iGo (IGOI) now has its major lines on Walmart.com just as the company said it would on the recent earnings call. Expect more to rapidly appear both here and in stores. Now iGo has two products in store (the laptop (1200 stores) and netbook charger) and more coming in the spring.
More importantly, currently Wal-Mart (WMT) shipments are going under the “deferred revenue” category (under the liability side of the ledger). That number, $2.5M is mostly Wal-Mart. This means the revenue is not realized until Wal-Mart sells a product. It is a very conservative way to account for sales (I like it). It also means when there is sufficient history with Wal-Mart (IMO this quarter) a flood of that $2.5M will come rolling into iGo’s income statement, and to its bottom line, as the expenses related to that deferred revenue are already recognized. For reference, the deferred revenue line has grown from $914k to $2.5m YOY.
For a company that made $51k last quarter, moving say $1m to the revenue line will have more than a little effect on the bottom line (iGo said on the latest earnings call that the majority of the deferred revenue line was WMT). Going forward, as Wal-Mart revenues are accounted for on a “ship to” method rather than “sell through”, we will see Q over Q results improve. Now, some deferred revenue will still be there from other retailers and for returns etc.
Here is how it works, iGo receives the cash but accounts for it as deferred revenue (asset = liability). When iGo decides to recognize it, the deferred revenue is decreased. All things being equal on the expense side, the result is an increase in earnings from the now recognized revenue.
Here is another way to look at it. The balance sheet is assets = liabilities + equity. Deferred revenue is a liability until recognized. Just using the simple equation, if we take out that liability, we have to increase the equity side (that would be us shareholders).
Think of it like a Christmas / Hanukkah present you know is there but have not receive yet.
Disclosure: Author holds a position in iGo.