictions are lifted right across the place. The U.K. have lifted all restrictions, and most of Mainland Europe is -- has not lifted but are certainly easing all the restrictions. So we're seeing a return to normality. We're seeing people back out in the streets. We're seeing a lot of footprint or a lot of footfall back into retail. So really looking solid now coming into Q3 or through Q3 in terms of a lot more activity on the ground.
Awesome, Martin. Thank you very much. With that, let me throw it to Matt Lau, who is in Melbourne. Matt is responsible at the GM level for Asia Pacific. Matt, why don't you give us a run-through of where you are in Asia Pac?
Yes. Thanks, Dave. So in APAC, we continue to see strong growth. Some highlights, I guess, from our key market in Australia, to -- I guess to provide the most accurate data set using our largest Australian retailer, I think it's great to announce here that our ASP has actually lifted from $75.88 to $76.56. And so for those, I guess, joining us recently on this investment trade, we -- to provide you with more context, we've actually recently did a markdown or RRP revision for [indiscernible] with our new products coming into channel. And so to see this result with the RRP revision essentially means that we're selling more units at a higher ASP year-on-year, which is very encouraging to see. And the average ASP drop that we saw, when we would need to do the revision on our new collection, was around 20%. So to make this up on our largest Australian retailer is a great effort across the board. And really, to further the Australian -- to echo the Australian growth, we actually almost saw, once again, our largest account double from last year's sell-through. So that is Q2 2020 versus 2019. So once again, if we compare like-for-like time and time, we both in Australia -- for those in Australia knew that we were suffering lockdowns and COVID restrictions and all that for both Q2s, both last year and the year before. So look, it's an incredible result to see that.And the one thing I just want to highlight here that these are actually sell-through units, right? So what we're highlighting here is units sold to the end customer. It's not units that we sold to the retail to load up their stores. So this is a true reflection of actual demand out there, especially in Australia. And we're just continuing to see this forward momentum really go throughout even as early as January, like the last month that just went. So I'm also pleased to announce that for January, if we were not just to take the largest accounts in Australia but aggregate all the accounts, all our channels across all of Australia, we are actually 68% up year-on-year from a unit sell-through perspective in all of Australia, which just is a true reflection of consumer demand in Australia in addition with our increasing ASP. I mean, there's just great things to come, Dave. So back to you.
Thanks, Matt. Yes, that is an important point to make. Sell-through is not sales of product from us to our customers, but rather from our customers, which are people like Bunnings and JB Hi-Fi, to their customers. The reason that's important, of course, is then replenishment orders come in subsequently to that. So that's not our sales, to be quite clear. But it does give a very good sense of what's going on in the market. And what I'm loving here is that ASP, average selling price, is going up ever so slightly, but nonetheless going up. That's not the case in all regions. But -- and we can counter that with margins and volume and so forth. But to see that go up in the Australian channel is a great result. So well done, Matt. Well done to the team in Australia. Turning now to our Annual General Meeting. We had our AGM last week. And it was a little bit unusual because for the first time, we actually had some resolutions that were voted down. And in particular, we recorded a strike, which was against the remuneration report, which I think was resolution #1. The remuneration report is part of the directors' report within the FY '21 annual report. It is a procedural vote that we have at the AGM. It was voted down, and I'll go into a reason why in just a second. The result of that is that at the next AGM, so the AGM for this year, 2022, if there is a second strike against the remuneration report, then there is a process whereby shareholders can vote to reelect all of the members of the Board with the exception of the MD. And there's a process that goes on. We would go into that if that was to be the case. It's not the case right now that we've just had a first strike, but I did want to address it and explain what had gone on. So not long before the AGM, a long-standing and substantial institutional shareholder reached out to us and notified us that they have a corporate policy that companies they invest in have a minimum 30% female representation on boards of directors. As many of you will be aware, we don't have 30% female representation on our Board. In fact, we had a female representative on our Board or a director on our Board who left us last year, but we have not yet replaced her with a female director. And we have not been at 30%. So as a result of this policy, they notified us they will be voting against some resolutions. And obviously, that's had a substantial impact. Now we've been in contact with them. We absolutely and strongly agree with the notion of having better diversity on the Board. Funnily enough, we've actually been in the process, the early steps of interviewing and reviewing candidates, a number of whom are female. So that's good news. But we have notified the shareholder that we intend to make sure that this is addressed in the course of FY '22. They also had some concerns about wanting to see more performance hurdles on some of the executive-based compensation. Unfortunately, the vote down for -- the 2 votes that did go down were almost all Board compensation rather than exec compensation. But nonetheless, we've agreed to engage with them, and we'll make sure that those concerns are addressed. In addition to addressing those concerns, we did let them know that our policy at the company is actually not to just have performance hurdles or milestones or OKRs, depending on your language, for just equity compensation. We actually have OKRs, or objectives and key results, for the entire scope of an employee's role in the business. And meeting those OKRs is a benchmark for not just their equity compensation but actually continued employment in the business. So we don't just put hurdles on people's equity compensation. We put hurdles on maintaining their employment with the business, and then equity compensation comes as a part of that. So regardless, we have been in contact with that shareholder. We will remain in contact with that shareholder, and we will resolve that. But I did want to share that piece of information because I think it's important for everyone to be aware of the origin of that vote and those results. Moving on to the business. Now I'll try and do a quick summary of the business for all the new shareholders in the company. I know there's a lot of you on the call that are not new shareholders, and I don't need to go into this in very great depth. What I do want to do is set a sort of a floor or a ground level of understanding of where we are and then move forward into some of the details on the business. We are a company that makes smart products. We make spaces smarter. The primary business, by way of