Canada Research
Published by Raymond James Ltd.
Lumenpulse Inc.
June 26, 2014
Company Report - Initiation of Coverage
LMP-TSX
Steven Li CFA | 416.777.4918 | steven.li@raymondjames.ca
Jonathan Lo (Associate) | 416.777.6414 | jonathan.lo@raymondjames.ca
IT Hardware
Outperform 2
C$25.00 target price
Current Price ( Jun-24-14 )
Total Return to Target
52-Week Range
Suitability
Initiating Coverage of Lumenpulse with an Outperform rating
Recommendation
By most estimates, lighting applications drive ~15% of global power consumption and
~30% of a building’s energy cost. The need to reduce energy consumption has clearly
bolstered the case for LED. The commercial lighting market is undergoing a dramatic
transformation and Lumenpulse is in the thick of it. Over the last 3 years, Lumenpulse has
grown revenue at a 46% CAGR. We forecast Lumenpulse to continue growing faster than
the market for several years to come as it expands its global footprint and lighting
applications. We are initiating coverage at Outperform.
Analysis




LED inflection point. The specification-grade (non-residential) LED market at ~$10.6
billion in 2013, is forecast to grow to $40.7 billion by 2020 (21% CAGR). Government
regulations have certainly given a boost with many countries phasing-out incandescent.
But, LED payback has been accelerating as well. ROI now runs at 35% (~3 years payback),
but can be as high as 70-80% (~1.5 years) in a retrofit. Effectively, LED lighting solutions
can pay for themselves in 1-3 years delivering another 10-15 years of pure profit.
Lumenpulse TAM growing even faster – at 59+% CAGR. Today, Lumenpulse is mostly
North America focused (~90% of its revenues) and its lighting applications coverage was
just about 20% in 2013. We forecast Lumenpulse to build out its European presence to
manage the substantial opportunities that are emerging. The company is also adding new
products to address more lighting applications. We forecast Lumenpulse to increase its
lighting application coverage from 20% in 2013 to 50% in 2020. We estimate Lumenpulse
TAM at $390 mln in 2013, growing to $10.1 billion by 2020 or a 59+% CAGR.
Unique Abilities, Differentiated Products. Many LED manufacturers leverage third-party
technologies and parts to assemble a finished product. Lumenpulse prides itself on its
ability to innovate ahead of the pack by designing its own electronics and lighting
systems. Lumenpulse has 25 granted patents and more than 51 patents pending around
LED technology that allows them to differentiate both from a qualitative (i.e., aesthetics
and usability perspective), as well as from an ROI perspective.
Model. F2015 estimates include revenues of $94 mln (+51% y/y) and adjusted EBITDA of
$6.4 mln (F2014: $0.4 mln). F2016 estimates include revenues of $136 mln (+45% y/y)
and adjusted EBITDA of $16.5 mln (+159% y/y). F2017 estimates include revenues of
$195 mln (+43% y/y) and adjusted EBITDA of $34.4 mln (+108% y/y).
Market Data
Market Capitalization (mln)
Current Net Debt (mln)
Enterprise Value (mil.)
Shares Outstanding (mln, f.d.)
10 Day Avg Daily Volume (000s)
Dividend/Yield
Key Financial Metrics
2014A
2015E
P/E
NA
NA
EV/EBITDA
NA
NA
EV/Revenue
NA
4.8x
Our $25.00 target price is based on a 25x F2017E/C2016E adjusted EPS. We typically do
not factor M&A in our forecasts, and a potential transaction could represent upside to
our forecasts and target price (see our Valuation & Recommendation section for
details).Lumenpulse currently trades at 44.7x C2015E EPS and 27.5x C2015E adjusted
EBITDA vs its lighting peers at 18.1x C2015E EPS and 8.6x C2015E EBITDA.
1Q
Jul
2Q
Oct
C$(0.01)
3Q
Jan
C$0.00
4Q
Apr
C$(0.10)
Full
Year
C$(0.38)
Revenues
(mln)
C$62
EBITDA
(mln)
2014A
C$(0.02)
2015E
(0.02)
0.01
0.04
0.09
0.11
94
6
2016E
NA
NA
NA
NA
0.47
136
17
2017E
NA
NA
NA
NA
0.98
195
34
C$0
Source: Raymond James Ltd., Thomson One
Please read domestic and foreign disclosure/risk information beginning on page 36 and Analyst Certification on page 36.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
C$541
-C$87
C$454
25.8
23
C$0.00/0.0%
2016E
2017E
44.7x
21.4x
27.5x
13.2x
3.3x
2.3x
Company Description
Lumenpulse is a designer, developer, manufacturer
and seller of specification-grade LED lighting solutions
for
commercial,
institutional
and
urban
environments.
Valuation
EPS
C$20.94
19%
C$21.65 - C$17.60
Aggressive Growth
Canada Research | Page 2 of 41
Lumenpulse Inc.
Table of Contents
Investment Thesis……………………….. ............................................................................................................. 3
Investment Risks……………………… ................................................................................................................. 9
Company Description & History……… .......................................................................................................... 9
Industry Overview & Opportunity……….. ..................................................................................................... 10
Customers & Markets Served………….. ......................................................................................................... 13
Geographic Breakdown……………. ................................................................................................................. 15
Products & Patents…………… ........................................................................................................................ 16
Competition & Industry Commentary………….. ............................................................................................ 23
Financial Model Highlights……….. ................................................................................................................ 26
Recent Financial Highlights……….. ................................................................................................................ 27
Financial Model Forecasts…………… .............................................................................................................. 27
Valuation & Recommendation………….......................................................................................................... 27
Appendix: Financial Statements………. ......................................................................................................... 29
Appendix: Management & Board of Directors………. ................................................................................... 31
Appendix: Share Ownership & Insider Holdings………… ............................................................................... 33
Appendix: Definitions…………. ...................................................................................................................... 34
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 3 of 41
Investment Thesis
Fast-growing $12 billion LED (specification-grade) market
Lumenpulse designs, develops, manufactures, and sells high-performance and sustainable
specification-grade LED lighting solutions for commercial, institutional, and urban environments.
Its primary customers are project specifiers (i.e., architects, engineers, landscape architects, and
lighting designers) – not residential. Lumenpulse targets the high end of the market with
customers like The Casino de Montreal, BC Place Stadium, The Carmelite Chapel, 230 Park Avenue
NY, GM Renaissance Center, John A Blatnik Bridge, and TELUS World of Science.
According to McKinsey estimates, the general lighting market (including light source, specifically,
bulbs) was $85 billion in 2013 and is forecast to grow to $114 billion by 2020 (4% CAGR). The
fixtures and controls market (F&C) is further broken down into stock and flow (commoditized
lighting solutions – residential) and specification-grade lighting solutions (designed to comply with
strict technical requirements imposed by specifiers in charge of lighting for particular projects).
Mckinsey estimates the specification market makes up ~60% of F&C at ~$45.6 billion in 2013 and
within that, LEDs are estimated at ~$10.6 billion in 2013 and expected to grow to $40.7 billion by
2020 (21% CAGR).
Exhibit 1: 2013 Market Size ($ billions)
Stock & Flow
= Residential
Source: McKinsey - Lighting the Way: Perspectives on the Global Lighting Market Second Edition 2012
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 4 of 41
Lumenpulse Inc.
Exhibit 2: 2020 Market Size ($ billions)
Stock & Flow
= Residential
Source: McKinsey - Lighting the way: Perspectives on the Global Lighting Market Second Edition 2012
Lumenpulse’s Actual TAM Is Expanding Even Faster
While the specification-grade LED market is forecast to grow at a 21% CAGR to 2020, we forecast
Lumenpulse to grow significantly faster than that. Why? Because Lumenpulse’s actual TAM is
expanding much faster. Today, Lumenpulse is mostly North Americafocused (~90% of its
revenues) and its lighting applications coverage was just about 20% in 2013.
We forecast Lumenpulse to build out its European presence (and to a lesser degree, APAC) over
the next five years (could be faster with potential acquisitions) to manage the substantial
opportunities that are emerging in EMEA and APAC. By 2020, APAC and EMEA together are
expected to make up 79% of the global market (5x larger than North America) according to
McKinsey estimates.
While Lumenpulse already offers a thoughtfully planned line of exterior and interior lighting
solutions (linear, floods, coves, etc.), the company is adding new products and core technologies
at a steady pace to address more lighting applications. For instance, outdoor (street lamps,
parking lots, and stadiums) and office applications are expected to grow into the two largest LED
market segment by 2020. We forecast Lumenpulse to increase its lighting application coverage
from 20% in 2013 to 50% in 2020 (this could prove conservative, as management has discussed
getting up to 80% coverage). At Lightfair in June 2014, Lumenpulse introduced 15 new products
including Lumencove Nano and Lumenfacade Inground and a bigger Lumenbeam LBX HO which
we estimate has increased Lumenpulse lighting application coverage to ~25%.
Under these assumptions, we show that Lumenpulse’s actual TAM is forecast to grow at 59+%
CAGR.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Exhibit 3: Lumenpulse’s TAM
Lumenpulse TAM ($ Billions)
Global LED (Spec-Grade) Market
North America Coverage
North America Penetration
EMEA Coverage
EMEA Penetration
APAC Coverage
APAC Penetration
Geographic Coverage
Application Coverage
Lumenpulse TAM
Canada Research | Page 5 of 41
2013
10.6
1.8
100%
0.2
5%
0.0
0%
2.0
20%
0.4
2020 CAGR 2013 to 2020
40.7
21.2%
6.5
100%
8.7
75%
5.2
25%
20.3
50%
10.1
59.0%
Source: McKinsey - Lighting the Way: Perspectives on the Global Lighting Market Second Edition –
2012; Raymond James Ltd.
Drivers of LED Market Penetration
According to the United Nations Environmental Programme (UNEP) Global Environmental Facility
(GEF) en.lighten initiative, 15% of global power consumption is from lighting. Since 2008, there
has been a secular trend towards a more broadly based adoption of LED lighting as government
and commercial sectors look for lighting options which can reduce the environmental impact of
energy consumption and lower operating costs. Government regulations have also been passed in
several countries to phase-out incandescent lamp sales; specifically, sales have been banned since
2009 in the European Union, 2012 in China, and 2014 in Canada and the US.
Exhibit 4: Timeline of Incandescent Bans By Country (GLS = Incandescent)
Source: McKinsey – Lighting the Way: Perspectives on the Global Lighting Market Second Edition,
2012.
LED lighting versus traditional and other lighting options (i.e., incandescent, CFL, Induction, HID,
etc.) presents varying scales of medium- to long-term project economic benefits. Project
economics are typically measured with total cost of ownership (TCO) and presented as return on
investment (ROI). According to NextGen Partners, ROI can typically run at 35% (or ~3 years
payback), but can sometimes be as high as 70-80% (~1.5 years payback) in a retrofit where the
previous lighting is very inefficient. Effectively, LED lighting solutions can pay for themselves in 1-3
years, delivering another 10-15 years of pure profit.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 6 of 41
Lumenpulse Inc.
Similarly, energy reduction has become a top priority for the commercial and industrial sectors, as
lighting can account for as much as 30% of a building’s overall energy cost according to
Lumenpulse. There is a growing theme around sustainable business practices which has given
birth to green-building certifications such as BREEAM (Building Research Establishment
Environmental Assessment Method), and LEED (US Green Building Councils - Leadership in Energy
and Environmental Design). The energy cost savings and the brand value of environmentally
sustainable business practices are compelling drivers of LED adoption in the commercial and
industrial sectors.
Exhibit 5: US Nonresidential Buildings – Green Building Breakdown
Source: McGraw-Hill – October 2012
Unique Abilities, Differentiated Products …
Many LED manufacturers leverage third-party technology and parts to assemble a finished
product and rely on others to supply control/drivers for their LED systems. Lumenpulse prides
itself on its ability to innovate ahead of the pack by designing its own electronics (PCBs and LED
modules) and lighting systems, as well as by constantly finding ways to add control to lighting.
Lumenpulse has 25 granted patents and more than 51 patents pending around LED technology.
