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RVLT - Impressive Numbers Or Are They

|Includes:Revolution Lighting Technologies, Inc. (RVLT)

This morning RVLT reported what looked to be a bang up quarter with big %'s in headline revenue gains. But were the numbers good enough for a company trading at 10 x the valuation of market darling LNKD. Let's think, does a company that installs light bulbs deserve such a multiple. Let's dive in shall we?

Revenue was $7.35mm up from $1mm last year. But let's take out the shovel and do some digging. Well first of $6.5mm came from the acquisition. Secondly and this required almost a backhoe to find, the company received $4mm in revenue at the end of the quarter from itself!!! From the 10Q:

In June 2013, Aston Capital provided $4.0 million in financing to a customer of the Company who used the proceeds to repay its obligations to the Company for the purchase of Company products.

Yes, revenues would have declined 50% quarter on quarter, had not Aston, which is basically RVL, which is RVLT (remember from my prior blog, keep it confusing) gave somebody $4mm to give to RVLT. This might be why receivables ballooned.

Who was this 60% customer? Could it be the executives themselves? Generally companies disclose who any 10% customers are, not LaPenta, he likes to keep it confusing.

So let's just get this straight. $7.3mm in revenue, $4mm from Aston, who gave somebody (we don't know) money at the very end of the quarter to give to RVLT so they could post good numbers. Let's just assume this is kosher, which i will leave up to the reader. So $1mm in EBITDA. Lets use this even though the company burned cash so EBITDA isn't really a fair metric. Even if we annualize this, and give them the benefit of the doubt the stock trades at well over 100 X EBITDA. If you want to pay this for a company that installs light bulbs go ahead. Should we pay 100+ x EBITDA for a company that gives its own customers money to buy products at the end of the quarter?

Readers should know that Aston is playing some games with the stock, once they convert all their preferred stock, shares outstanding will balloon. Given they have made $300mm+ in just 6 months, I am just thinking they might be sellers. It appears investors in RVLT are playing chicken with a 18 wheeler coming at them full steam ahead.

But dreams must go on........until you wake up

Disclosure: I am short RVLT.

Stocks: RVLT