revenue anyway, is our smart lighting business, which we sell under the brand of LIFX. But we also have a commercial offering, which is -- goes under the brand of Buddy Ohm. In terms of LIFX, core bulb range, you see light fixtures here or light bulbs that are of very familiar sort of style, BR30s, A60s. There's different types and performance but very much lights that will fit into a regular light socket that are Internet-connected, quite often have color, often have additional features such as night vision or disinfection or other particular features. This is the core bulb range. There's a lot of volume that you'll see us do in these particular bulbs. And we sell these in these markets around the world, including North America, Central and Latin America, Europe and Asia Pacific. We also sell feature lights. In this case, you're seeing on the screen some light strips. This is our new packaging, by the way. We've got some brand-new packaging that is really lighting up the retail environment. That's been very well responded to. We do extensions. We do 1-meter, 2-meter, 3-meter. We have an exclusive 3-meter pack for Best Buy in the U.S. And these are a very, very popular product as well. But then in the last year, we've added now smart switching. And smart switching is a really, really important part of the new -- of the business moving forward. Not only do the switches control LIFX lights, but they control non-smart lights and also have the Buddy Ohm energy monitoring componentry in them. So there's an opportunity to sell these into commercial as well as residential environments. While most of the lights really are residential products or very, very light nonresidential environments, perhaps like a hotel room or a retail environment, the switches can, in fact, go pretty much anywhere. The form factor of the U.S., which, in particular, is a form factor that is standard across offices, across homes, across retail, across light commercial, it's a very broadly applicable product. So we're excited to see switches continue to take on. Now with that, I'm going to throw it to Brian Seitz, who is our VP of Global Sales and Marketing. Brian, we've got obviously a slide we've shown before, which has talked about some of the commentary we get on the products. They are very well received in reviews. But as we look to branding and voice and how we market, maybe you can talk a little bit about what's going on in this quarter and into the year.
Sure, Dave. Thanks. And hey everyone, glad to be with you today. Thanks for tuning in to the meeting. I just want to take a quick minute to highlight some of the priorities that we had last quarter, things that will carry over into the second half of this year as we move along through the fiscal year. First of all, as Dave mentioned, we've been in the process of rolling out a new brand stance that's now in our packaging. But as you'll likely have seen it, it really hit our advertising and marketing over the course of last quarter. And it's that classic LIFX RGB look, something that we pioneered and people really appreciate. But we've kind of taken it to the next level to help differentiate LIFX on the shelf but also the way that it looks when you're online. It's something that our partners and our customers have said they think makes LIFX unique, and we really do see ourselves as more of a lifestyle product. The way that you experience our product is the light as a -- than a technology product. We really want to connect with people on that level. In that regard, we launched a number of new campaigns to help drive engagement and sales. And we started with a Halloween campaign last October that linked up our social and lifx.com, had a really cool contest to get people to win LIFX prizes. This was done to help drive new traffic to lifx.com so that we could then build a relationship with them over the course of the next year, offering them deals, a way to communicate more directly with new customers. And that drove the highest engagement on our social channels that we've seen in the life of the company. We also launched a full-scale integrated marketing campaign for Black Friday and the holiday, and this included custom creative, long- and short-form content, social engagement and custom LIFX product bundles that were only available at lifx.com. And again, this helped us reach out to a new set of customers and really drive them from first touch to first purchase. And then it creates a good environment for us to keep that relationship going forward to offer them new products. That's -- I just want to pop in and just give a little bit of a highlight of what we've been up to you and what's going to be carrying forward. Thanks again to everyone for joining. And back over to you, Dave.
Thanks, Brian. Really appreciate it. There's a lot about this business that is very dependent on marketing and the importance of marketing. We have a very loyal customer base. There's no question of that. The trick for 2022 is to bring more people into the top of that funnel. You've seen us do -- if you're on our mailing list, you've seen us do e-mail promotions. We've had a lot of success with bundles and discounts and some ways to sort of tie a couple of products together and achieve a sale where perhaps we wouldn't. But you're going to see us focus a lot more on that top of funnel, bringing more people into the family and particularly as the shape of our customer base becomes more mainstream, and we'll talk about that in just a moment, there's a great opportunity for us there. So perfect segue into a discussion of the shape of our annual revenue. And so I think this is important to touch on. I'll also ask Travis Gerber, our COO, to throw some comments in here shortly. As we mentioned, our revenues were down, but our sell-through volume was up. And our margins were so high that our EBITDA was substantially up. So what's going on there? Well, first of all, we had some key SKUs, as in products, that dropped in price in some markets. You've heard that Australia actually sort of bucked the trend there, which was great. But in some territories, we've deliberately gone and dropped the price. We've had products such as our LIFX Colour, our staple product, which has historically been at around $35. We're able to bring that down now even as low as $25 and still maintain better margins than we had at the $35 price point. So we think that's going to have a substantial impact on getting uplift but also maintaining margins, which is super important to us. So ASP is dropping on some SKUs. That means we're selling more units for less revenue, but our margins again can make up for that. The other thing is that during the holiday period, retail partners -- or sorry, in advance of the holiday period, retail partners actually really overstocked. So the challenges we've had with perhaps ordering a little more inventory than we hadn't expected to have needed or ended up needing was the case with all our retail partners as well. Lots of them ordered well in advance of holiday. They were fearful of logistics and other challenges. And so in doing that, they were very much stocked, full to the gills as it were, going into the holiday period. So that means that they can sell through and do multiples or have significant lift in revenue on prior years or quarters. But at the same time, if they've got so much stock, they don't need to reorder from us. That will impact and we'll see a lower top line revenue number for that period. Now we expect that