Lumenpulse can differentiate its products both from a qualitative aspect (i.e., aesthetics and
usability perspective – Lumenbin, Lumenoptiflex, Lumendim, and Lumendrive) while also
dramatically improving the ROI with more obvious economically beneficial technologies
(Lumentalk, Lumensmart, Lumendrive, Lumencool, Lumenlife). Below, we highlight three of
Lumenpulse’s main trade secrets/intellectual properties (IP). Please see our “Products & Patents”
section for more details.
Lumenbin is one of Lumenpulse’s main trade secrets. It is a proprietary method of “binning”
(categorizing) LEDs by colour temperature, to produce best-in-class colour consistency. Similar to
wafer production, LEDs have different yields (colour variations). Manufacturers are sometimes
forced to pay a premium to buy from one bin (yield) to ensure colour consistency. Lumenpulse’s
binning process enables them to buy from different bins and yet still achieve consistency over
linear length (board to board, 1 ft to 4 ft), over time (fixtures in 5 years, will match fixture today)
and over product family (facade versus cove versus beam, etc.).
Lumentalk represents the company’s cutting-edge lighting control technologies. While LED
competitors use data wiring to transmit data between lighting fixtures and controllers – which
requires cutting open walls for installation (disruptive and expensive) – Lumenpulse’s patented
Lumentalk core technology enables lighting control without the need of additional data wiring. It
is able to use new or existing power lines to transfer reliable digital data for lighting control
commands. In a retrofit project, this can save up to 30% of the typical installation cost (according
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 7 of 41
to Lumenpulse). Other vendors may use a wireless connection, but connectivity can be unreliable
especially when several walls exist between the fixtures and the controllers.
Lumendrive, which was just introduced at the LightFair 2014 show in June, eliminates the need
for a power supply on the fixtures, enabling a smaller design, increased efficiency, lower costs
(higher margins for Lumenpulse) and an extended lifetime. An embedded ASIC (application
specific integrated circuit) microchip eliminates the need for an onboard power supply.
Exhibit 6: Lumendrive in the New Lumencove Nano
Lumencove
1.0
Lumencove
2.0
Lumencove
Nano
Smaller with lumendrive
Source: Lumenpulse Inc., Raymond James Ltd.
… Leads to Margin Expansion
While declining LED chip pricing (input cost) should help Lumenpulse, it is also available to all
competitors which makes it difficult to predict to what extent lower LED chip pricing will be
passed onto customers. What is a little clearer is that Lumenpulse has intellectual property (IP)
that allows them to generate more margins on its products including Lumenbin (does not need to
buy premium bins); Lumencool (patented chimney design and dual chamber design allowing
Lumenpulse to make 40% lighter products at a lower cost and yet with an industry-leading LED life
warranty); and, Lumendrive (removal of power supply lowers cost by 15%). Additionally, as
manufacturing utilization improves (currently only 40% – management estimates that Lumenpulse
can almost triple its production capacity with limited additional incremental fixed costs), gross
margin could see as much as ~400bps improvement. We forecast gross margins to increase from
42% in the just concluded F2014 to closer to 50% over the next few years.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 8 of 41
Lumenpulse Inc.
Exhibit 7: Historical and Forecast Margins
Source: Lumenpulse Inc., Raymond James Ltd.
Impressive Team
Lumenpulse is led by François-Xavier Souvay (Founder, Chairman, and CEO) who, we believe,
successfully embodies the company’s innovative approach to architectural lighting, with his
steadfast vision of what architects, engineers, and lighting designers are aiming to achieve. All
combined, Mr. Souvay’s management team boasts 150+ years of industry experience and
continues to attract top talent from competitors such as Color Kinetics and Philips. Management
and other officers (and directors) of the company own more than 50% of the company.
Management as a group owns ~30% of the company.
Exhibit 8: Insider Holdings
Insider Holders
François-Xavier Souvay
Position with the Company
Founder, Chairman, President,
and CEO
Nicolas Bélanger
Director
Philippe Racine
SVP Sales Operations
Alexandre Taillefer
Director
Yvan Hamel
SVP Product Development
Michel Ringuet (Placements Mica 3 Inc) Director
Brandon Siemion
SVP Sales Americas
Greg Campbell
SVP CTO
Pierre Larochelle
Lead Director
François Côté
Director
Pierre Fitzgibbon
Director
Robert Comeau
EVP CFO
Jean Clermont
SVP Manufacturing Operations
Nicolas Vanasse
EVP Chief Legal Officer &
Corporate Secretary
Philip Alexander O'Donnell
SVP Sales International
Yvon Roy
VP Investor Relations
Julie Lamontagne
SVP Human Resources
Jesse Nicholas Lilley
SVP Marketing
Shares % of O/S
5,484,803
23.75%
4,127,957
927,112
586,520
445,797
225,031
23,927
22,503
20,469
14,668
8,813
6,250
625
11,894,475
17.88%
4.00%
2.53%
1.92%
0.97%
0.10%
0.10%
0.09%
0.06%
0.04%
0.03%
0.00%
51.47%
Options
DSU
2,336
35,714
1,168
35,714
2,336
562,893
170,574
2,765
2,587
1,293
392,857
41,667
107,143
47,619
35,714
26,398
26,398
1,482,691
12,485
Source: Ink Research
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Investment Risks
New technology risk: The lighting industry is continuously developing new products with greater
functionality and performance; this may result in pricing pressure on existing products. Lighting
technology also continues to improve rapidly. Should Lumenpulse fail to respond quickly, its
competitive advantage could diminish over time.
Macroeconomic risk: Lighting demand is reliant on the construction of new buildings and the
renovation of existing buildings. Global macroeconomic health can have a significant effect, either
positively or negatively, on Lumenpulse.
Rapid growth risk: Lumenpulse grew at 46% CAGR from F2011 to F2014, and is forecast to
maintain this rate of growth in the near to mid-term. To achieve this, Lumenpulse must continue
to effectively scale its personnel, systems, and production at a similarly high rate. Any short-term
hiccup in quarterly results could result in a selloff of the shares.
Highly competitive industry: Many of Lumenpulse’s competitors are larger and have a longer
history supplying the lighting industry.
Volatility and liquidity risk: Lumenpulse has a market capitalization around $500 million and an
average volume of 112,000 shares per day (~0.5% of shares outstanding). As a result, the market
price may be volatile. We expect this risk to decline as earnings potentially turn positive and its
book equity and subsequent valuation increase.
Geographic expansion – barriers to entry risk: Lumenpulse is planning to build out its European
presence and eventually its Asia Pacific presence. There is a significant barrier to entry with
establishing relationships with project specifiers. While we believe Lumenpulse should gradually
gain traction in these new markets by expanding its footprint through potential M&A transactions
and a general increase in its brand awareness, an inability to penetrate these markets would dent
Lumenpulse’s growth opportunities.
Valuation: Lumenpulse is still in its early stages as a company with a modest level of profitability
which results in a relatively high P/E ratio. This implies some valuation risk.
Company Description & History
Based in Montreal with offices in Boston and London, England, Lumenpulse designs, develops,
manufactures, and sells specification-grade LED lighting solutions for commercial, institutional,
and urban environments. Lumenpulse already offers a thoughtfully planned line of exterior and
interior lighting solutions (linear, floods, coves, etc.) and offers various configurations for
specifiers (i.e., architects, engineers, landscape architects, and lighting designers) for many
verticals including architecture, offices, and hospitality, for example. Its LED lighting solutions are
sold through direct sales, as well as through value-added resellers (VARs) and agents. In North
America, Lumenpulse works with over 80 agents (representing 80-90% of Tier 1 agents) and VARs,
which combined, makes for over 400 sales people. These agents work exclusively with
Lumenpulse for specific lighting applications. The company has also started building a footprint in
EMEA and APAC. Lumenpulse has approximately 278 employees – 233 employees in Canada, 37
employees in the United States, and eight employees in EMEA and APAC. In Québec, Lumenpulse
also acts as a VAR for over 15 North American and European manufacturers to provide a complete
project solution for its clients.
Lumenpulse LED lighting solutions have been installed in over 5,000 projects, in settings ranging
from the arts and education, commercial and public infrastructure, healthcare, hotels and
restaurants, municipal, retail, sports and leisure, to the interior and exterior of work places.
Founded in 2006, Lumenpulse has launched over 105 LED products spread across 10 distinct
product families with over 25 patents, 51 patents pending, and trade secrets.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 9 of 41
Canada Research | Page 10 of 41
Lumenpulse Inc.
History of Lumenpulse
Lumenpulse was founded in 2006 by its current Chairman, President, and CEO, FrançoisXavier Souvay. From day one, Mr. Souvay’s vision has been to grow a company
combining strong industrial design capabilities and innovative technology expertise to
develop high performance and sustainable specification-grade LED lighting solutions.
In 1999, before Lumenpulse, Mr. Souvay acquired Luxtec, a value-added reseller of
diversified specification-grade lighting solutions. In 2006, Lumenpulse was established
as a dedicated R&D and manufacturing division of Luxtec, and in 2008, Lumenpulse
Lighting Inc. was incorporated to absorb the growing R&D and manufacturing activities
of Luxtec.
In 2008, Lumenpulse introduced its first products to the North American market
(Lumenfacade and Lumencove).
In 2009, Lumenpulse introduced the first products from the Lumendome, Lumensub,
Lumentube, Lumensign, Lumentask and Lumenedge families and started appointing
agents to further penetrate the market.
In 2010, Lumenpulse expanded its product line by introducing the first products from
the Lumenbeam family, introduced its first complete product catalogue, and
strengthened its North American direct sales force to support its expanding agent
network.
In 2011, Lumenpulse launched new products from the Lumenbeam and Lumenfacade
families. Lumenpulse also continued its geographic expansion and established a new
office in London, England to support growing sales in the EMEA and APAC regions and
also formally opened its new office in Boston.
In 2012, Lumenpulse launched the Lumenline family to challenge traditional fluorescent
technologies, and Lumentalk, a patented technology that allows digital control signals to
be carried over electrical power lines without additional wiring.
In 2013, new products from the Lumenbeam, Lumenfacade, and Lumenline families
were launched. Lumenpulse also entered into strategic agreements with VARs in the
APAC region, thereby continuing its geographic expansion.
In 2014, Lumenpulse signed 6 VARs and 1 agent in Australia, New Zealand, Scandinavia,
Northern UK, Netherlands, Germany, and Belgium. It also established new direct sales
presence in Latin America and France. Lumenpulse now has over 90 VARs and agents in
9 international markets. Lumenpulse also completed its IPO of 7,187,500 shares on April
15 2014 at $16.00 per share.
Lumenpulse has received several awards and recognitions, including the International
Red Dot Award, the LFI Innovation award, Next Generation Luminaires Design awards,
and Product Innovation Awards.
Industry Overview & Opportunity
General Lighting Industry
The global lighting industry is divided into three markets: general lighting where lighting in itself is
the functional end-product; automotive lighting (car lights); and back-lighting screens (e.g., TVs,
device displays, etc.). Lumenpulse operates within the general lighting market.
McKinsey estimates the general lighting market for fixtures and controls (F&C) at $73.5 billion in
2013, and this is forecasted to grow to $104 billion by 2020. Within general lighting, Lumenpulse
competes primarily in F&C, which include lighting apparatuses, sockets, fixtures, and control
systems (not light sources; i.e., bulbs).
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
The F&C segment is further broken down into the specification-grade (high-grade) lighting
solutions segment and stock and flow (commoditized lighting solutions – residential) segments.
Specification-grade lighting is comprised of fixtures and controls designed to comply with strict
technical requirements imposed by project specifiers. This high-grade segment is where
Lumenpulse competes. If we exclude residential applications (which are mostly commodity
grade), the F&C market in 2013 was ~$45.6 billion and is forecast to grow to $63.6 billion by 2020,
a 5% CAGR, according to McKinsey estimates. While the F&C market is forecast to grow modestly,
the key driver for Lumenpulse will be the market penetration of LEDs which is expected to grow
from 23% penetration in 2013, to 64% penetration by 2020, which expands the 7-year CAGR to
21%, clearly presenting a huge opportunity through cannibalization of the non-LED market, which
is expected to shrink at 6% CAGR over the same period.
