Nexxus Lighting (NEXS) reported results this morning that are admittedly a bit confusing, but not as bad as the headlines in my opinion and I think the selling pre-market is a bit overdone, but we’ll see how the day progresses.  The company recently sold its legacy commercial and pool lighting business to focus on its LED business which is a smart move and should pay off in the longer run.

As a  result of this sale, the company is reporting revenues from continuing operations this morning of $1.25 million vs the $1.28 million it reported in the year ago quarter.  I can’t compare this to the analyst estimates because it looks like they are based on the entire business. 

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The revenue number is obviously a disappointing number and the CEO mentions that in his comments, but also says he’s seeing a pick up in interest for the Array product since the Energy Star certification.  On the EPS side, the company did narrow it’s loss when you take away the one time loss from the sale of the legacy business.  When you do that, I get an EPS loss of .08 which as close to profitability as the company has ever been, so it appears the company is doing a good job of cutting costs.

Breaking it down further, sales of its Lumificient product (LED signage) grew 8% over the year ago quarter, but the Array line of LED lighting was down 22% over year ago quarter ($326K  vs $423K).

Nexxus CEO Mike Bauer commented on the legacy business sale: “The divestiture of the Legacy Commercial and Pool Lighting Businesses was a major accomplishment and positions us to focus the Company and our resources on the higher growth opportunities offered by Array and Lumificient.

Commenting on the 3rd quarter lull related to Array: “Despite the 3rd quarter lull we experienced in shipments, recent quotation and order activity has been stronger and we are encouraged by the momentum that has been building since our Energy Star announcement. We were disappointed with our Array sales performance.  We did not anticipate the softness in demand for Array that we experienced in the quarter, both in the U.S. and in Europe, and there was a confluence of factors, both internal and external to the Company, that affected our results. Internally, we reorganized our sales team in the 2nd quarter and this change impacted our previous sales momentum. In addition, we lost some traction in Europe and we are currently working on developing a more comprehensive and focused market strategy for penetrating international markets.”

Commenting on the potential of its LED signage business:  “Lumificient’s strategy for attaining large multi-site retail signage programs is beginning to pay dividends, having successfully secured specifications and orders from two of the largest mobile phone companies, a global coffee retailer, a major retail shoe company and, most recently, attaining prototype approval for a significant opportunity with a leading automotive supplier.”

Commenting on the state of the industry: “Our market intelligence is showing that the overall adoption rate for solid state lighting has been below what was forecasted by industry experts.”

He highlights two reasons for this:
1. Economy: customers still being conservative
2. Customers awaiting utility incentives tied to Energy Star approved products in 2011

Shares of NEXS are down about 20% this morning, indicating it’s going to be a rough go in the short term.  The stock may need to test the all time low around 1.54 at some point