to normalize, obviously. We expect that to sell through and then the replenishment orders to come in. We also know that certain retailers have sort of funny end-of-financial-year dates, where they won't order until after they cross their end of financial year. So there's a bunch of factors in there, but we do expect that to sort of normalize going into 2022. And the other thing is that the SKU mix changed, right? The needs and demands of customers changed in the year between when we ordered the product and what we've got now. Again, not the end of the world, we can manage that. We can sell through some of that excess stock. But it is important that we get back to a world where we're carrying less inventory, we're ordering more often, and we're rotating it. Because when we're ordering and getting that product within 3 months, 3 to 4 months, we can be very much in tune with what customer orders are. When that gets out to be a year, then you start to find that things change. For example, LIFX Beam, that was close to being cut as a product because it did not sell well previously. Once the pandemic came, and I don't know if it was because of the pandemic, but during that period, Beam flew off the shelves. It would become a very, very successful product. So things can change, and we just need to be able to accommodate that. As we look at our EBITDA, we obviously talked about it to death, let's talk about receipt cycles. So we need to make sure that we're getting receipts in and we're -- sorry, not receipts, we're receiving products is what I mean, 3 to 4 months on a cycle versus on that 9- to 12-month cycle that the pandemic had us on. As long as we can keep that inventory fresh, we'll be in a much better position. And that's where we're getting into right now. We sell down the inventory. We're ordering in smaller quantities. I think we ordered something like close to $40 million at a retail level back a year ago. We don't need to order that large quantity all at once. We can order in bite-size chunks and keep that inventory level manageable but keep it fresh as well. Having said all of this, the holiday quarter, which has historically been a larger quarter than the rest, in fact, I think in some years, it was even as much as the other 3 quarters combined, that curve is flattening out, and that's a good thing. We don't want to have to keep relying upon 1 quarter. We're seeing that revenue, and we're seeing that demand shape out in a more even fashion. For example, Amazon Prime Day is now on track to be this year our biggest holiday period. And that would put that in the, if it was like last year, in the June time frame, which is not obviously in November, which is obviously not in the holiday quarter. So a lot of changes are happening there. But also, the average number of lights per cart is going up. The average number of lights per customer household is going up, and bulk purchases are increasing. We're seeing more trade. We're seeing more prosumer, and we'll get to that in just a minute. I want to just try and explain what's going on here or what we think is going on by referring to this law of diffusion of innovation. And if you haven't seen, a guy named Simon Sinek does a great YouTube video on this, definitely go check it out. The short version of it is that in any tech adoption or the adoption of any innovation, there's this sort of path to getting across the line for that particular piece of innovation. So there's early adopters that come out of the innovators. Innovators are the very first folks that will try anything. They're all tech forward. And following them is early adopters. But you've got this chasm. And once you cross that chasm and then the majority of people start to use the product or start to join the innovation, then you hit mainstream and then you really hit the stride. So this is a pretty well-known law. It was -- popped in the '60s, I think. But I wanted to apply it to tech retail because I think this explains where we are and where we're going. Back in the day when the first smart lights were invented, these were a Kickstarter product. They -- the product was funded. The product was developed. It went into the tech stores, your JB Hi-Fis, your Best Buys. We're still in those stores today. But what's happening is there is a greater focus now on the mainstream stores, and there's a greater focus on the customer's side to not just being a tech enthusiast but a mainstream person. And we've always held the view that where this business really takes off is when the average consumer, going to replace a set of burnt-out light bulbs, buys a smart light because that will be the thing that's out there. And you won't choose to go buy a specific smart light. Just the light you buy will be smart. We're still a little way off that yet. But we're now at a point where people are buying 4, 8, 10 lights at a time for their homes, down like to selling in bulk numbers because the people are outfitting an entire room. This is no longer people just buying one light for a gaming room or a tech study or a kid's bedroom. This is starting to become now a product that people are buying en masse. And so we think of this as the pathway through. As we now look at where the shift of revenue is, it also applies to a shift in buying patterns, right? You would expect to have greater holiday sales at a Best Buy or a JB Hi-Fi. Then perhaps you can order it at Bunnings or at Home Depot. And you'll see more around-the-year purchasing. And you'll see more renovation purchasing. You'll see more new home construction purchasing, and you'll see more people just going in at any time of the year to purchase at those sort of more mainstream stores versus the tech-specific stores. So we are expecting a flatter quarter curve, not quite the huge peaks that we'll have in holidays. That being said, we're not done with big holidays at all. That's still going to be our largest quarter, we expect. And of course, we're not offering any guidance here in terms of dollars or anything else. But simply that where we've historically had a huge holiday quarter and then a next-to-dead subsequent quarter, we think that's flattening out. And so we don't exactly expect that to be the same pattern moving forward in future years. As I've said, Prime Day is on track to be our largest holiday in terms of promotional holidays, with Black Friday, Cyber Monday obviously being globally important. But Amazon is just a juggernaut and driving enormous movement in the retail landscape with their Prime Day program. Like I said, both prosumer/trade channels would have significant growth in that area. We'll get to that in just a minute. And given what we're seeing in the early days of January and the numbers that are coming through for January, we haven't closed the month yet, but seeing what January looks like, I think that divergence from that historical shape is something that we will be able to comment on further in due course. Turning now to margins. And I want to address margins because we've got a pretty interesting situation here in terms of this growth. And I want to loop Travis Gerber in on this particular conversation because he, as COO, has been heavily involved in driving this margin conversation. Trav, can you just jump in and talk us a bit through this lift? Because we're at high 20s previously, 28%, give or take. We expected to get to 36% by the end of June, which would have been a phenomenal result. And here we are at 43.1%. So talk us through that again.