Factors Driving the Adoption of LEDs
Government Intervention: According to the United Nations Environmental Programme (UNEP)
Global Environmental Facility (GEF) en.lighten initiative, 15% of global power consumption is from
lighting. Since 2008, there has been a secular trend towards a more broadly based adoption of
LED lighting as government and commercial sectors look for lighting options which can reduce the
environmental impact of energy consumption and lower operating costs. Incandescent lamps are
on average one-sixth as efficient as LEDs (based on Lumenpulse efficacy levels), and fluorescent
tubes (used mostly in offices) are on average one-quarter as efficient. Converting global lighting to
LEDs would vastly reduce global energy demand. As a result, government regulations have been
passed in several countries to phase-out incandescent lamp sales; specifically, sales have been
banned since 2009 in the European Union, 2012 in China, and 2014 in Canada and the US.
Improving ROI: The return on investment (ROI) of LEDs is improving with efficacy (lumens/Watt)
and life expectancy (hours of life). LED lighting versus traditional and other lighting options (i.e,.
incandescent, CFL, induction, HID, etc.) presents varying scales of medium- to long-term project
economic benefits. Project economics are typically measured with total cost of ownership (TCO)
and presented as ROI. According to NextGen Partners, ROI can typically run at 35% (or ~3 years),
but can sometimes be as high as 70-80% (~1.5 years) in a retrofit where the previous lighting is
very inefficient. Effectively, LED lighting solutions can pay for themselves in 1-3 years (through 7590% energy savings) and deliver another 10-15 years of pure profit (20-year life).
Smithsonian American Art Museum in Washington, D.C.
A more detailed example comparing the total cost of ownership of LEDs versus halogen and
incandescent lamps in a retrofit project at the Early Modernism Gallery, Smithsonian American Art
Museum in Washington, shows the initial cost of installation (excluding labour costs) was 12 times
greater for LEDs. However, the average annual electricity usage is 73% lower with LEDs. Given the
energy-cost savings, the higher initial cost of installation for LEDs will be paid off within the
second year according to the US Department of Energy (US DOE).
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 11 of 41
Canada Research | Page 12 of 41
Lumenpulse Inc.
Exhibit 9: Smithsonian American Art Museum Case Study Results
Source: US Department of Energy – Demonstration of LED Retrofit Lamps June 2012
Environmental Certifications: Energy reduction has become a top priority for the commercial and
industrial sectors, as lighting can account for as much as 30% of a building’s overall energy cost
according to Lumenpulse. There is a growing theme surrounding sustainable business practices
which has given birth to green building certifications such as BREEAM (Building Research
Establishment Environmental Assessment Method), and LEED (US Green Building Councils –
Leadership in Energy and Environmental Design). The energy-cost savings and the brand value of
environmentally sustainable business practices are compelling drivers of LED adoption in the
commercial and industrial sectors.
Exhibit 10: US Nonresidential Buildings – Green Building Breakdown
Source: McGraw-Hill – October 2012
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Intangible Factors
While LEDs have several tangible benefits which result in energy-cost savings, less tangible
benefits which enable greater versatility for specific project needs include: 1) The ability to dim to
nearly 0%, which increases lighting control flexibility and optimized energy usage; 2) Inherent
durability from external shock as LEDs have no filament or glass to break; 3) Greater directionality
of light, focused where it is needed to reduce light pollution (i.e., wasted light energy); 4) Instant
full-light intensity (unlike fluorescent and HID); 5) The ability to dynamically change the colour of
light to create decorative moods; and, 6) The small size of LED chips (one square millimetre of
surface area) enables new flat form factors.
Customers & Markets Served
Value Chain
LEDs are solid-state electronic components that emit light in a variety of brightness levels and
colours. The LED value chain is divided into three segments: upstream, midstream, and
downstream. As Exhibit 11 summarizes, the upstream sector (chip manufacturers) produces the
LED chips on a substrate (sapphire, silcon carbide, silcon, gallium nitride, or copper); the
midstream (module assemblers) integrates the LED chips onto printed circuit boards (PCB) to
make LED modules (the light source/lamp); and the downstream is where the LED modules are
combined with lighting fixtures and integrated design services to achieve customized lighting
solutions. There are also vertical integrators which produces everything from LED chips to lighting
solutions. The LED value chain is typically more profitable downstream where Lumenpulse
operates (with no intention to vertically integrate).
Exhibit 11: LED Value Chain
Source: Lumenpulse Inc.
In recent years, the upstream LED industry has suffered from overcapacity (too many production
lines in China) as LED backlighting demands have been sluggish (i.e., not selling enough LED TVs),
according to McKinsey. The US DOE forecasts LED package prices to fall 22%-27% per year through
2020, and substrate prices to drop 10%-29% per year. While declining LED chip pricing (input cost)
should help Lumenpulse, it is also available to all competitors which makes it difficult to predict to
what extent lower LED chip pricing will be passed onto customers. What is clear and more
sustainable, is that Lumenpulse has several IP that allow them to generate more margins on its
products including Lumenbin (does not need to buy premium bins), Lumencool (patented chimney
design and dual chamber design allowing Lumenpulse to make 40% lighter products at lower cost
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Lumenpulse Inc.
and yet with industry-leading LED life warranty) and Lumendrive (removal of power supply lowers
cost by 15%). Additionally, as manufacturing utilization improves (currently only 40%;
management estimates that Lumenpulse can almost triple its production capacity with limited
additional incremental fixed costs), gross margin could see as much as ~400bps improvement.
Given multiple levers to increase margins, as Lumenpulse gains manufacturing efficiencies and
realizes lower input costs, we forecast gross margins to increase from 42% in the just concluded
F2014 to closer to 50% over the next few years.
There is also more differentiation and higher barriers to entry in the downstream segment. For
instance, one of the distinct features of the specification-lighting market is that the strict technical
requirements from the specifiers would often limit the end-user’s ability to choose the lighting
manufacturer – emphasizing the importance of relationships between solution providers and
specifiers (i.e., architects, engineers, landscape architects, and lighting designers). In North
America, Lumenpulse already works with over 80 agents (representing 80-90% of Tier 1 agents)
and VARs, which combined makes for over 400 sales people. These agents work exclusively with
Lumenpulse for specific lighting applications – creating barriers to entry. The company has also
started building a footprint in EMEA and APAC. As we show in Exhibit 13, Lumenpulse has
contributed to several high-profile projects in North America, as well as in Europe.
Exhibit 12 outlines the process of a sale from Lumenpulse to specifiers. In most cases, Lumenpulse
will indirectly assist project specifiers through agents and VARs. Once Lumenpulse has met the
project specifications, the agent or VAR will bid on the project, and upon a winning bid will
typically sell Lumenpulse products through electrical wholesale distributors. VARs and electrical
wholesale distributors make a spread on the product, while agents are paid a commission for
initiating the sale through an electrical wholesale distributor. Lumenpulse primarily employs
agents in the US and VARs in international markets and Canada with exclusive territories. During
F2014 ending April 30 2014, 81.8% of revenue was from electrical wholesale distributors
(originating from agents) and 13.9% was from VARs.
Exhibit 12: Typical Lighting Sales Process
Source: Lumenpulse Inc.
Exhibit 13: Examples of Lumenpulse Projects
BC Place Stadium (Vancouver – Left), The Langham Hotel (Boston - Right)
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
TELUS World of Science (Vancouver – Left), 230 Park Avenue - The Helmsley Building (NYC - Right)
Bayview Village (Toronto - Left), Solvesborg Bridge (Solvesborg, Sweden - Right)
Maison symphonique de Montréal (Montreal - Left), NFOE Office (Montreal - Right)
Helsinki Cathedral (Helsinki, Finland - Left), Wellesley Hotel (London, UK - Right)
Source: Lumenpulse Inc.
Geographic Breakdown
Lumenpulse generates ~90% of its revenue from the US and Canada. With Lumenpulse acting as a
VAR in its home market the majority of its direct sales employees (42 of 75) are located in Canada,
while the US market is targeted mostly through agents. In 2011, Lumenpulse opened its London,
England office to support sales growth in EMEA (now eight employees).
Outside North America, Lumenpulse has VARs in Northern UK, Netherlands, Germany, Belgium,
Southeast Asia, the Middle East, Australia, New Zealand, and Scandinavian countries. $10 million
of the IPO proceeds are earmarked for use in expanding its global reach over the next few years to
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Lumenpulse Inc.
strengthen distribution and sales channels through hiring more sales professionals to assist VARs
and specifiers in EMEA, APAC, and Latin America. A portion of the $72 million, allocated for
working capital and general corporate purposes, will be available for strategic acquisitions for
both broadening its product offering but also to expand its international footprint.
Breaking down the specification-grade LED lighting market size by geographic region, Asia is a
clear leader at $5.3 billion in 2013, well ahead of North America at $1.8 billion, and EMEA at $3.0
billion. By 2020, McKinsey estimates the Asia Pacific, North American, and EMEA markets will
grow at 20%-21% CAGR to $20.7 billion, $6.5 billion, and $11.6 billion, respectively. By 2020, Asia
and EMEA together are expected to make up 79% of the global market (5x larger than North
America).
In terms of concentration, excluding the business generated by its sales force in the province of
Québec and in London, England, Lumenpulse’s top five agents and VARs accounted for 15.4% of
total revenues in F2014.
Exhibit 14: Geographic Revenue Breakdown
Source: Lumenpulse Inc. (F2014)
Products & Patents
Lumenpulse is a designer, developer, and manufacturer of high-performance LED lighting
solutions, selling its own products directly to specifiers and through agents, value-added resellers
(VARs), and electrical wholesale distributors. Additionally, in its home market of Québec,
Lumenpulse acts as a VAR for over 15 North American and European lighting manufacturers – this
is in order to be able to provide a complete end-to-end solution, given that its current product
portfolio only addresses ~25% of the addressable lighting applications. Other manufacturer
products it offers include: track lights, downlights, recessed spotlights, area lighting fixtures, and
pedestrian street lighting fixtures. In F2014, 22% of revenue was from other manufacturer
products, down from 58% in F2011. As Lumenpulse adds new products and other core
technologies to address more lighting applications, we expect its VAR business to decline over
time.
Growing into other applications
Early on, Lumenpulse focused on architectural lighting applications as architecture has been an
early adopter of LED lighting and is by far the most highly penetrated market segment for LED
lighting at ~60% in 2013 (forecast to reach 87% by 2020 according to McKinsey estimates). The
reason for the early adoption in architecture versus other segments is that specifiers in
architectural projects have a mandate that is more about performance and design than absolute
pricing. Architecture projects use LEDs for creating decorative moods, with the flexibility of RGB
(red, green, blue) colour control. There is limited pricing pressure in specification-grade lighting
projects.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Exhibit 15: LED Penetration by Application
Source: McKinsey - Lighting the way: Perspectives on the Global Lighting Market Second Edition –
2012
Exhibit 16: LED Market Size by Application
Source: McKinsey - Lighting the way: Perspectives on the Global Lighting Market Second Edition –
2012
As other vertical penetration catchs on, we believe Lumenpulse will continue to expand its lighting
application coverage. In the days leading up to Lightfair 2014 earlier in June, Lumenpulse
launched 15 new products. Lumencove Nano is a dimmable cove-lighting system that eliminates
the need for a power supply, optimizing size, efficiency, and durability. The fixture debuts
Lumendrive, a breakthrough application specific integrated circuit (ASIC) technology that powers
LEDs directly from the AC mains, while still allowing full digital dimming and control. Lumenfacade
Inground is an LED fixture designed specifically for ground-recessed lighting applications. Both
products are expected to become among the big sellers (10+% of total revenue). There were also
other additions to the Lumenbeam (Lumenbeam LBX HO – a high-output version of Lumenbeam
LBX to reach very tall structures and spaces) and Lumenline families (especially lit corners as
designers can tailor the shape of lighting schemes with squares, crosses, and tees that blend into
interior architecture). Dynamic Warm now allows smooth variations at the warm end of the
colour spectrum, ideal for indoor hospitality and heritage applications, mimicking the feeling of
dimmed incandescent.
