Lucy Lefty, righty tighty

2Q24 results at Innovative Eyewear

Dear Reader,

Innovative Eyewear, Inc. (NASDAQ:LUCY), the company behind the Lucyd Lyte smart glasses and part-owned by Tek Capital (LON:TEK), announces its 2Q24 results as of June 30th this evening.

Business Overview

Founded in 2020, Innovative Eyewear aims to develop and sell smart glasses that keep users connected to their digital lives while offering vision correction and protection. The company’s flagship product, Lucyd Lyte, along with white-labelled Nautica and Eddie Bauer glasses, allows wearers to listen to music, make and take calls, and use voice assistants hands-free.

“Lucyd, call me an Uber!”

And, no, it doesn’t do a Leslie Nielsen and reply “Uber.” Surely not…. and don’t call me Shirley. Instead It puts you through, and moments later, your taxi pulls up. Smooth.

Since the initial launch of Lucyd Lyte in 2021, the company has expanded its product lineup to include 29 different models, offering a wide range of styles and features to cater to diverse customer preferences.

• Lucyd: Young, trendy, and offers great value.

• Nautica: Comfortable and cool, appealing to a slightly older generation.

• Eddie Bauer: Quality, sophisticated, and outdoorsy.

• Reebok: Eponymous sports look with wraparound style.

• Armor: Tough and practical.

Financial Performance

The hoped for increase to sales did not materialise in Q2. Sales in fact fell quarter to quarter while overhead costs continued to escalate. On a positive a small but growing gross profit was achieved and measures to reduce cost of sale were spoken of to reduce costs by around 40%. It cannot happen soon enough.

With $6.8m remaining cash and a likely burn rate of at least $3m but potentially $4m until the end of the year, much now depends on the scale up of sales. A $3m loss assumes 80% growth in Q3 and Q4 at a larger 36% margin.

The business does speak to having sufficient funds for at least the next twelve months - the going concern test.

If sales could increase to $5m a quarter at a 36% margin we would see a small net profit by my estimates. That would require a 410% increase in Q3 and then another 410% in Q4 to achieve that in FY2024.

Marketing Investments

Innovative Eyewear has made significant investments in sales and marketing, establishing various brand ambassadors and influencers, including numerous TikTokers and Instagrammers who post pictures of themselves wearing Lucyd glasses. Investment is also going into its online sales channels, including its own Lucyd.co website and Amazon.com, which have become growth drivers.

There is also a retail store footprint with over 350 stores now carrying Lucyd Lyte products, primarily in the United States and Canada. LUCY believe this physical retail presence, combined with a strong co-op marketing program and new modular display systems, will be key to driving further growth and customer awareness.

Product Development

Innovative Eyewear is also investing heavily in product development, with the launch of several new smart eyewear models, including the Lyte XL and the co-branded Nautica, Eddie Bauer, and soon the Reebok collections. These new offerings feature a range of technical and design improvements, such as upgraded audio quality, flexible hinges, and Bluetooth 5.2.

Last month, LUCY announced the debut of a new Walkie-Talkie feature on all Lucyd Eyewear. The new update to the Lucyd app for iOS and Android, released this week, enables Lucyd users worldwide to speak to each other through walkie-talkie style communication channels on their glasses. This new feature provides instant, unlimited voice conferencing with up to thousands of users on each channel.

“Imitating the simple controls of walkie-talkies, but removing their typical signal radius limitations, makes this a fast, powerful, and convenient communication feature of our glasses,” said Harrison Gross, CEO of Innovative Eyewear. “No dialing, waiting for an answer, or conferencing in folks - just share a channel number and join in real time. We anticipate this feature will be well-received by industrial and warehousing customers of our upcoming smart safety glasses. We look forward to providing this handy new tool to working teams worldwide.”

Copy that.

Designed with large teams of safety glass users in mind, this feature will make Innovative Eyewear's upcoming Lucyd® Armor smart safety glass a communication tool and personal protection equipment (PPE) in one convenient device. For example, the entire staff of a warehouse or hospital can communicate freely with each other, handsfree on their safety glasses.

The Company is also pleased to share that last week, it received ANSI certification on the upcoming Lucyd Armor product, enabling it to be sold as certified safety glasses.

The Company views the global safety glass market, valued at $7.9b worldwide with a CAGR of 13.85%, as an important growth opportunity, and a necessary step in its mission to Upgrade your Eyewear®.

As listed below, this new walkie-talkie feature is another smart eyewear industry first introduced by Innovative Eyewear Inc., the holder of 112 patents, applications and licenses in the smart eyewear industry.

• First US company to ship prescription-fitted smartglasses direct to consumer.

• First US company to develop and produce a line of smart eyewear in 10+ distinct styles, in 2019, and today offer more than 30 styles.

• First US company to offer multiple smart eyewear styles for women & youth.

• First to develop a cordless charging cradle for smartglasses, that fits any size of glasses.

• First to introduce smart eyewear with titanium front plates in the US market, in 2021.

• First smart eyewear with 12 hours of talk/music time or 160 hours of standby Bluetooth per charge. The longest battery life in the category.

• First smart eyewear company to introduce ChatGPT in glasses in 2023 and introduce the first wearable Generative AI product in the world.

• First Company to provide flexible spring hinges for smart eyewear.

• First Company to introduce a social audio platform purpose-built for glasses, Vyrb.

Risks and Challenges

While Innovative Eyewear has great potential, it has not yet been able to translate that into profitable sales.

Meanwhile the smart eyewear market is highly competitive, with established players like Bose, Snap, and Amazon’s Echo Frames, as well as emerging startups, vying for market share. The company’s ability to differentiate its products and maintain a competitive edge will be crucial to its long-term success.

Outlook and Conclusion

Despite challenges, Innovative Eyewear does have a strong product pipeline, a growing retail footprint, and its focus on innovation position the company well for future growth. However, the company’s dwindling cash is a serious risk. Sales are not expanding as fast as hoped.

Looking ahead, the company’s guidance suggests continued revenue growth, as well as substantial cost reductions, expanding through its retail partnerships and the launch of additional co-branded smart eyewear collections.

$1.66m turnover per month at a 36% margin isn’t inconceivable. But time is ticking. The smart glasses category is gaining traction and more people are embracing the idea as happened with smart watches. LUCY offer a breadth, style and quality of products unmatched by competitors. Battery life particularly is a closely-watched feature by many.

LUCY could still emerge as a compelling investment opportunity in the rapidly evolving smart eyewear market.

Regards

The Oak Bloke

Disclaimers:

This is not advice

Micro cap and Nano cap holdings might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip".