Is Revolution Lighting Technologies a Sleeping Giant, or Is It in a Permanent Coma?

Revolution Lighting Technologies has ambitious plans for 2014, but will they come to fruition.

Jun 2, 2014 at 7:00PM

Photo: Revolution Lighting Technologies

LED lighting company Revolution Lighting Technologies (NASDAQ:RVLT) is known for dangling carrots in front of shareholders and then failing to deliver. In its latest earnings report, it may have dangled the biggest carrot yet, but perhaps this time is different?

The dim results
On May 12, Revolution Lighting Technologies reported its fiscal-first-quarter results. Revenue plunged 21% even though the company acquired revenue-generating businesses since the year-ago quarter. In the year-ago period there was a single $3.9 million order that didn't repeat this quarter, so the company also reported a revenue increase of 108% excluding that order. Still, most of that "increase" was at least in part due to the acquisitions.

Net loss was $3.5 million. Adjusted loss before interest, taxes, depreciation, and amortization, or EBITDA, was $2.2 million, and Revolution Lighting Technologies finished the quarter with just $1 million in cash left. It has borrowed $3.5 million from "an affiliate of its controlling stockholder" in the first quarter and $11.8 million in April, most of which was already used to fund a major acquisition. That acquisition seems to represent a "boom or bust" opportunity for the company.

An illuminating idea
In April of this year, Revolution Lighting Technologies closed on the acquisition of a company called Value Lighting. Robert V. LaPenta, CEO of the company, acknowledges that revenue "got off to a slow start" this year, but he also pointed out that the first quarter is seasonally slow. As mentioned in the company's SEC filings, the winter months, and especially this past winter's harsh storms, negatively affected new construction and remodeling. This in turn negatively affects LED lighting installation.

LaPenta, while dangling the usual optimistic carrot, said, "We continued to position Revolution Lighting for accelerated growth beginning in the second quarter and continuing throughout the year." The company guided for second-quarter revenue of between $15 million and $17 million, which includes two months after the Value Lighting acquisition.

The bright orange carrot
Revolution Lighting Technologies reiterated its guidance for $110 million of pro forma revenue along with adjusted EBITDA of between 12% and 15%. This puts EBITDA, if achieved, at between $13.2 million and $16.5 million. Considering that the main components of the adjusted EBITDA have never been a large amount ($0.7 million last quarter), when compared to the straight adjusted net loss, Revolution Lighting is looking at an adjusted net income of somewhere between $10 million and $13 million (with higher interest expenses.) That puts earnings per share at somewhere between $0.12 and $0.15.

It gets better.

Keep in mind that the adjusted EBITDA loss was $2.2 million for the first quarter. This means that in order for EBITDA to reach between $13.2 million and $16.5 million for the year, during the last three quarters it will have to be between $15.4 million and $18.7 million. This brings earnings per share to between $0.15 and $0.18 for the final three quarters, a rate of between $0.05 and $0.06 per quarter on average, or an annualized amount of between $0.20 and $0.24.

Foolish final thoughts
According to LaPenta, Revolution Lighting Technologies' sales pipeline is over $200 million. If the company can translate that into the revenue and profit margins it has planned, it may just be a sleeping giant. Based on the share price at the time of this writing, that annualized pace of $0.20-$0.24 would yield a P/E between 12 and 10, with a very high growth rate in a rapidly expanding industry. That seems very cheap and could mean a stock that appreciates multiples from the current share price. However, if its guidance proves to just be another dangling carrot, Revolution Lighting Technologies' thinly available cash and mountain of debt could mean that this potential sleeping giant may never wake up.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information