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Lumenpulse Inc.
Unique Abilities, Differentiated Products
Many LED manufacturers leverage third-party technology and parts to assemble a finished
product and rely on others to supply control/drivers for their LED systems. Lumenpulse prides
itself on its ability to innovate ahead of the pack by designing its own electronics (PCBs and LED
modules) and lighting systems, as well as by constantly finding ways to add control to lighting.
Lumenpulse has 25 granted patents and more than 51 patents pending surrounding LED
technology.
Lumenpulse can differentiate its products both from a qualitative aspect (i.e. aesthetics and
usability perspective – Lumenbin, Lumenoptiflex, Lumendim, Lumendrive), while also dramatically
improving ROI with more obvious economically beneficial technologies (Lumentalk, Lumensmart,
Lumendrive, Lumencool, and Lumenlife).
Lumenbin is one of Lumenpulse’s main trade secrets. It is a proprietary method of “binning”
(categorizing) LEDs by colour temperature, to produce best-in-class colour consistency. Similar to
other wafer production, LEDs have different yields (which leads to colour variations).
Manufacturers are sometimes forced to pay a premium to buy from one bin to ensure colour
consistency. Lumenpulse’s binning process/algorithm enables them to buy from different bins and
yet still achieve consistency over linear length (board to board, 1 ft to 4 ft), over time (fixtures in 5
years, will match fixture today) and over product family (facade versus cove versus beam etc.).
Lumentalk represents the company’s cutting-edge controls technologies. While LED competitors
use data wiring to transmit data between lighting fixtures and controllers which requires cutting
open walls for installation (disruptive and expensive), Lumenpulse’s patented Lumentalk core
technology enables lighting control without the need of additional data wiring. It is able to use
new or existing power lines to transfer reliable digital data for lighting control commands. In a
retrofit project, this can save up to 30% of the typically installation cost (according to
Lumenpulse). Other vendors may use a wireless connection, but connectivity can be unreliable
especially when several walls exist between the fixtures and the controllers. Lumensmart is a
patented technology that can automatically recognize the input signal (0-10V, Digital MultipleX,
Remote Device Management, or Digital Addressable Lighting Interface) and adapt the fixture to be
compatible with the dimming protocol to enable faster adoption of energy-saving LED lighting
controls.
Buckley Recital Hall (Amherst College) in Amherst, Massachusetts
Buckley Recital Hall is a great example of the ROI from Lumenpulse lighting solutions and IP.
Typically, by the end of the graduation year, 70% of the incandescent lamps would fail (burn out).
Changing these lamps each year cost $50,000 and required the facility to close for 3 weeks, as
scaffolding was erected and lamps were changed. This resulted in a loss of usage (5.5% per year)
and the cost of changing the lamps ($50,000 per year). With Lumenpulse’s LED lighting and digital
control solution, energy costs for the 158 Lumenbeam large pendants installed was 60% lower
than the previous incandescent lamps and fixtures. Furthermore, Lumentalk technology enabled
the use of existing wires greatly accelerating the ROI with the payback estimated to have been
less than one year.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 19 of 41
Exhibit 17: Buckley Recital Hall – During 3-Week Long Annual Lighting Maintenance
Source: Lumenpulse Inc.
Lumendrive, which was just introduced at the LightFair 2014 show in June, eliminates the need
for a power supply on the fixtures, enabling a smaller design, increased efficiency, lower costs
(higher margins for Lumenpulse) and an extended lifetime. An embedded ASIC microchip
eliminates the need for an onboard power supply.
Exhibit 18: Lumendrive in the New Lumencove Nano
Lumencove
1.0
Lumencove
2.0
Lumencove
Nano
Smaller with lumendrive
Source: Lumenpulse Inc., Raymond James Ltd.
Lumenoptiflex enables a single fixture to combine various beam widths at different optical angles
replacing the work of multiple fixtures. This increases optical options (width of the light beam)
and improves flexibility and versatility of lighting functionality. The differently coloured LEDs on
the same fixture enable multiple lighting designs with a single fixture. Thanks to this feature,
Lumenpulse is able to use 2-3 times fewer beams compared to competitors (e.g., BC Place).
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
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Lumenpulse Inc.
Exhibit 19: Lumenoptiflex in Lumenbeam LBX Colour Changing Fixture
Source: Lumenpulse Inc.
Lumencool’s dual chamber design maximizes airflow enabling LEDs to last at L70 lifetimes (70% of
the maximum light output – human eyes cannot differentiate a 30% light intensity difference) for
an industry-leading 120,000 hours (where typical LEDs last between 25,000 and 50,000 hours;
CFLs at 6,000 and 18,000 hours; fluorescent tubes at 20,000 and 36,000 hours; and incandescent
at 750 and 1,000 hours). This greatly improves the lifetime economics of a lighting project, and
saves maintenance downtime for businesses that do not have significant slow seasons.
Exhibit 20: Lumencool Cross-Sectional Diagram
Source: Lumenpulse Inc.
Lumendim enables smooth dimming of LEDs. Typically, 30% of light energy consumption is wasted
when spaces/rooms are not in use. The combination of dimming and lighting control systems can
further minimize wasted light energy consumption and improve the ROI further.
Lumenlife adds a smart feature through patented onboard sensors which monitor the remaining
life of the fixture by temperature readings, power readings, and the fixture clock. Coupled with
Lumentalk, these measurements can be queried through specific commands. LumenID is a
software/hardware package that provides a direct connection to a PC for quick and easy
addressing, diagnostics and demonstration of Lumenpulse fixtures, reducing commissioning time
and installation costs.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 21 of 41
Exhibit 21: Lumenlife Monitors the Real Life of a LED
Source: Lumenpulse Inc.
Core Technologies
Lumendrive
Lumentalk
Lumensmart
Lumenbin
Lumendim
Lumencool
Lumenoptiflex
Lumenlife
Benefits
• Greater efficiency
• Smaller size
• Longer lifetime, not restricted
by third-party components
• Reduces installation costs
• Facilitates conversion to LED
lighting
• Compatible with all common
control standards
Description
Lumendrive removes the need for onboard power supplies. The ASIC
(Application Specific Integrated Circuit) technology directly powers, dims and
controls LEDs, providing greater efficiency, smaller size and a lifetime no longer
restricted by third-party components.
Lumentalk is a patented technology that enables digital control of LED lighting
over existing AC power lines, thus reducing installation costs and facilitating the
conversion to LED lighting. With Lumentalk, electrical wiring becomes a stable,
noise-free, high-speed communications link, enabling LED fixtures to be
controlled without additional wiring for data. The technology is protocol
independent, making it compatible with common dimmer and control
standards such as Triac, 0-10V, DALI, DMX and ELV.
• Adapts to all common control Lumensmart is a patented technology that enables LED fixtures to automatically
standards
detect and adapt to common lighting control protocols such as DMX, RDM,
• Solves common incompatibility DALI, and 0-10V over a wired network. By making the fixtures automatically
issues
adapt to whatever control protocol is planned or in place, Lumensmart
facilitates specification and enables faster adoption of smart, energy-saving LED
lighting controls. Lumensmart is being progressively implemented in its
products over the 2014 calendar year.
• Light quality
Lumenbin is a proprietary binning method that ensures colour temperature
• Colour consistency
consistency across all Lumenpulse fixtures – overcoming a typical challenge for
specifiers of LED lighting. Using a manufacturing and supply chain process,
Lumenbin technology guarantees a consistent colour temperature within
industry standards.
• Smooth dimming
Built into all Lumenpulse fixtures, Lumendim is a proprietary firmware that
allows smooth white light dimming. Lumendim produces a dimming response
curve that matches human eye perception, providing a more natural and
appealing dim and avoiding a stepped appearance that can be seen with linear
dimming.
• Smaller size of fixture
An innovative dual chamber thermal design system, Lumencool is used in many
• Extended life of product
of Lumenpulse’s fixtures. The patented technology allows air to flow between
the driver and LED board, maximizing the surface area, increasing output and
resulting in L70 lifetimes of up to 120,000 hours. By separating the driver
components from the light sources, the technology also improves the
sustainability of the system, enabling simple component replacement extending
the life of the fixture.
• Increases optical options,
Lumenoptiflex is an innovative technology that increases optical options,
improving flexibility and
improving flexibility and versatility. The patented technology combines optics
versatility
and LED boards within the same fixture, enabling segmentation and the
• Allows the combination of
creation of distinctive photometric distributions. With Lumenoptiflex, a single
different beams in one fixture
fixture can combine different beams, both narrow and wide, replacing the work
of multiple fixtures.
• Accurately predicts the life
Lumenlife is a patented method of calculating the true life expectancy of a
expectancy of a fixture
fixture by taking into account the environmental factors that influence lifetime,
• Alerts the user when a product rather than merely the past hours of operation. Lumenlife can accurately
is reaching its life expectancy and calculate when a luminaire reaches L70 and even issue alerts as the fixture
should be replaced
starts to approach the end of its useful lifetime.
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Canada Research | Page 22 of 41
Product
Lumenbeam
Lumenfacade
Lumenpulse Inc.
Applications
• Architectural exteriors and
facades, including multi-story
facades and tall structures.
Interiors, including columns,
trees or other architectural and
landscape features.
• Grazing, accenting and
floodlighting exterior and interior
walls and facades.
Descriptions
High performance LED projectors for indoor and outdoor applications. The
Lumenbeam family is comprised of 27 products, including dynamic white and
colour changing projectors in various sizes. Lumenbeam fixtures are also
available as pendants.
High performance linear LED fixtures for indoor and outdoor applications. The
Lumenfacade family is comprised of 21 products, including dynamic white and
colour changing fixtures.
Lumencove
• Installed on ledges and in coves. High performance fixtures designed to provide a more durable and flexible
Ideal for soft, indirect lighting.
alternative to fluorescent. The Lumencove family is comprised of 13 products,
including high output, exterior, dynamic white and color changing versions.
Lumenline
• Discreet, flexible general lighting High-quality linear LED fixtures for general illumination of architectural and
for commercial and institutional commercial interiors. The Lumenline family is comprised of 14 products,
environments, including offices including pendant, surface wall mounted and recessed versions.
and classrooms. Provides an
energy-efficient and costeffective alternative to
fluorescent.
Lumendome
• Ideal for low-resolution screens
and media facades, low-density
video displays and environmental
graphic. Can also trace the
contours of buildings and
structures.
• Designed for underwater
applications.
High performance, direct-view pixel fixtures for indoor and outdoor
applications. The Lumendome family is comprised of six products, including
different sizes and colour changing versions.
Lumensign
• Designed for way-finding
applications, including hotels,
offices, schools and universities.
A customizable edge-lit architectural signage solution for way-finding
applications.
Lumentask
• Designed for under cabinet,
cove and tight space lighting.
A linear LED task light for tight spaces. Available in a range of sizes.
Lumenedge
• Designed for architectural
signage and poster display
applications.
A customizable double-sided, edge-lit architectural LED light panel.
Lumentube
• Designed for use in cabinets,
closets, bookshelves, tabletops
and worksurfaces.
A linear task lighting system, providing a durable, low-energy alternative to
fluorescent. The Lumentube family is comprised of four products, including
pendant and table applications.
Lumensub
Submersible fixtures for underwater applications. The Lumensub is also
available in a colour changing version.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 23 of 41
Control Systems
Lumencue
Benefits
• Simplifies integration, with eight
relay ports
• Allows easy archiving with
removable mini SD card
LumenID
• Live feedback allows quick and
easy addressing and diagnostics
• Memorizes progress, allowing
installations to be completed at a
later date
Lumentouch
Lumentone
Descriptions
Lumencue is a standalone USB-based DMX512 lighting controller that allows
dynamic lighting shows to be programmed quickly and easily. New lighting
scenes can be triggered based on a calendar or time clock, by external
controllers, or can run continuously.