Yes. Sure thing, Dave. And thanks, everyone, for having me. Yes, one of the biggest key things that we really focused on this year was managing our promotional strategy and having better data integration across the business. With some of our customers like Amazon and Best Buy and even some of our customers around the world, we see a tremendous amount of data that comes through at the point of sale that helps us be able to identify trends and be also able to really optimize our supply chain. And so by tying this data together and focusing on a promotional strategy that was really aligned to some of the buying patterns and trends that we were seeing, we saw a much stronger uplift of SKUs that we had stronger margins on, SKUs that we had a good inventory position on. And so we were able to be a lot more precise in that promotional strategy. And that helped with our margins. And then also, just that end-to-end supply chain data integration and really just maturing our overall processes and doing a lot more with less. The team, we really focused on what was critical for us. And that's how we were able to pull in some of these margin objectives. And pretty happy with the result.
Yes. What our team and what -- Trav, that is a great result. We will keep folks updated on how that progresses. But our focus on margins will remain very, very keen. You can be sure of that. Okay. Turning now to new products, and I had a lot of questions about new products. And I guess the Tesla results that were announced, I think it was last week when Elon Musk came out and said, because of supply chain issues, they weren't going to be releasing any new products this year, I had a lot of questions coming from shareholders saying, "Oh, is that true of us, too? And are we able to -- are we having no new products? Or what's the situation with us?" We will have new products, and we've announced all of these. So there's not anything here that is entirely, entirely new. But there's a bit more color here I can share on some of the things that we're doing. I did talk about this in the 4C as well. So first of all, downlight. The downlight on the right there, that's the 100-millimeter downlight that's currently sold in Australia, very, very popular product. We just did a promotion on that as well. It was wildly successful. This, on several weeks, will be the highest-selling product we'll have in Australia, very, very popular. Look how tall that is. Can you imagine the amount of that sort of real estate that goes up into the ceiling? Unfortunately, that doesn't meet code for many other parts of the world. So we had to develop a downlight that was less tall. But in doing so, we did develop one that was cheaper because people again are not buying 1 or 2 of these. They're buying 4, 6, 8, 10. The downlight you see on the left is our brand new mid-tier downlight. That's a less expensive product but a phenomenal product. It's based on our LIFX Colour and has all the features of any of our color lights. It's a full-color product. It's obviously WiFi connected, the whole deal. And this will be priced in a 2-pack for $99 or at a single pack for $59. This is in final preproduction right now. So we're in testing right now in Australia. The team is testing them. We've got a few being used around the place. These are performing very, very well. We are super excited to get this out. And you will see us launch this in a presale very, very soon. The U.S. equivalent, I don't have a photo of it there, it looks a little bit different. It's a little larger. It is also a mid-tier product. So this will be our first downlight product that we'll be bringing to the United States. That's in early preproduction right now. So that's a little bit further behind, but we will have that out in the course of this half. And that is a product that we will ship in 2 packs, and that will be a $69 2-pack. With that, I want to just quickly ask Travis. Travis, as you think about the U.S. market and competitors to Philips Hue and so forth, this is a pretty competitive product in terms of features and pricing and everything else.
Yes. It really is, Dave. So what we're seeing in this product is there's a lot of different market approaches to this. Actually, there's one right there. This is a product that is going to have better lumens than our competitor, Philips. It's going to have better color indexing. So if you look -- so what Dave talked about earlier on are some of the things we take a lot of pride in. And it's going to be priced far better than the Philips Hue alternative. So we think that given this is going to be something that many households have, 16, 20, 25 of these in their ceilings, we think this is going to be one of our #1 selling products coming in the new fiscal year. So really excited about this one.
