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Summary

  • Revolution Lighting matches raised guidance for second quarter.
  • Acquisition of Value Lighting continues to offer growth for the company going forward.
  • Upcoming catalysts with Ganga Hospitality and Staples will power third and fourth quarter.
  • Strong backlog could add $150 million in potential revenue.

Revolution Lighting (NASDAQ:RVLT) reported second quarter earnings last week. What followed from the report was several days of choppy trading and higher than average volume. In the end, share of Revolution Lighting traded down for the week. The lower price point offers a great entry point for investors, as all bullish reasons I gave in my last article remain.

Revolution Lighting posted revenue of $17.5 million in the second quarter. Earnings per share came in at a reported $0.01. The quarterly total was an increase of 136% from the prior year. Excluding a one time $4.5 million order from the second quarter of last year, revenue was up a staggering 503%. In the first six months of the year, total revenue has now rose to $22.5 million, an increase of 64% from the prior year.

The revenue of $17.5 million matches company expectations. The company had raised its guidance recently as the impact of a recent acquisition was expected to have a material impact. The company expects third quarter revenue to come in at $24 to $26 million. Fourth quarter revenue is expected to be in a range of $31 to $34 million. Full year sales are estimated to come in a range of $77.5 to $82.5 million. The company continues to believe it will be cash flow positive in the fourth quarter.

The second quarter results included two months from Value Lighting, a company recently acquired by Revolution. Revolution acquired Value Lighting for $10.5 million in cash and $28.1 million in stock. The deal was expected to add $55 million to sales in 2014, after posting 2013 sales of $43 million.

The important takeaway from Revolution Lighting's second quarter was the company remains on track for its future growth. The company said, "we continued to make significant progress in the second quarter as we added distribution channels, converted our sales pipeline to customers and commenced several large and strategic LED retrofit projects."

Revolution continue to show off its robust pipeline, which includes:

· Selected on LED lighting retrofit projects for several large nationwide franchise operators with 6000+ outlets, potential $100 million deal

· Designated preferred LED provider New Jersey and New York public schools, potential $30 million

· Large multi-use project in a major US city for hotels, apartments, and retail, potential $20 million

· Near completion of installation of LED lighting at the Connecticut Convention Center, at 540,000 square feet, the area is the largest energy reduction project ever in the state

Aside from the backlog, Revolution Lighting also has the major catalysts coming up that I highlighted in my last article. The company has a partnership with Staples (NASDAQ:SPLS) launching this month that will see its LED lights available online through Staples.com. A similar deal with Quill.com will also launch in the third quarter.

My last article highlighted the following key points:

· Company raised Q2 and full year guidance

· New acquisitions and backlogs adding to fiscal year total revenue

· New deal with Ganga Hospitality gives access to 12,000 potential customers

· Launch with Staples in August is near term catalyst and gives Revolution another entry point to small business.

The first point was hit on the head with the earnings report that matched the raised guidance for the quarter. The second point I highlighted above as the Value Lighting acquisition has now impacted revenue growth and should continue going forward. The third point on Ganga Hospitality didn't make a difference in the quarter, but continues to be one of the largest catalyst going forward. Ganga is committing a 30 person sales force team specific to Revolution Lighting and its products. This has huge potential going forward. The last point will be the strong catalyst for the current third quarter as the next earnings report will show how big of an impact Staples, the country's third largest online retailer, has on Revolution Lighting.

One of the risks with Revolution Lighting continues to be its cash position and possibility of additional funding. With that being said, Revolution did announce it is seeking a $25 million credit line in the near future with a bank. The company could see a big change in funding needs if it hits its goal of being cash flow positive in the fourth quarter. Several large deals in the backlog and the possibility of increased sales with Ganga and Staples could bring cash to the bottom line to help this company relieve its financing needs.

Revolution Lighting is not the perfect stock for investors. It remains speculative and continues to struggle as an unprofitable company. However, several catalysts are ready to push this $2 stock higher as demand picks up and more cash is brought to the top and bottom lines. Investors should see the light and consider taking a small position in this name.

Source: Revolution Lighting Upside Still Stands With Expansive Backlog And Increased Revenue