LumenID is a software/hardware package that provides a direct connection to a
personal computer for quick and easy addressing, diagnostics and
demonstration of Lumenpulse fixtures. LumenID is able to turn Lumenpulse
fixtures into a networked installation by locating and identifying each fixture for
quick, efficient addressing. LumenID’s intuitive approach results in a significant
reduction in commissioning time and installation costs.
• Simplifies integration with third- Lumentouch 2.0 is a DMX512 controller that provides an intuitive touch button
party systems
interface to program, modify and trigger dynamic lighting shows quickly and
• Allows quick and easy
easily.
installation
• Makes complex lighting effects
accessible
• Simplifies integration with all
industry junction boxes (gang
boxes)
Lumentone is a wall-mounted DMX controller that gives users access to
advanced lighting installations, by allowing them to dim, change colours,
increase the colour temperature, add effects, or alter the transition speed with
simple commands. Lumentone is suitable for either white or coloured light
installations.
Competition & Industry Commentary
The market for general lighting fixtures and controls is highly competitive with a few large players
and some level of fragmentation. According to McKinsey, the 10 largest lighting fixture companies
made up 64% of the US market in 2010 (74% when you consider only LED fixtures). The European
market is more fragmented with the top 10 making up 43% in 2010 (48% for LED fixtures). As
Lumenpulse enters these markets with highly differentiated product offerings, we believe it is
poised to capture a sizeable share of the LED opportunity.
Market-Leading Competitors
Philips: Philips is the largest manufacturer of lighting globally. In June 2007, Philips acquired Color
Kinetics, a leading innovator of LED lighting systems, for $791 million. At the time of acquisition, it
had TTM revenue of $75 million and operated in three segments: lighting systems, OEM, and
patent licensing. Philips products spans across the entire lighting market supplying both
commodity-grade and specifier-grade lighting fixtures, controls, and lamps in new and traditional
lamp technologies including LED, but also fluorescent, CFL, HID, halogen, incandescent and
specialty lamps. In 2013, Philips generated 37% of its revenue from lighting. Lumenpulse licenses
patents from Philips for its colour-changing products (which represents a declining 15% of its total
revenues as Lumenpulse expands its offerings).
OSRAM Licht: The second-largest manufacturer of lighting globally, OSRAM, was spun off from
Siemens AG in 2013. In 2011, OSRAM acquired the remaining 49% of Traxon, a global leader in
solid state lighting (SSL) and control systems. Similar to Philips, OSRAM’s product offering spans
the entire lighting market supplying both commodity-grade and specifier-grade lighting fixtures,
controls, and lamps in new and traditional lamp technologies including LED, but also fluorescent,
CFL, HID, halogen, incandescent, and specialty lamps. Notably, on May 1, 2014, OSRAM separated
its business segments into “classic lamps and ballasts” and “LED lamps and systems” – a strong
indication of the significance OSRAM sees for LEDs going forward, as well as the differentiated
dynamics the LED segment experiences versus other lighting solutions. In F2Q14, OSRAM
generated 34% of its revenue from SSL (LEDs) up from 27% a year ago, growing 23% y/y.
Cree: The third-largest manufacturer of LED semiconductors, Cree is vertically integrated from LED
chips (upstream) to LED modules (midstream) to LED lighting products (downstream). 41% of
Cree’s F9M14 (ending March 2014) revenue was from lighting products (all LED). Gross profit from
lighting has seen a distinct drop from a 29%-31% range over the last 3 years to a F9M14 level of
27.4%, partially due to a reduction in new product ASPs (primarily consumer lighting products).
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Canada Research | Page 24 of 41
Lumenpulse Inc.
Cree has demonstrated many innovations recently with the first 200 lumen/Watt LED concept
fixture, which has twice the efficiency of the best linear fluorescent fixtures. In lighting control, its
one button SmartCast claims to be able to reduce energy consumption by more than 70% using a
wirelessly networked lighting control system. Cree recently entered the architecture market with
some downlight products.
Acuity Brands: A leading provider of indoor and outdoor lighting solutions with operations in
North America, Europe, and Asia, and similar to Lumenpulse, Acuity generated 98% of its 2013
revenue in North America. Its lighting offering includes both conventional lighting fixtures and LED
(solid-state) technologies and lighting controls. Its product development has seen explosive
growth with over 500 new product families introduced in the last 5 years. Acuity Brands is an
industry consolidator adding 11 companies recently, now with 22 brands in its portfolio. LED
fixtures made up 30% of sales in 2Q14.
Hubbell: In 2013, Hubbell acquired Norlux for $14.9 million which gave it lighting and LED
expertise in custom LED design, manufacturing, and lighting-control solutions. Hubbell had $3.2
billion of revenue in 2013 and has 21 lighting product brands in its portfolio with a full range of
applications in architecture, industrial, commercial, office, institutional, hospitality, outdoor and
residential lighting.
Dialight: Dialight is an industrial (hazardous) and commercial (non-hazardous) application-focused
custom LED manufacturer based in the UK (but with 63% of sales in North America). Its industrial
lighting segment has grown at a 61% CAGR from 2011-2013, making up 52% of its revenue in
2013. Lumenpulse has minimal penetration in the industrial segment.
Eaton/Cooper: In December 2012, Eaton acquired Cooper Industries for $13 billion. The combined
lighting division is focused on indoor and outdoor lighting and control solutions serving customers
in commercial, industrial, retail, institutional, residential, utility, and other markets. In 1Q14, LED
lighting made up 37% of its overall lighting revenue.
Revolution Lighting: Revolution Lighting provides LED lighting and signage products for indoor
and outdoor lighting, signage and smart grid control systems, through its four subsidiaries
Lumificient, Seesmart, Relume, and Sentinel.
Best of Breed European Comps
Zumtobel: Zumtobel has been providing lighting solutions and controls for over 60 years, covering
applications in offices, institutions, retail, hospitality, art/culture, industrial, and architecture. 79%
of its $1.65 billion F2013 revenue was from Europe.
ERCO: ERCO (privately held) has been providing LED lighting solutions since 2000, with 2800 LED
projects globally (over 60% in Europe) covering applications in public/community space,
art/culture, retail, offices, hospitality and residential.
Schreder: Schreder is an international lighting group specializing in outdoor lighting (roads,
tunnels, pedestrian spaces, and sports lighting). Present in 33 countries and based in Europe,
Schreder has refocused its lighting towards LEDs.
Industry Commentary
OSRAM
“The gross margin improvement in SSL and in SSL Forward is still visible in our books. We have
now a positive SSL Forward gross margin trend, which also continued in the second quarter. And
now we had the seventh quarter in a row with a year-over-year gross margin increase in our SSL
Forward business.” – CFO Klaus Patzak of OSRAM 2Q14 transcript April 30 2014; note: SSL = solid
state lighting (i.e., LEDs) and SSL Forward = SSL lighting products (i.e., LED lamps, light engines,
luminaires/fixtures).
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
“We see that the capacity lowering and the LED area is getting better” (in response to a question
about LED chip supply and demand situation) – CFO Klaus Patzak of OSRAM 2Q14 transcript April
30 2014.
“…gross margin of our new products is actually higher than the gross margin of our traditional
products … we are currently suffering from the sharp decline in the traditional business.” – CFO
Klaus Patzak of OSRAM 2Q14 transcript April 30 2014.
“OSRAM Licht AG is adjusting its revenue expectation against the background of an accelerated
decline in the traditional general illumination business in the current fiscal year. The Managing
Board now expects revenues on the last year's level, at best a modest revenue increase, on a
comparable basis for the current fiscal year.” – OSRAM press release May 27 2014.
Philips
“By 2015, 2016, 45% of the lighting market will be LED. The market is on track to achieve
that….In professional projects, the penetration of LED is already north of 50% and the good
thing that in professional projects, our margin is better than in conventional.” - Chairman and
CEO Frans van Houten of Koninklijke Philips Electrical Products Group Conference transcript May
20 2014.
“The majority of LED professional projects is still retrofit and I dare say even here in the US when
everybody talks about an uptake that is primarily residential, not so much non-residential
market and the same applies to Europe. There are not yet that many new buildings being built
and in China, the new construction market is also slower. So a lot of retrofit but that is a great
market and where very often we can control the entire solution” - Chairman and CEO Frans van
Houten of Koninklijke Philips Electrical Products Group Conference transcript May 20 2014.
“About 30% of lighting is in applications, about 70% is still in bulbs so we need to continue to
work that in order to get an even bigger proportion in lighting applications and services.” Chairman and CEO Frans van Houten of Koninklijke Philips Electrical Products Group Conference
transcript May 20 2014.
“Through connected LED lighting, we foresee a future where lighting innovations connect
seamlessly with smart controls, networks, devices and apps to positively benefit and improve
lives and drive new business value.” - Chairman and CEO Frans van Houten of Koninklijke Philips
1Q14 transcript April 22 2014.
Cree
“We believe some opportunities may emerge over the next 24 months to leverage the Cree brand
as the shift in new technology accelerates and the industry begins to go through a consolidation
phase…. I think it's more of an indication that as we see LED adoption picking up pretty much
across the industry, we -- I think there's a perspective that as that accelerates, that the landscape
is going to change…those that can access the customers and build brand and have channel that
there are opportunities to combine maybe product portfolios or use some deals to access new
markets. With that being said, this is not an imminent thing, it's something that I thought that was
important that we let people know we're starting to look at more seriously than we have for the
last couple of years.” – Chairman and CEO Chuck Swoboda Cree 3Q14 transcript April 22 2014.
“This quarter, Lighting is the fastest-growing segment, and we have both fixtures and bulbs
growing.” – Chairman and CEO Chuck Swoboda Cree 3Q14 transcript April 22 2014.
“Given the trends in the industry and the growth in LED lighting … the capacity is going to get
tight.” – Chairman and CEO Chuck Swoboda Cree 3Q14 transcript April 22 2014.
“We're fully utilized and we start to hear other people in the industry talk about rising
utilization, there's an obvious semi cycle that you would think is coming. We don't see it yet, but I
do think at some point we'll see that tightness that probably would do two things. We'll see the
lead times move out first and then we'll see some pricing power shift to the suppliers.” –
Chairman and CEO Chuck Swoboda Cree 3Q14 transcript April 22 2014.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 25 of 41
Canada Research | Page 26 of 41
Lumenpulse Inc.
Acuity Brands
“The sale of LED-based fixtures at Acuity now accounts for 30% of our total revenues. In fact, each
quarter for the last 3.5 years in a row, sales of LED products at Acuity have more than doubled
compared with the year-ago periods. If the sales of our LED-based luminaires were measured as a
separate business, we believe today, it would be the fourth-largest lighting company in North
America, and remember, it's 30% of our total business.” – Chairman, President & CEO Vern Nagel
Acuity Brands 2Q14 Transcript April 2 2014.
“Excluding LED luminaires, we believe the puts and takes for product pricing, as well as material
and component costs were, again, fairly benign this quarter. Looking at overall market conditions
for the second quarter, we believe spending in the US nonresidential construction market, in
which we participate, was up low to mid-single digits compared with a year ago, while
residential construction was up almost 20%. Growth rate in these markets was hampered by the
severe weather conditions.” – Chairman, President & CEO Vern Nagel Acuity Brands 2Q14
Transcript April 2 2014.
General Electric
“Lighting revenue was down 4%. Our traditional channels in Lighting were down 9%, partially
offset by LED growth, up 33%.” – CFO Jeff Bornstein General Electric 1Q14 Transcript April 17
2014.
Summary of Industry Commentary
The outlook for the lighting market is for traditional lighting to continue to decline and even
accelerate down as seen at OSRAM, while LED lighting solutions will continue to transform the
market with double-digit, year-over-year revenue growth. Customers are looking for quality
lighting solutions including lighting control systems to maximize efficiency.
Higher margins are being seen in professional projects (specification-grade) with most of these
projects being retrofits. Though gross margins continue to improve for LED lighting solutions, the
LED chip and package capacity oversupply from recent years has begun to tighten.
A few commented on the consolidation opportunities in the lighting industry, where over the next
24 months, the industry is expected to see many changes.