I'm trying to flick back and forth through the slide deck. It's not super easy. But this is the U.S. version. It's a metal construction that takes on a disc format and fits a 5- or a 6-inch U.S.-style socket in the ceiling. So very excited to get this out, and that will be something we'll announce as soon as we have that ready to go. So that's the downlight product. We're excited to get that out. There's a lot of opportunity there. Not having a downlight in the U.S. and now having one is really exciting for us. We've previously disclosed that we have a new LIFX Strip Gamer coming out, which is the black-colored LIFX strip. This is a product that will be out obviously as well this year. Bias lighting behind TVs, gaming scenarios, very, very excited. First product of its kind in the market. There are no black strips on the market today. So we're very keen to get that out. I get a lot of -- probably the product I'm tweeted about most is LIFX Switch. And LIFX Switch is one that has really done well in the early days, small but well. We've sold out in certain channels in Australia. We're getting new inventory in as fast as we can. We've done promotions in the U.S., and we're about to roll out HomeKit support. And we had a lot of inquiries about HomeKit support for Switch. We decided not to hold the product for HomeKit. We decided to ship it and then add HomeKit later, but we're also adding the ability to change the background color of the button lights. Excited to bring that out. Like I said, 4-gang, the 4-button Switch in Australia did very, very well. We've now introduced the 2-gang, and we're excited to get that through the various channels as well. I think JB Hi-Fi, they're #1 selling channel for Switch in Australia. The other thing that's a great feature that's coming is multi-way switching, and some of those features you still have to explain to people. But the ability to assign to a button a light or a switch that's somewhere else in the house without having to rewire the house is phenomenal. So if you've got to switch outside the bathroom and a switch inside the bathroom, you can actually, through software, assign one of the buttons outside the bathroom to turn on the bathroom lights, things like that. So lots of cool features coming. This is going to be something we really lean into with trade, with refurbishments, with renovators and bulk purchasing. And Switch in the U.S. at $49 is a very, very attractive price. That competes very, very well in the marketplace. Again, we've talked about gamer before. This sort of applies across a range of our products. We will continue to apply focus here. We've just entered the large U.S. retailer, GameStop. And that is an opportunity for us to really hit that market, high disposable income, high willingness to spend on lighting and decor. And of course, with our Razer integration, we intended to lean on that further in 2022. The last one I will talk about just in this section is something that we've discussed previously as a concept and things we're planning to get to. But we've always wanted to roll out a subscription service, which is, in effect, an offering for our closest customers, our most valued customers, where they can get enhanced warranty, better customer support, preferential access to new products and a whole bunch of other features. Think of this as kind of like our version of Amazon Prime, right? So sort of a subscription service where you can get closer to the brand, closer to the company, access to more benefits. And we'll offer that on a monthly and an annual subscription. We don't have anything more to announce on this right now. We're not disclosing pricing. We're not announcing time frames, but we are looking to roll this out very soon. And when we do, we'll make sure that the market is informed accordingly. Excited to get that out there. So with that, let's turn to something I've been sort of hinting at throughout the course of the call, trade, prosumer and refurbishments. And with that, I'm going to ask Jim Nelson, who is our Head of E-commerce in Melbourne, to come on and talk about what we're doing in terms of direct sales to these channels and then how we're now managing things like refurbishment and that being a revenue stream for us. Over to you, Jim.
Thank you very much, Dave. So one of the things that we really look to do as we were going through the challenges of the last 2 years is look for more opportunities to get into direct channel communication with the customers. And one of those aspects was to actually make ourselves open to this direct trade. It has been so successful and seen such growth over the last couple of years that we've now formally launched our trade/renovator/prosumer direct channel in which we are able to directly facilitate a customer's requirements for a volume of orders above just a single e-commerce or retail purchase but perhaps not quite at the amount that would necessitate a wholesale purchase. So it's really focusing on the people who are looking to do a one-off renovation or a significant investment in their home or small business. We more or less got to the point where in November of last year, we saw that about 10% of our online business in Australia specifically saw purchases made to these smaller groups of customers but making significantly larger purchases. In only 2 months, that volume has now increased to about 30%, 29.5%, with an average order size in excess of $1,000 versus the standard $120 to $130, $140 that you would see for a consumer sale. And that is a huge untapped opportunity, specifically whereas with other conventional retail channels, we have direct competition to overcome before we can actually reach to the customer. Whereas with here, we've got a direct path to purchasing, which is the demand we see -- seeing is requiring us to reallocate internal resources to align. So the result is that we're leaning hard into this, and we don't even think we've scratched the surface of what we could achieve. It's helping us understand a lot more about customer requirements as well because customers are literally coming to us with specific problems that require a solution, and we've managed to get the product and the expertise to help them out. The second thing that we've also done as much of necessity as opportunity is look to refurbishment domestically. So in the United States, we have the facility to refurbish returned goods to us into a sellable format. And that can be something through firmware updates, repackaging of shop-damaged goods returned from a retailer or fully repair and resetting to factory standards. This action can be done at scale in our domestic warehouses in both Chicago and Los Angeles, and it allows us to create additional revenue streams that support new SKU products in addition to reducing the environmental impact that we would see from e-waste disposal. As a priority, we focused on refurbishing one of our most beloved but now obsolete products, which is the Tile. And if you are across the U.S. site, you would have seen that for a short period last month, we refeatured the refurbished Tile kits. We had over 3,500 pieces of individual inventory for this particular product, completely refurbished and repackaged and sold as a one-off and very clear sale to our existing database. Every single unit that we had sold through under 2 weeks, which was absolutely incredible to the point now where we still have a huge demand from the customers who missed out or who want more. There's a couple of questions that we've got here so I'll jump straight in to tackle them. There's a question here that says that we had commented on one of our previous webinars that there was a specific plan that our initial path to purchase would be through a major retailer such as an Amazon within a bundle or through a direct offer, and then that the customers would go to our top-level domain, our dot-com, to make further purchases. So has this plan transpired to the expected level? Yes. Sessions to our lifx.com via our mobile app, which is our shopping experience within our app ecosystem for newly onboarded users, saw high levels of traffic and trade. To give some context, the cohort of traffic that we now get through the app is significantly larger than all of our paid marketing channels combined. So that's in addition. So we're seeing all of this come through, and these customers are all new to lifx.com. But already, or at least a significant portion, they already have lights onboarded to our cloud ecosystem. So the assumption there being is that these are the customers who have purchased from another channel and who are making secondary purchases through our website via the app. So the tactic has worked as a resounding success, and we're reoptimizing as much as we can. We're improving the in-app experience with personalized offers. We're equally making sure that there's reduced friction on that checkout experience. Another question is, "The sites have continually been sold out despite $14 million in inventory. Why is this the case?" This isn't actually correct. This is inaccurate in the sense that while some of the SKUs may show out of stock for a short window in between deliveries, stock levels across Q2 were very strong. Australia had 100% stock availability for that quarter. And when something did drop out of stock, it was temporary until stock become available. U.S. had 82% stock availability. So it's probably best to call out the 3 SKUs that, that represents. The Beam kits, which represents a product that has both the lowest margin and the largest form factor package, this is something that we have not been able to restock to meet the demand. And when the stock does arrive, it sells out very quickly. Candle Color is another item that has a high demand from the retail channel, prioritizing, in this case, our stock to Amazon. And the Nightvision, which has the exact same form factor as an A19 and a Clean, we chose to prioritize the Clean over the Nightvision in the A60 format. So I think those 3 are contextually quite easy to explain. But in terms of stock availability, I feel that we probably had our best representation online for a long time.
