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Why Romeo Power's Revenue Fell Far Short of Estimates

By John Rosevear – Updated Aug 17, 2021 at 11:16AM

Key Points

  • Romeo Power is ramping up to supply battery packs to electric truck makers.
  • It just signed a key supplier deal last week and is now pivoting to production.
  • Much of this year's revenue will arrive in the fourth quarter.

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And why the company stuck with its full-year sales guidance despite the miss.

Romeo Power (RMO) reported second-quarter revenue on Aug. 16 that was much lower than Wall Street had expected. But with a new battery-cell supply deal just signed, it stuck by its earlier sales guidance for the full year. 

On a net income basis, Romeo Power lost $28.7 million, or $0.22 per share, on revenue of just $926,000. That was a significant miss: Wall Street analysts polled by Thomson Reuters had expected a loss of $0.16 per share on revenue of $2.37 million, on average. 

Romeo Power's stock fell sharply in after-hours trading following the release of the results. 

The second quarter in a nutshell

Romeo Power makes battery packs for big trucks, other commercial vehicles, and energy-storage providers. The company doesn't make its own battery cells; it buys cylindrical cells from established suppliers and assembles them into battery-pack modules optimized for heavy vehicles with proprietary energy-management software. 

To some extent, Romeo Power has been waiting to secure a steady long-term supply of battery cells before ramping up sales and production. That didn't happen until last week, when the company signed a long-term deal with a major global battery maker it didn't name.

That's why it missed Wall Street's revenue estimate for the second quarter: The revenue from its ramp-up hadn't yet started to arrive. But electric vehicle investors should note that the company stuck by its previous full-year revenue guidance range, as it currently expects to have production in full swing by the fourth quarter. 

A rendering of a Peterbilt electric garbage truck.

In April, Romeo Power signed a deal to provide battery packs for several of Peterbilt's new electric heavy trucks. Image source: Paccar.

What Romeo Power's chief financial officer said about guidance

Although the company missed Wall Street's second-quarter estimates, CFO Kerry Shiba stuck by the guidance provided with first-quarter results: full-year revenue between $18 million and $40 million.

Shiba said that the company is in the process of ramping up manufacturing and sales, and that investors should now expect the bulk of its revenue for the year to come in the fourth quarter, once deliveries to customers are underway. 

With the company's new long-term battery cell deal, "the second half of 2021 is expected to be the beginning of a period of a ramp-up of sales and operating activity for us," he said. "But keep in mind that while we are pleased to have hit this inflection point, there still are many variables that will affect the final revenue outcome for the year."

But, Shiba warned, Romeo Power operates in a marketplace -- electric heavy vehicles -- that is still in the process of coming into existence. That's why the revenue guidance covers a wide range.

"As much as I would love to have high predictability of demand and its related timing," Shiba said, "we are a tier 1 supplier and don't control the pace of end-market product acceptance and sales volume." 

About the new CEO

Romeo Power's new CEO is Susan Brennan, an auto industry veteran who has deep experience with zero-emission vehicles and components. Brennan served as the chief operating officer of fuel-cell maker Bloom Energy from 2013 until last week, and had earlier held a series of manufacturing roles at Nissan Motor, where she managed a factory that built electric vehicles, and Ford Motor Company.

Monday was Brennan's first day on the job, so she didn't have a lot to say during the company's earnings call beyond a brief introduction. 

The raw numbers

Metric Q2 2021 Q2 2020
Revenue $926,000 $1.129 million
Cost of revenue $5.9 million

$2.4 million

Operating income (loss) ($29.7 million) ($5.34 million)
Net income (loss) ($28.674 million) ($7.025 million)
Earnings (loss) per share ($0.22) ($0.09)

Data source: Romeo Power. 

As of June 30, Romeo Power had $267.7 million in cash and equivalents, versus $287.5 million as of March 30.

John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Romeo Power, Inc. Stock Quote
Romeo Power, Inc.
RMO

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