Financial Model Highlights
Seasonality
Lumenpulse provides both indoor and outdoor lighting solutions. Outdoor products tend to see
lower sales in F3Q ending January 31 due to seasonal weather conditions and less favourable
outdoor construction and new installation programs. As the sales channels expand internationally,
the seasonality should smooth out.
Revenues
Revenues are segmented into Lumenpulse products and other manufacturers’ products.
Lumenpulse Product Revenues
Lumenpulse product revenues are generated in all of Lumenpulse’s channels both directly sold in
its home market of Québec, and sold through VARs and electrical wholesale distributors (through
agents) around the world.
Other Manufacturers’ Product Revenues
Other manufacturers’ products are sold exclusively in Lumenpulse’s home market of Québec
where it acts as a VAR for over 15 North American and European manufacturers. These revenues
should decline as Lumenpulse launches more applications from its in-house Lumenpulse product
line.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Recent Financial Highlights
F4Q14
Lumenpulse reported its inaugural quarterly results on June 19 2014, reporting revenues of $17
million (+51% y/y), adjusted EPS loss of $(0.10) and adjusted EBITDA of $0.1 million was the third
consecutive quarter of positive adjusted EBITDA. Lumenpulse products revenues were up 92% y/y
at $14.8 million. Other manufacturers’ products (OMP) revenue was down 51% y/y at $2.3 million;
the large decline was attributed to the previous quarter (F3Q14) benefiting from pent-up demand
in its direct sale market in Québec. Management does not expect this level of OMP to continue in
the following quarters; however, long term they expect OMP to gradually decline as Lumenpulse
products reach more applications.
Lumenpulse saw strong results from international customers recording $3 million of revenue in
4Q (18% of revenue). $2.2 million came from 3 major projects in Asia Pacific and the Middle East,
while the remaining $0.8 million came from projects across the UK and Scandinavia. Lumenpulse
has focused on large projects in its initial expansion to international markets and we believe this
focus will prove successful in developing the Lumenpulse brand and gaining visibility in these
markets. Larger projects tend to make lumpy revenues quarter-to-quarter as they also have
longer lead times, so the 4Q international revenue proportion is less indicative of Lumenpulse
international penetration.
Financial Model Forecasts
F2015 Forecast (ending April 30 2015)
We are modeling $94 million in revenue, representing 51% y/y growth. We are modeling $80.9
million in Lumenpulse product revenues up 67% y/y from $48.5 million in F2014, and $13.1 million
in Other Manufacturers’ product revenues down 5% y/y from $13.8 million. We forecast adjusted
EBITDA of $6.4 million in F2015 up from $0.4 million and adjusted EPS of $0.11.
F2016 Forecast (ending April 30 2016)
We are modeling $136 million in revenue, representing 45% y/y growth as we expect its
geographic expansion in EMEA and APAC to accelerate. We are modeling $123.8 million in
Lumenpulse product revenues up 53% y/y from $80.9 million in F2015, and $12.4 million in Other
Manufacturers’ product revenues down 5% y/y from $13.1 million as the Lumenpulse product line
grows and replaces applications formerly filled by Other Manufacturers’ products. We forecast
adjusted EBITDA of $16.5 million in F2016 up from $6.4 million and adjusted EPS of $0.47.
Long-Term Model
Lumenpulse is still in its early growth stages. With a TAM that is expanding at 59+% CAGR over the
next few years, we expect Lumenpulse to grow at a similar clip, if not better as it gains more mind
share with customers. With multiple levers to increase margins, as Lumenpulse gains
manufacturing efficiencies and realizes lower input costs, we forecast gross margins to increase
from 42% in the just concluded F2014 to closer to 50% over the next few years. Under these
assumptions we can see adjusted EBITDA margin of ~17-18%.
Valuation & Recommendation
Lumenpulse completed its IPO on April 15 2014, offering 7,187,500 common shares at C$16.00
per share for IPO net proceeds of $104 million recorded in F4Q14.
As a young company, Lumenpulse’s still modest level of profitability results in a relatively high P/E
ratio which would imply some valuation risk. However, you would be hard pressed to find another
company in an industry that is at an inflection point and a TAM growing at a 59+% CAGR over the
next few years. With strong IP, and more manufacturing efficiencies as they gain scale, we expect
profitability to quickly expand with adjusted EBITDA margin accelerating to the target model of
~17-18% over the next few years. Our $25.00 target price is based on a 25x F2017E/C2016E
adjusted EPS.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 27 of 41
Canada Research | Page 28 of 41
Lumenpulse Inc.
While management has made it clear that M&A in Europe would be the fastest way to build out
its footprint, we do not factor in M&A in our forecasts. As an example, if we were to infer a $75
million transaction at these assumed metrics (@2.5x Rev, onboard at 10% EBITDA margin), we
calculate an additional $3 million EBITDA and $0.10 EPS (potentially worth $2.00/share of equity
value). Lumenpulse currently trades at 44.7x C2015E EPS and 27.5x C2015E adjusted EBITDA
versus its lighting peers at 18.1x C2015E EPS and 8.6x C2015E EBITDA.
Exhibit 22: Comparable Companies
Lumenpulse
Ticker
Symbol
Koninklijke Philips N.V
PHIA
Cree, Inc.
CREE
ROHM Co., Ltd.
TSE:6963
Sanan Optoelectronics Co., Ltd.
SHSE:600703
Acuity Brands, Inc.
AYI
OSRAM Licht AG
OSR
Seoul Semiconductor Co., Ltd.
KOSDAQ:A046890
EPISTAR corporation
TSEC:2448
Everlight Electronics Co. Ltd.
TSEC:2393
Zumtobel AG
WBAG:ZAG
Beacon Lighting Group Limited
ASX:BLX
Revolution Lighting Technologies, Inc. RVLT
Dialight PLC
LSE:DIA
EUR
USD
JPY
CNY
USD
EUR
KRW
TWD
TWD
EUR
AUD
USD
GBP
Price
Mkt. Cap.
EV/Sales
24-Jun-14 (US$ mlns) C13A C14E C15E
EV/EBITDA
C13A C14E C15E
P/E
C13A C14E C15E
$30.88
$48.59
$57.59
$3.64
$134.66
$46.44
$38.24
$2.37
$2.46
$21.21
$0.96
$2.35
$5.20
$28,582
$6,010
$6,209
$5,526
$5,804
$4,865
$2,230
$2,200
$1,211
$915
$206
$191
$170
Group Average
Lumenpulse
TSX:LMP
CAD
C$20.94
C$541
Growth (2013A-15E)
Rev.
EPS
1.0
3.1
1.1
9.3
2.6
0.6
2.3
3.1
1.5
0.7
1.6
8.3
2.1
1.0
2.6
1.0
6.2
2.4
0.6
2.1
2.4
1.2
0.7
1.4
n.m.
1.8
0.9
2.2
1.0
4.7
2.2
0.6
1.8
2.2
1.1
0.6
1.3
n.m.
1.6
7.7
15.8
6.0
21.7
18.5
7.5
12.8
14.5
9.4
9.4
15.1
n.m.
16.2
7.3
12.1
5.5
15.8
16.1
4.8
12.1
9.3
8.3
7.9
11.1
n.m.
12.9
6.4
10.1
4.7
11.6
13.7
4.3
10.1
7.8
8.2
6.2
10.2
n.m.
9.8
17.8
n.m.
n.m.
31.5
n.m.
n.m.
n.m.
n.m.
21.5
33.2
19.1
n.m.
n.m.
14.6
27.7
27.2
24.8
n.m.
14.6
n.m.
n.m.
16.5
22.8
18.2
n.m.
22.8
12.6
22.6
23.6
18.4
24.7
12.2
21.6
19.0
15.0
13.2
16.5
n.m.
17.1
2%
18%
4%
41%
9%
0%
14%
20%
14%
3%
12%
n.m.
16%
19%
49%
n.m.
31%
27%
n.m.
n.m.
n.m.
20%
59%
7%
n.m.
48%
2.9
2.0
1.7
12.9 10.3
8.6
24.6
21.0 18.1
13%
32%
7.3
4.8
3.3
n.m. n.m. 27.5
n.m.
n.m. 44.7
48%
n.m.
Note: Estimates for LMP are from Raymond James Ltd., all other estimates are from Capital IQ
Source: Raymond James Ltd., Capital IQ
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 29 of 41
Appendix: Financial Statements
Lumenpulse
Income Statement
Revenues (mln)
Q/Q
Y/Y
Cost of Sales
Gross Profit
% Gross Margin
Operating Expenses:
Sales and Marketing
Research and Development
General and Administrative
Acquisition and Related Costs & Other Expenses
Apr-13
F2013
42.33
Apr-14
F2014
62.21
Apr-15
F2015E
93.99
Apr-16
F2016E
136.23
Apr-17
F2017E
195.04
34%
26.99
15.34
36%
47%
36.36
25.86
42%
51%
51.42
42.58
45%
45%
71.71
64.52
47%
43%
99.17
95.87
49%
15.16
2.40
6.83
0.00
24.39
(9.05)
0.00
(6.59)
0.00
(15.64)
2.45
(18.10)
(9.39)
17.74
3.13
8.95
0.00
29.82
(3.96)
0.00
(44.48)
0.00
(48.44)
0.74
(49.18)
(4.50)
21.62
5.17
12.22
0.00
39.01
3.57
0.00
0.20
0.00
3.77
1.20
2.57
2.97
27.25
7.49
16.35
0.00
51.09
13.43
0.00
0.20
0.00
13.63
2.04
11.59
12.09
35.59
9.75
19.50
0.00
64.85
31.02
0.00
0.00
0.00
31.02
6.20
24.81
25.31
5.12
1.12
2.95
0.00
9.20
(0.38)
5.44
1.25
3.06
0.00
9.74
0.39
5.51
1.33
3.26
0.00
10.09
1.32
5.55
1.47
2.95
0.00
9.97
2.24
0.00
0.00
(0.38)
0.30
(0.68)
(0.58)
0.00
0.00
0.39
0.30
0.09
0.19
0.00
0.00
1.32
0.30
1.02
1.12
0.20
0.00
2.44
0.30
2.14
2.24
EPS
Reported EPS
Adjusted EPS
(1.57)
(0.81)
(0.81)
(4.17)
(0.38)
(0.38)
0.10
0.45
0.96
(0.03)
0.00
0.04
0.08
0.11
0.47
0.98
(0.02)
0.01
0.04
0.09
Basic shares
Diluted shares
11.56
11.56
11.80
11.80
23.09
25.83
23.09
25.83
23.09
25.83
23.09
25.83
23.09
25.83
23.09
25.83
23.09
25.83
(18.10)
(6.59)
2.45
1.49
(7.57)
2.57
0.20
1.20
2.40
5.97
11.59
0.20
2.04
2.60
16.03
24.81
0.00
6.20
2.90
33.92
(0.68)
0.00
0.30
0.69
0.31
0.09
0.00
0.30
0.79
1.18
1.02
0.00
0.30
0.88
2.20
2.14
0.20
0.30
0.04
2.28
1.56
(6.01)
1.49
(6.59)
(49.18)
(44.48)
0.74
2.05
(1.91)
0.60
1.71
0.40
2.05
(44.48)
0.40
6.37
2.40
0.20
0.50
16.53
2.60
0.20
0.50
34.42
2.90
0.00
0.10
0.41
0.69
0.00
0.10
1.28
0.79
0.00
0.10
2.30
0.88
0.00
0.10
2.38
0.04
0.20
5.04
2.45
2.11
(9.39)
42.37
0.74
0.00
(4.50)
1.20
2.04
6.20
0.30
0.30
0.30
0.30
2.97
12.09
25.31
(0.58)
0.19
1.12
2.24
-18%
-14%
-3%
1%
6%
7%
12%
12%
17%
18%
2%
2%
5%
6%
9%
9%
9%
9%
EBIT: Operating Income (Loss)
FX Gain (Loss)
Interest and Financing Costs
Other Income (Expenses)
EBT: Income (Loss) Before Income Taxes
Income Taxes (Recovery) - Current and Deferred
Net Income (Loss)
Adjusted Net Income (Loss)
Reconciliation
Net Income (Loss)
Interest and Financing Costs
Income Taxes
Depreciation & Amortization
EBITDA
Offering Related Expenses
Non-Cash Share-Based Compensation
Adjusted EBITDA
Depreciation & Amortization
Interest and Financing Costs
Deemed Interest on Class A Preferred Shares and Net Change in
Fair Value of Related Financial Derivative Liability
Income Taxes
Deferred Tax Asset
Adjusted Net Income (Loss)
EBITDA Margin
Adjusted EBITDA Margin
Source: Lumenpulse Inc., Raymond James Ltd.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Jul-14
F1Q15E
19.70
16%
54%
10.88
8.82
45%
Oct-14
F2Q15E
22.65
15%
48%
12.52
10.13
45%
Jan-15
F3Q15E
25.05
11%
46%
13.63
11.42
46%
Apr-15
F4Q15E
26.59
6%
56%
14.38
12.21
46%
Canada Research | Page 30 of 41
Lumenpulse
Balance Sheet
ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories
Prepaid Expenses and Deposits
Property, Plant and Equipment
Intangibles and Goodwill and Intellectual Property
Other Assets and Receivables and Shareholder Advance
Total Assets
LIABILITIES AND EQUITY
Debt (Overdraft, LoC, LT Debt and Finance Lease Obligations)
Accounts Payables + Accrued Liabilities
Income Taxes Payable
Deferred Tax Liability
Redeemable Shares and Financial Derivative Liabilities
Other Liabilities (Leasehold Inducements)
Total Liabilities
Total Equity
Total Liabilities and Equity
Lumenpulse
Cash Flow Summary
Net Income
+ Depreciation and Amortization
+ Finance Expense
+ Unrealized FX Loss (Gain)
+ Income Taxes Expense
+ Share-Based Compensation
+/- Other
Operating Cash Flow
+ Change in W/C
- Capex
Free Cash Flow
- Acquisitions (Sales)
- Common Dividends
+ Equity Raised
+ Debt Increase (Decr)
+ Prefs Increase
+/- Other
Change in Cash From Continued Operations
Lumenpulse Inc.