And Jim, it's worth mentioning because I'm sure people will say, "Well, wait a second. Why would you prioritize stock to Amazon?" I think it's worth calling out that when Amazon makes an order, they order in very, very large quantities. And so it's a substantial -- potentially hundreds of thousands of U.S. dollar orders at a time. So for us to shift some of that demand to Amazon, yes, it may be true that we're seeing slightly less margin than if we were selling it directly on our website. But we're driving that interest and driving their -- effectively their AI ordering systems for them to then turn around and put in a $0.25 million order or some large order, then that's a tactical reason why we would do that.
Absolutely. And again, it also furthers the initial tactic in which I feel very comfortable in seeing those sales go through on another channel now that we have locked in or have a definite path or a tactic to lock in that second sale via the app because it gives us the means by which we can communicate with the customers. The TV advertising is something that we have been very excited about because, again, it's one of those things that's come out of an unexpected channel. We're now doing heavy advertising on America's #1 streaming platform, Roku, which has over 55 million active accounts as of the end of last year. So this allows us to advertise on this particular streaming service in the same way that one would advertise on, say, a YouTube channel. And so by doing this, we are actually able to target specific customer groups or viewership with adverts on various things. It does mean that we don't quite have that same ROI that tracks attribution to a purchase. But from a top of the funnel activity to drive awareness, it allows us to market a product and say that this is available on Amazon, Best Buy, JB Hi-Fi -- actually, sorry, it's America-centric, Amazon and Best Buy as well as dot-com. Roku is not something that has a strong footprint in Australia, certainly, but it is a very dominant streaming service within America and very cost effective to market on as well. So we could basically be marketing a standard advertising campaign. We could market to 20,000, 30,000 people for the cost of a small Facebook campaign in Australia. So it's very, very attractive.
Yes. It's a great result, Jim, and I appreciate the update there, lots to cover in e-com. Just the shift in sort of retail purchase patterns and so forth, we're learning a ton. As that shift occurs, we're learning a ton about how we can engage better with people like Amazon. And there's a lot of investment in that area going on as well where our e-com team is directly engaging further with Amazon, further with the online channels of our retail partners. So exciting to see. Thank you, Jim. I appreciate that. Let's -- before -- we've got one more topic before we get into the Q&A, and that is commercial and in particular, Buddy Ohm. And I'm going to ask Travis Gerber, our COO, to talk to this because this doesn't get a lot of coverage. We tend to focus on the lights, and that's for good reason, right? This has become a much smaller part of our business. We got a question about that and about profitability on this part of the business, which we'll get to. But I've asked some of the team to send through some photos of recent installations. And I thought I'd get you, Travis, to talk through some of these and just give us a quick state of the union.
Yes. So we're still seeing a lot of activity in Europe. We had some installations last quarter across the U.K., Germany, Spain, Italy. So we saw a number of different use cases and installations in that region. Also in the Central and Latin America regions, we are still continuing to see traction as this becomes -- as Buddy Ohm is one of the best available solutions in the market for distributed building management. And so whereas we may be accustomed in markets like the U.S. or Australia to very large and sophisticated Honeywell and Siemens systems, those types of systems are not available nor cost-effective in a lot of these different regions like Central and Latin America. In particular, we've started to see deployments around health care scenarios, so whether it be clinics, and we're monitoring refrigeration of vital medicines, or whether it be in the supply chain and transport of some of those vital medicines. And so we've been opened up to more of these critical scenarios, which is giving us even more credibility as we grow into those markets. We've also recently had some very successful installations at a large-scale bank in Colombia. And we are looking at actually monitoring their data centers and their server racks for temperature anomalies because you know some of these regions can be quite hot. And that heat can be a significant damage to servers. And this is running the bank's infrastructures on them. So this was after a successful proof-of-concept for the better part of 2021. And now we've been able to secure future contracts for additional data centers, regional data centers and are now in discussions around monitoring of their branch office facilities, which are throughout the country. So seeing some a good traction, small but mighty. And yes, it keeps on ticking.
Perfect. Well, with that, let's jump into the Q&A.
I might see if I can just find -- we had a question on that topic. But why don't we just talk to it right away? Because one of the questions was, is this a profitable business? Should we sell it off? Is it -- in what shape is that, I guess, is the question.
Yes. I can take that one, Dave. So we leverage a lot of partners in this business. So we have partners across the world that perform our installation and our distribution, sales. Well, many of these partners provide end-to-end service for us. They actually represent us as a distributor in the region. So with that in mind, a lot of our sales and our cost is tied to revenue generation. So from a profitability standpoint, we've been able to position these partnerships such that as we scale, they scale. And as our increased revenue goes up, such does our cost basis. But that allows us to eliminate some of the high-cost items that are ahead of generating revenues, which is what generally leads to a business unit not being profitable. So yes, we can scale with it. And it is profitable, given that business model.
Small but profitable.
Yes.
Yes. Great. All right. Let's jump into the rest of the Q&A. So first of all, when do you plan to recruit a new set of Board members? As many of you know, our former CFO left late last year. We have brought on actually a bunch of new members of the finance team. So we've nearly entirely overhauled the finance team, but I think there's maybe 1 or 2 folks. But otherwise, it's an entirely new team. But we've also engaged a retail turnaround consultant to advise the business on further efficiencies we can receive -- or we can achieve, rather. So we're looking to tighten up the ship, find areas where we can improve. We've got a hungry and passionate team that -- particularly in the finance side, that is working hard on that and working with the support of this retail consultant. We expect to bring on a new CFO at the conclusion of that process. We wanted to go through and just scrub everything as best we could. The margin lift you've seen, the cost reductions you've seen, this is all part of that process. And we want to bring a CFO at the point when we've got that through. But in the meantime, we've got a very strong bench of support. And right now, for example, the half yearly audit is underway. All the systems are running and moving forward at pace. In terms of Board members, we addressed that earlier on. We're in the process of doing that. But yes, we want to make sure that we get that done and bring on some new folks during the course of the year. What's the latest on licensing the LIFX chipset to other customers? This was a part of the business that -- an attractive part of the business when we acquired LIFX, right, was to take the internal chipset, we call it the LIFX Control Module or the LCM, and license that to other parties. We get inquiries on this very consistently. We get a couple of inquiries a quarter on doing this. Right now, we have deprioritized this as part of our cost management process, but there's nothing about this that can't be turned on in the future. And we are building new versions of the LCM. You've probably seen announcements around Matter and our support for that new technology. Part of that is new updated LCM modules with cost reductions, improvements in connectivity, all of these things. So none of that goes away, but it is very much on hold today. And so that's not currently a focus. A question I get all of the time, are we back to a capital raise? It's a difficult question because, of course, if we are, we can't say that. If we were, we would come out and announce it. But no, there are no current plans to do a capital raise. We're very comfortable that we've got significant ARR and inventories that we can monetize. We have an expectation that we can maintain the efforts we've been maintaining on margins, and we've got new products to help grow sales as well. When are Amazon Prime Day revenues recognized? Now of course, we don't know when Amazon Prime Day is. We -- that's a closely guarded secret, and Amazon can move that around at will. That being said, typically, we would get orders for these products 2 to 3 months in advance with delivery in advance of Prime Day by, let's call it, a month. And then receipts of payments from that revenue on terms after that would be 45 or 60 days after that. If timing mirrors last year, we will start to see the impact of that in Q4 of the fiscal year. But again, we just don't know when Prime Day is. So we'd like to keep you updated. We had a question about the nearly $40 million of inventory at customer invoice value that was ordered last year. And the question was, what happened to it? And there was an assumption on sort of some math that was done on where that landed. That inventory began arriving in March and had arrived in warehouses by roughly September. The March quarter, which was $5 million, of which most of all -- most of that was March actually. We didn't do very much in January or February because we were still out of stock. April to September revenues, October to December revenues, and then, of course, the amount of invoice value that we have right -- or inventory value that we have right now at invoice values, give or take, $17 million. So that breaks down where that $40 million went. Now of course, that adds up to more than $40 million. We did order more product, and more product is inbound. And we received that on a regular basis. But inventory constantly rotates, right? It's never that we sell it down to 0 and then order more and then sell it down to 0 and then order more. As we spoke about on this call, the goal is to increase the cycle, the pace of cycle and increase the number of cycles of that inventory processed throughout the year. A question came in. With Don Hicks leaving, who is responsible for sales? We've announced last year that Brian Seitz, who you heard on the call earlier today, has taken on responsibility for both global sales and marketing. He's based here in the U.S. Where are the black light strips? Where is LIFX Filament? Travis, LIFX gamer strips are in final production testing right now with the manufacturers. So we're looking good there. And so it's been out for, what, 2 years or so, a year a half?
Yes.
