Photo: Revolution Lighting Technologies

LED lighting company Revolution Lighting Technologies (OTC: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.