F2013
F2014
F2015E
F2016E
F2017E
1.21
8.97
7.23
0.32
4.09
4.94
0.75
27.50
87.06
13.49
7.00
0.69
4.02
5.13
0.45
117.84
87.81
25.75
9.86
0.69
4.44
5.13
0.45
134.13
96.38
35.46
12.77
0.69
5.25
5.13
0.45
156.13
117.49
48.09
16.30
0.69
6.64
5.13
0.45
194.79
10.38
10.32
0.27
0.11
31.83
0.40
53.31
-25.81
0.16
11.41
0.42
0.01
0.00
0.58
12.59
105.25
0.16
24.65
0.65
0.02
0.00
0.58
26.07
108.06
0.16
34.38
0.99
0.03
0.00
0.58
36.15
119.98
0.16
47.55
1.32
0.04
0.00
0.58
49.66
145.13
27.50
117.84
134.13
156.13
194.79
F2013
(18.10)
1.49
0.18
0.00
2.14
1.56
5.18
(7.55)
(2.33)
1.64
(11.53)
1.22
F2014
(49.18)
2.05
(0.16)
0.00
0.05
1.71
42.72
(2.82)
(2.67)
1.91
(7.40)
F2015E
2.57
2.40
(0.16)
0.00
0.00
0.40
0.24
5.45
(1.88)
2.82
0.75
F2016E
11.59
2.60
(0.16)
0.00
0.00
0.50
0.35
14.87
(2.89)
3.41
8.58
F2017E
24.81
2.90
(0.16)
0.00
0.00
0.50
0.35
28.40
(3.00)
4.29
21.11
9.83
2.46
104.64
(10.64)
0.00
0.00
0.00
0.00
0.00
0.00
(0.03)
(0.48)
(0.74)
85.85
0.00
0.75
0.00
8.58
0.00
21.11
Source: Lumenpulse Inc., Raymond James Ltd.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 31 of 41
Appendix: Management & Board of Directors
Management
Mr. Souvay is the founder, Chairman, President and CEO of Lumenpulse, overseeing the global vision,
corporate development and strategic planning. With over 20 years of experience in the lighting industry,
Founder,
Mr. Souvay also has experience with large commercial real estate projects in Montreal, a specificationFrançois-Xavier Souvay Chairman,
grade outdoor lighting company where he established a network of agents and VARs in Canada and the
President, CEO United States, and as a consultant for various lighting companies across North America. Mr. Souvay holds
numerous patents in his name and is a well-known thought leader in the LED lighting industry. In 2011, he
was a Québec finalist for Ernst & Young’s “Entrepreneur of the Year”.
Mr. Comeau is a CPA with over 30 years of experience with financial planning and reporting, treasury and
financing, M&A, restructuring and information systems. Previously CFO of Emergis Inc. and Aveos Fleet
Robert Comeau
EVP - CFO
Performance Inc. and Matra, he was also VP of Finance at Nortel Networks. In addition, Mr. Comeau
served as CEO of Media5 Corporation.
Nicolas Vanasse
Greg Campbell
Jean Clermont
Yvan Hamel
Julie Lamontagne
Mr. Vanasse has over 14 years of business experience in law, analyzing, structuring, negotiating and
closing sophisticated commercial and corporate transactions. Previously, Mr. Vanasse was VP Chief Legal
EVP - Chief
Officer and Corporate Secretary for Enerkem Inc. and for Aveos Fleet Performance Inc., and practised law
Legal Officer
in the Business Law Group of Stikeman Elliott LLP, where he dealt with financing and M&A transactions for
and Corporate
large national and multi-national corporations. Mr. Vanasse holds a Bachelor’s degree in civil law from the
Secretary
University of Ottawa and he also studied political science and industrial relations at Laval University. In
2010, he won the Tomorrow’s Leader Award at the Québec General Counsel Awards.
Mr. Campbell oversees technology innovation, IP portfolio management and collaboration with the
Company’s product development team. Previously, Mr. Campbell helped manage the product
development roadmap and innovation strategy in his role as Electrical Engineering Manager at Philips
SVP - CTO
Color Kinetics. He also served as an embedded systems engineer at BNS. Mr. Campbell is the author of a
number of SSL patents and holds a Bachelor’s of Science in Electrical Engineering from Virginia Polytechnic
Institute and State University.
Mr. Clermont oversees manufacturing, logistics and the Company’s supply chain. With over 28 years of
experience in leading supply chain operations he has expertise in negotiations, demand planning, sales
SVP and operations, logistics, project management, process enhancement and systems integration. Previously,
Manufacturing
he was VP of Supply Chain Management at Aveos Fleet Performance Inc. and Director of Global Optical
Operations
Supply Chain Operations at Nortel Networks. Mr. Clermont holds a MBA from the Université de
Sherbrooke as well as a certificate in Operations Management from HEC Montreal.
Mr. Hamel oversees the management of the product development program, product design, mechanical
and optical engineering with a view of testing and improving the full Lumenpulse line of products. Mr.
SVP - Product
Hamel has over 25 years of experience in design and product development in the lighting industry.
Development
Previously, he was Operations Manager at Lumec-Schreder and Senior Project Manager in Product
Development at Lumec.
Ms. Lamontagne is responsible for talent management, talent acquisition, performance management,
human resources policies and governance, and global executive compensation. She brings over 15 years of
experience in HR from Bell Canada, Brookfield Lepage Johnson Controls, Ceridian Canada and SIBN (a
SVP - HR
subsidiary of National Bank). Ms. Lamontagne holds a Bachelor’s degree in Industrial Relations from the
University of Montreal and a CRHA professional designation with l’Ordre des conseillers en ressources
humaines agréés.
Jesse Lilley
SVP Marketing
Mr. Lilley leads Lumenpulse’s advertising, communications, branding, events and training activities.
Previously Mr. Lilley founded Marketburo, a consultancy firm specialized in promoting clients within the
lighting, architecture and design sectors, and held a senior marketing role at Martin Professional. He has
contributed to industry magazines and journals such as Professional Lighting Design, Lighting (UK) and
Lighting and Sound International. He has also spoken at industry events, including the Professional
Lighting Design Convention (PLDC). He holds a Master’s degree from Cambridge University.
Philip O'Donnell
SVP - Sales
International
Mr. O’Donnell brings over 35 years of senior-level sales and leadership experience, and he has worked
extensively throughout the Asia Pacific region for Color Kinetics as VP of Sales (acquired by Philips) and
continued in a global role at Philips. Formerly, Mr. O’Donnell was CEO of Strand Lighting. He holds a BFA in
Technical Design from New York University and he attended Graduate School at Yale University.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 32 of 41
Philippe Racine
SVP - Sales
Operations
Brandon M. Siemion
SVP - Sales
Americas
Yvon Roy
VP - IR
Lumenpulse Inc.
Mr. Racine is responsible for all global inside sales and application engineering. With nearly 20 years of
experience in the lighting industry, Mr. Racine brings knowledge and leadership in the fields of
specification and manufacturing. He is actively involved in product and business development, as well as
the continued expansion and performance of the inside sales channel and team.
Mr. Siemion is responsible for business development, developing the Lumenpulse brand and expanding
the Company’s footprint in the Americas. Mr. Siemion brings over 20 years of experience to the role, with
11 years in senior level positions at Philips Color Kinetics, as Director of Business Development, and also
as Director of Sales.
Mr. Roy is a CPA with 14 years of financial control, responsible for the financial administration at
Lumenpulse. Previously, he served as VP of Finance at ProDrive Systems, Corporate Controller at Actional
Corporation (now Progress Software), senior positions at KPMG LLP in the corporate tax department, and
financial advisory services at PricewaterhouseCoopers LLP. Mr. Roy holds a Bachelor’s of Commerce in
Business Administration from the Université du Québec à Montreal (UQAM), and a Graduate Diploma in
accounting from HEC Montreal.
Directors
Mr. Souvay is the founder, Chairman, President and CEO of Lumenpulse, overseeing the global vision,
corporate development and strategic planning. With over 20 years of experience in the lighting industry,
Founder,
Mr. Souvay also has experience with large commercial real estate projects in Montreal, a specificationFrançois-Xavier Souvay Chairman,
grade outdoor lighting company where he established a network of agents and VARs in Canada and the
President, CEO United States, and as a consultant for various lighting companies across North America. Mr. Souvay holds
numerous patents in his name and is a well-known thought leader in the LED lighting industry. In 2011, he
was a Québec finalist for Ernst & Young’s “Entrepreneur of the Year”.
Mr. Larochelle is President and CEO of Power Energy Corporation, a subsidiary of Power Corporation of
Canada. Previously he was President and CEO at Adaltis Inc., VP Business Development at Picchio Pharma
Inc. and VP M&A for Credit Suisse First Boston in London, England. Mr. Larochelle started his career as a
Pierre Larochelle
Lead Director lawyer at Ogilvy Renault. Mr. Larochelle holds a law degree from Université de Montreal, a master’s
degree in international business law from McGill University and an MBA degree from INSEAD in
Fontainebleau, France. He sits on the boards of directors of Sagard Capital, Sagard SAS, Bellus Health,
Power Energy Corporation, Potentia Solar Inc. and Eagle Creek Renewable Energy, LLC.
Mr. Bélanger co-founded and manages Groupe W Inc., a privately held growth and buyout investment
fund. He has led over 30 investments and is an active board member for several of these investments. He
Nicolas Bélanger
Director
co-founded DTI Software, as President DTI became a leader in the in-flight entertainment industry. In
2007, Ernst & Young named him “Entrepreneur of the Year”. Mr. Bélanger is also a founder and board
member of the not-for-profit organization La Fondation Noel Printemps.
François Côté
Director
Pierre Fitzgibbon
Director
Michel Ringuet
Director
Alexandre Taillefer
Director
Mr. Côté is EVP of TELUS Corporation and Vice Chair of TELUS Québec, TELUS Health and TELUS Ventures.
Mr. Côté was formerly President and CEO at Emergis Inc. and also held several other senior positions at
TELUS. Previously he was also at Bell Canada for 17 years and spent two years working in the health sector.
