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RVLT: Q2 in Line; Company Guides to Huge Q4

07/27/2017
By Lisa Thompson

NASDAQ:RVLT

Revolution reported revenues for Q2 2017 of $43.4 million, in line with its guidance of $43-$45 million versus $43.1 million in 2016. Gross margins were 32.8%, versus a 31.0% a year ago, and similar to Q1 2017. Again, despite the decline in tube prices near 25% year over year, margins were helped by an increase in the percent of higher margin products and a consolidation of facilities.

Taking out one-time expenses and stock-based compensation, non-GAAP net loss was $634,000 versus $1.3 million a year ago. Adjusted EBITDA in the quarter $3.2 million versus $3.5 million in 2016. This resulted in a non-GAAP EPS of $0.03 versus $0.07 in 2016.

Backlog reached a record and stands at $35 to $45 million and is spread across all businesses. The company anticipates that 80-90% of this backlog will be shipped by the end of Q4.

During the quarter the company earned qualification with the Navy. It indicated that it expected to win its first bid “momentarily.” When it receives notification, the company plans to reveal the details and size of the order. To date Revolution has not included any business from the Navy in its forward guidance, so any wins would be upside to numbers.

Near Term Opportunities 

In addition to an imminent Navy contract, the company has other opportunities near term. The first is a new partnership with a US company that sells products complementary to Revolution including fixtures and troffers. To date Revolution has been stymied by a limited product line that has allowed it to bid only 20-30% of some contracts. With this new partnership, the two companies may be able to provide upwards of 70-80% of a given proposal leading to a much higher probability of an award.

Secondly the company continues to be excited about potential sales to an extremely large retailer. It is currently in a pilot program in which three companies were awarded contracts to retrofit a few stores. Revolution has estimated that the price to retrofit the entire chain could cost upwards of $175 million dollars which in turn would save the customer $50-$60 million per year. Based on feedback, management is optimistic it can be awarded a fair chunk of that $175 million.

The third, and most cryptic opportunity is with key customers in Connecticut that represents an “interesting way of doing business in the future.” The company also described this idea as a “game changer.” While this is not much to go on, if it is successful, Revolution believes revenues from this could start as early as Q4.

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