ALT5 Sigma Corporation

Third-quarter revenue was $33.6 million, up $100,000 year over year. EBITDA was $1.4 million. Net earnings were $556,000, or $0.09 per diluted share, versus $1.1 million, or $0.20 per diluted share, in the third quarter last year. Recycling revenue was $12.2 million, up $400,000, and byproduct revenue was $4.7 million, consistent with last year. ApplianceSmart sales were $16.7 million, down 2%, and ApplianceSmart operating loss was $595,000 versus a $163,000 loss a year ago. Management said the lower earnings were driven by a higher effective tax rate and lower profit margins at ApplianceSmart. For guidance, the company does not expect carbon offset revenue for the remainder of 2014 and expects $500,000 to $600,000 of carbon offset revenue in 2015. It also said a utility funded another $4 million under a replacement program through the end of Q4 2014.

Mark Eisenschenk emphasized that the company is in transition but sees multiple growth levers, including appliance replacement programs, new recycling facilities, and strategic opportunities not yet disclosed. He said the company is improving operations through cost reductions, reducing excess square footage, cutting call center and vendor costs, and eliminating redundancies, with savings expected to reach several hundred thousand to potentially seven figures annually. His tone was constructive and optimistic, especially around the utility program extension, the Oregon facility, and potential business from industry consolidation such as Electrolux’s planned purchase of GE Appliances.

Jeff Cammerrer said the company again delivered quarter-over-quarter revenue growth and positive earnings, but net income fell year over year because of a higher effective tax rate and weaker margins at ApplianceSmart. He highlighted $33.6 million in revenue, $1.4 million of EBITDA, and $556,000 of net earnings, and explained that last year’s EPS benefited by $0.10 per diluted share from a lower tax rate. He also noted no carbon offset revenue in Q3 or for the rest of 2014, while expecting $500,000 to $600,000 in 2015, and flagged an ongoing California sales tax examination that could be material if assessed.

There was no analyst Q&A; the operator stated that no questions were queued. The most notable issues raised during prepared remarks were the California sales tax examination, which could result in material taxes, penalties, and interest, and the absence of carbon offset revenue in 2014 due to the California market being on hold. Management also discussed the CFO’s departure and a transition plan, but no live follow-up questions were asked.