Yes. Got a couple of those in my Adelaide place, I think, actually. Okay. Turning now to strategies in place to address the decline in BUD's share price. Look, I'm a very big believer that if a management team is focusing on the share price as their highest priority, they're probably not focusing on the business. So our goal is to make sure that the focus is on the business. We've been very clear about reaching positive EBITDA and then building that EBITDA to exceed our debt interest obligations so that we're net cash flow positive and then continue to see that growth with new products, margin maintenance and now hopefully, some subscription revenue as well to come in during the course of the year. Just to give you a sense, last year, we had -- this time last year, we had a market cap of about $170 million with similar cash on hand and much larger EBITDA losses. So I would argue that from an EBITDA perspective, the business is healthier. We are selling our lights at a positive contribution margin on every light. That wasn't the case previously, so that's healthier. And so we need to keep delivering on that, and the market will take care of the price accordingly. The best thing we can do is to keep the communications up, to keep delivering on those results and move forward. I think we've addressed the Buddy Ohm profitability question, so we can move on from that one. Are we anticipating the pattern of monthly positive EBITDA to continue in 2022? Obviously, we're not able to give financial guidance. But as I've said a number of times, our focus will absolutely remain on preserving high margins, and high margins with continued sales growth is how we deliver that. So that's where our focus is. What happened to target.com and costco.com? We are online with target.com. That remains the case. It's a small channel for us. It's still not where a lot of people are going to buy smart lights. That tends to be still more the electronic stores and increasingly the hardware stores and do-it-yourself stores. But we continue to engage with them, of course. Costco did not perform well for us. We had a -- they didn't take the full range, as they never do. They take a particular offer or a particular product. It did not work out well. We had competition from lower-end and lower-priced product, which did better than we did, frankly. But also, Philips Hue had the same problem. They were also in Costco. They also were not able to compete. Just a different customer, and people weren't going to Costco to buy smart lighting. They were going to buy chicken and wine and clothing and all that sort of things and then pass by the light and throw a few in the cart and move on. So a very different customer. We continue to maintain contact them. And certainly, in Australia, we've got a distributor that works with them. But for the meantime, that's not moving forward at this point. A question here from the AGM. Can you just provide the granting of stock and explain why grants to 2 directors were voted down? Okay. So the stock that was granted to me actually was -- 2/3 of that was stock I've previously purchased, given back to the company to grant over time. And so it's now being given back to me again. So that was stock that I already owned, I paid for and I sort of gave back to the company to vest. And now it's coming back to me. It will come back to me over 3 years starting 2023 through to 2025. So this is not coming back to me anytime soon, if that's the concern that there's a big grant being given. The balance of that was stock granted as an acknowledgment of sacrifice of salary. I don't draw a salary from the business and have not since last April, but that really isn't a one-for-one. That's about $36,000 a year, again, over 2023 to 2025 at current share price values. In terms of the other directors, obviously, we're disappointed to see those resolutions voted down. We will have to endeavor to find other ways to make sure they are compensated. We're not going to not compensate Board members. But of course, the reason we do have a stock compensation model versus a cash compensation model is we think that aligns directors' compensation with the interest of shareholders and preserves cash that we can spend in the business to grow the business. If the company received meaningful Ohm orders, Trav, do you have sufficient funds to fulfill them? Now I've mentioned here about how we negotiate contracts with each commercial deal. Maybe you want to talk to that just very briefly.
Yes. Along the lines of what we said before, so as these contracts become available, we already have distribution and distributors that have advanced supply and the ability to procure additional supply. So from an inventory perspective, we're able to bring that forward. And then from a cost execution, as mentioned previously, we have distribution and deployment partners. So it's more of a revenue share plan. So the costs upfront for us are minimized. So yes, we are able to service these as we come across it.
And then while you're talking, let's talk about the next one. So how did the company only record $1.6 million of revenue in December? So the shareholder has gone and done the math and sort of backed out December. There's a lot of complexity in terms of how this works in terms of what we sell versus what we get paid. Maybe just talk through that in December.
Yes. So the way the accounting works is that when we sell a product, for example, in November, which is a very significant month for us, all of the promotions that we've agreed to with our retailers go into what's known as an accrual. And what that means is that in the month of December, they're going to withhold the amount of that promotion from future orders from us. And this is a standard practice. How it works is when we do a 10% on promotion, every unit we sell, they accrue a $1 and then withhold it from us later. So rather than having that all hit for the whole quarter, again, January, February, the standard accounting practice is to develop an accrual for this such that you have almost a reserve. And that accrual actually deducts from your net revenue. And this is what the standard practice of mapping out these accruals would be. And that's why we see a lower revenue than what was actually sold in December. It's because we are managing for these accruals that came from the holiday promotion quarter.
It's probably true to say that there's -- we could get a whole degree in trying to understand how retail math works and your finances. And Amazon, in particular, is on a whole another level again, right, just understanding that process. And it seems crazy that you would have -- you sold the product at full price. You get discounts that you agreed on. They then credit you back or charge you back for those discounts in subsequent months, which may not correlate to the payments for that. I mean, it's all over the place, isn't it?
Yes.
Yes. It's a great question because it's hard to understand. But at the high level, that's what's going on. And then the last question we have here was a question from a shareholder who asked us to acknowledge just the loyalty of shareholders that we've had. And I think that's absolutely the case. And I think we can say that's unequivocally true. The team is very, very grateful for the support of shareholders in the market. I get a lot of email. Some of it's positive. Some of it's not, but I appreciate it all. I respond to it all and, likewise, the team. Our shareholder numbers have risen from about 5,000 at the time of the LIFX acquisition to about -- I think it's a little bit shy of 9,000 today. So it really is a substantial lift in the support. We do appreciate it very much, and I appreciate the questions. So with that, we have reached the end of the questions. We've reached the end of the webinar. I hope that's been helpful. I hope that's been informative. We are in the process now of moving through -- well, we're already done with the first month of this quarter. We're now moving into February, of course. We're now building up our preparation for things like Prime Day and things like the Switch into the second half of the year. As always, I hope that we answered your questions. If we didn't, please don't be afraid to send them through. We'd love to hear from you and very happy to answer any questions we didn't address. So with that, thank you very much. And I wish you all a good day. Take care.