Against a market backdrop of strong growth in consumer adoption of smart home products, Lightwave’s next-generation products are seeing a combination of favourable reviews and accelerating sales. An almost three-fold increase in directto-consumer revenue to £1.24m in 2018, from £0.35m in 2017, was followed by an overall revenue growth run rate for the first two months of 2019 that was 25% higher than the 4Q’18 run rate. Led by an experienced new CEO, digital marketing and distribution initiatives are among the management team’s highest priorities. The £2.5m fundraising, due to be completed in March 2019, will allow the company to execute on these initiatives.
Consumer interest in smart home technologies has never been greater, yet penetration remains in its relative infancy. The ease of use and instant access to content offered by Amazon Alexa/Echo, Google Home and Apple HomeKit are having a dramatic impact on consumer appetite for smart devices. Market forecasts anticipate substantial growth, in one case to ca.$160bn globally by 2022.
Today, Lightwave products are available in Apple Stores in five countries, including the UK, and on Apple’s online stores across Europe. These developments have been highly positive for the company’s brand recognition. Large proportions of the product ranges are available on Amazon, as well as in Screwfix, John Lewis, Currys, B&Q and many other specialist online and physical retailers.
Lightwave’s financial performance in recent years has been relatively flat. However, these metrics do not yet reflect the benefits of the substantial product investment and device launches that took place during 2018 or the more prevalent online and instore retail presence. Growth rates have accelerated in the last few months, indicating that the strategic initiatives are starting to bear fruit.
The smart home segment has seen extensive M&A in recent years. The incumbent manufacturers of domestic electrical devices have, in many cases, struggled to keep up with smart home developments and have opted to make acquisitions to plug product gaps. Lightwave’s new partnership with Resideo Inc. for the latter’s Honeywell Home brand is, in our view, particularly noteworthy in this context.
Lightwave is a small vendor that will need to succeed in its online marketing initiatives to drive and maintain greater brand recognition against several large players in the market. At the same time, it will need to execute on an ambitious product refresh programme, as it upgrades its first-generation products to the specification of its Generation 2 products. The recent successful £2.5m fundraising was an important step in creating financial flexibility to deliver on these objectives.