The Buddy Technologies Limited (ASX: BUD) share price is one to watch this morning after reporting inflated revenue figures and a major supply chain error.
Why is the Buddy share price on watch?
The internet of things (IoT) and cloud-based solutions provider updated on the market after trade closed last night on its March 2021 quarterly results.
Buddy has identified a reporting error in its internal management reports and accounts for the March sales data. That error was the incorrect inclusion of intercompany accounts, which would usually be cancelled out in internal accounting.
As a result of the error, Buddy’s management accounts for March had incorrectly included intercompany accounts, which inflated the quarterly revenue figures. That means the Buddy Technologies share price is one to watch as it retracts several statements.
Those include the following:
- March is on track to be the company’s highest revenue month ever, revenue expected to be more than double 2020’s best month and expected to be substantially EBITDA positive;
- March 2021 is expected to be the highest revenue month ever for LIFX;
- Quarterly revenues are expected to exceed the combined holiday revenue for November and December 2020; and
- Accordingly, March is also expected to deliver the highest monthly (positive) EBITDA in the company’s history.
The Buddy Technologies share price could be under pressure in early trade following the announcement. Buddy this morning revised its quarterly customer revenue to A$5.0 million.
Financial guidance update
It wasn’t just the intercompany accounting error that makes the Buddy share price worth watching today.
While in a trading halt last week, Buddy was informed by a Chinese manufacturer that an entire production run’s allocation of a “critical semiconductor component” for its smart lights had been sold to a third party without its knowledge. Given the high demand for the product and now lack of availability, Buddy’s manufacturing activities have ceased until further notice.
That means all previous guidance for second-half revenue and earnings have been withdrawn. The board noted that these two issues have “created challenges” for Buddy as it looks to manage its supply chain and turnaround internal processes.
Foolish takeaway
The Buddy share price is one to watch after today after the double whammy announcement. Both the accounting error and supply chain error could have investors selling down shares in early trade.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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