Mr. Côté holds a Bachelor’s degree in Industrial Relations from Laval University. In 2007, Ernst & Young
named him “Entrepreneur of the Year” in the category of Turnaround Entrepreneur for Québec. In 2013,
the Canadian Forces named him Honorary Lieutenant-Colonel of the 34th Signal Regiment. Mr. Côté serves
on the board of the Montreal Heart Institute. He is a member of the Board of Governors for the Tolerance
Foundation and President of the Board for FitSpirit. He is also Vice Chair of the TELUS Fund, an
independent organization established to finance the creation of health and wellness content.
Mr. Fitzgibbon is President and CEO of Atrium Innovations. Previously as the Vice Chairman and also
Senior VP, Finance, Technology and Corporate Affairs at National Bank Group, he brings a range of
expertise including corporate direction and finance, M&A and strategic planning in various industries. Mr.
Fitzgibbon also held senior positions at Telesystem International Group, New World Mobility, Domtar,
Peerless Carpet Corporation, and PricewaterhouseCoopers LLP. A member of the Ordre des comptables
professionnels agréés du Québec, Mr. Fitzgibbon holds a bachelor’s degree in business administration
from the École des hautes études commerciales of Montreal (affiliated with Université de Montreal) (HEC
Montreal) and a certificate in general management from Harvard Business School.
Mr. Ringuet is CEO of The Master Group L.P. He previously held positions as VP Finance and CFO of Master
Group. Previously, Mr. Ringuet worked in corporate finance and venture-capital investment services at
National Bank of Canada. He is a member of the Investment Committees of Cycle Capital Fund I, a clean
technology venture capital fund management, and XPND Capital, a growth capital fund located in
Montreal focusing on media, entertainment and technology companies. He holds a Bachelor’s Degree in
Administration from Université Laval and an MBA from McGill University. Mr. Ringuet is President of the
Board of Directors of Fondation Tel-Jeunes, a non-profit organization dedicated to supporting young
people in Québec.
Mr. Taillefer is the Managing Partner at XPND Capital. He is the co-founder and former CEO of Stingray
Digital, a media company based in Montreal that owns and operates Galaxie, The Karaoke Channel, and
Stingray360 (formerly Chum Satellite Services). An entrepreneur in the software and media industry, he is
the founder of Nurun (sold to Québecor) and Hexacto (sold to EA Mobile).
Source: Lumenpulse Inc.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 33 of 41
Appendix: Share Ownership & Insider Holdings
Insider Holders
François-Xavier Souvay
Position with the Company
Founder, Chairman, President,
and CEO
Nicolas Bélanger
Director
Philippe Racine
SVP Sales Operations
Alexandre Taillefer
Director
Yvan Hamel
SVP Product Development
Michel Ringuet (Placements Mica 3 Inc) Director
Brandon Siemion
SVP Sales Americas
Greg Campbell
SVP CTO
Pierre Larochelle
Lead Director
François Côté
Director
Pierre Fitzgibbon
Director
Robert Comeau
EVP CFO
Jean Clermont
SVP Manufacturing Operations
Nicolas Vanasse
EVP Chief Legal Officer &
Corporate Secretary
Philip Alexander O'Donnell
SVP Sales International
Yvon Roy
VP Investor Relations
Julie Lamontagne
SVP Human Resources
Jesse Nicholas Lilley
SVP Marketing
Shares % of O/S
5,484,803
23.75%
4,127,957
927,112
586,520
445,797
225,031
23,927
22,503
20,469
14,668
8,813
6,250
625
11,894,475
17.88%
4.00%
2.53%
1.92%
0.97%
0.10%
0.10%
0.09%
0.06%
0.04%
0.03%
0.00%
51.47%
Source: Ink Research
Top Holders
QV Investors
Pyramis Global Advisors (Canada) ULC
Fidelity Management & Research Company
Connor Clark & Lunn Investment Management
CI Global Holdings
Fiera Capital Corporation
CIBC Asset Management
Aston Hill Asset Management
Matco Financial
Standard Life Investments
Schroder Investment Management
1832 Asset Management
RBC Global Asset Management
Guardian Capital
Brickburn Asset Management
Wellington Management Company
Shares
1,064,725
785,000
465,000
217,900
100,000
99,464
95,480
50,000
40,000
28,900
19,783
13,400
3,400
3,200
1,000
700
2,987,952
% of O/S
4.60%
3.39%
2.01%
0.94%
0.43%
0.45%
0.41%
0.22%
0.17%
0.12%
0.09%
0.06%
0.01%
0.01%
0.00%
0.00%
12.91%
Note: Holding list may not be complete due to timing of disclosures and time of publishing.
Source: BD Vision
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Options
DSU
2,336
35,714
1,168
35,714
2,336
562,893
170,574
2,765
2,587
1,293
392,857
41,667
107,143
47,619
35,714
26,398
26,398
1,482,691
12,485
Canada Research | Page 34 of 41
Lumenpulse Inc.
Appendix: Definitions
Application specific integrated circuit (ASIC) – An integrated circuit (microchip) used for a specific
application rather than a wide range of applications.
Efficacy –The light output of a light source divided by the total electrical power input to that
source, expressed in lumens per watt (lm/W).
Flux / Luminous Flux – Luminous flux is the measure of the perceived power of light, adjusted to
reflect the varying sensitivity of the human eye to different wavelengths of light.
IP – Intellectual Property.
Light Emitting Diode (LED) – A Light Emitting Diode (LED) is a solid-state semiconductor device
that converts electrical energy directly into light. On its most basic level, the semiconductor is
comprised of two regions. The p-region contains positive electrical charges while the n-region
contains negative electrical charges. When voltage is applied and current begins to flow, the
electrons move across the n region into the p region. The process of an electron moving through
the p-n junction releases energy. The dispersion of this energy produces photons with visible
wavelengths.
LED array or module – The light source, made up of LED chips mounted on printed circuit boards
(PCBs), to be integrated on the LED lighting product.
LED binning – The systematic categorization of LED chips into small finite groupings (bins) based
on the specific colour of light emitted. During production, LEDs will vary in colour, flux, and
forward voltage even within the same batch. Binning is essential for most LED applications as
some industry and regional standards require a specific colour to be emitted (like in traffic lights in
Europe); as a consequence, any replacement LEDs must come from the same bin.
LED chip – The light producing semiconductor device.
LED driver – An electronic circuit that converts input power into a consistent current source,
protecting the LED from fluctuations in voltage.
LED fixture (luminaire) – A complete lighting unit consisting of LED-based light emitting elements
and a matched driver together with parts to distribute light, to position and protect the light
emitting elements, and to connect the unit to a branch circuit. The LED-based, light-emitting
elements may take the form of LED packages (components), LED arrays (modules), LED Light
Engine, or LED lamps. The LED fixture is intended to connect directly to a branch circuit.
Source: Lumenpulse Inc., Raymond James Ltd.
LED light engine – An assembly of one or more LED modules with an LED driver.
LED package – An assembly of one or more LED chips that includes wire bonds or other type of
electrical connections, possibly with an optical element and thermal, mechanical, and electrical
interfaces.
Light source – Also referred to as a lamp or bulb.
Lumen (lm) – The international (SI) unit of luminous flux or quantity of light and equals the
amount of light that is spread over a square foot of surface by one candle power when all parts of
the surface are exactly one foot from the light source. For example, a dinner candle provides
about 12 lumens.
Lumen maintenance – The luminous flux at a given time in the life of the LED, expressed as a
percentage of the initial luminous flux. Ex. “120,000 hours at L70” indicates the LED will emit 70%
of its maximum lumens for 120,000 hours.
Solid-state lighting – A description of the devices that do not contain moving parts or parts that
can break, rupture, shatter, leak or contaminate the environment.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Company Citations
Company Name
A-Power Energy Generation Systems, Ltd.
Acuity Brands
Atrium Innovations Inc.
BCE Inc.
Bellus Health
Credit Suisse Group
Cree, Inc.
Dialight
Domtar
Eaton Corp.
Electronic Arts Inc.
General Electric Company
Hubbell Inc.
Koninklijke Philips Electronics NV
National Bank
PROGRESS SOFTWARE CORP
Quebecor
Revolution Lighting
TELUS Corp.
Canada Research | Page 35 of 41
Ticker
APWR
AYI
ATB.T
BCE
BLU
CS
CREE
DIA
UFS
ETN
EA
GE
HUB.B
PHG
NA.T
PRGS
QBR.A
RVLT
T.T
Exchange
NASDAQ
NYSE
TSX
NYSE
TSX
NYSE
NASDAQ
LSE
NYSE
NYSE
NASDAQ
NYSE
TSX
NASDAQ
TSX
NASDAQ
TSX
Currency
Closing Price
US$
47.79
US$
43.98
RJ Rating
NC
NC
NC
NC
NC
NC
4
NC
2
NC
NC
NC
NC
NC
NC
NC
NC
NC
NC
RJ Entity
RJ & Associates
RJ LTD.
Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for rating definitions.
Stocks that do not trade on a U.S. national exchange may not be registered for sale in all U.S. states. NC=not covered.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 36 of 41
Lumenpulse Inc.
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15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and
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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 37 of 41
rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next
six to twelve months and should be sold.
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over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over
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Medium or higher risk equities of companies in
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RATING DISTRIBUTIONS
Coverage Universe Rating Distribution
Investment Banking Distribution
RJL
RJA
RJ LatAm
RJEE
RJL
RJA
RJ LatAm
RJEE
Strong Buy and Outperform (Buy)
69%
55%
50%
46%
36%
22%
0%
0%
Market Perform (Hold)
28%
40%
50%
38%
20%
9%
0%
0%
Underperform (Sell)
3%
5%
0%
16%
40%
0%
0%
0%
RAYMOND JAMES RELATIONSHIP DISCLOSURES
Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all
companies under research coverage within the next three months.
Company Name
Disclosure
Lumenpulse Inc.
Raymond James Ltd - the analyst and/or associate has viewed the material operations of Lumenpulse
Inc.
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12
months with respect to Lumenpulse Inc.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 38 of 41
Company Name
Lumenpulse Inc.
Disclosure
to Lumenpulse Inc.
Raymond James Ltd. has received compensation for investment banking services within the last 12
months with respect to Lumenpulse Inc.
STOCK CHARTS, TARGET PRICES, AND VALUATION METHODOLOGIES
Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and
quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management
effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to
change depending on overall economic conditions or industry- or company-specific occurrences.
Target Prices: The information below indicates our target price and rating changes for LMP stock over the past three years.
RISK FACTORS
General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James
research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact
expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change
investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or
accounting policies or practices could alter the prospective valuation.
Technology & Communications - IT Hardware
Companies in the Communication Technology sector face intense global competition, component supply issues, rapid technological
change, patent infringement litigation, labour strife and macroeconomic pressures effecting demand.
Risks - Lumenpulse Inc.
New technology risk: The lighting industry is continuously developing new products with greater functionality and performance; this may
result in pricing pressure on existing products. Lighting technology also continues to improve rapidly. Should Lumenpulse fail to respond
quickly, its competitive advantage could diminish over time.
Macroeconomic risk: Lighting demand is reliant on the construction of new buildings and the renovation of existing buildings. Global
macroeconomic health can have a significant effect, either positively or negatively, on Lumenpulse.
Rapid growth risk: Lumenpulse grew at 46% CAGR from F2011 to F2014, and is forecast to maintain this rate of growth in the near to midterm. To achieve this, Lumenpulse must continue to effectively scale its personnel, systems, and production at a similarly high rate. Any
short-term hiccup in quarterly results could result in a selloff of the shares.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
Canada Research | Page 39 of 41
Highly competitive industry: Many of Lumenpulse’s competitors are larger and have a longer history supplying the lighting industry.
Volatility and liquidity risk: Lumenpulse has a market capitalization around $500 million and an average volume of 112,000 shares per day
(~0.5% of shares outstanding). As a result, the market price may be volatile. We expect this risk to decline as earnings potentially turn
positive and its book equity and subsequent valuation increase.
Geographic expansion – barriers to entry risk: Lumenpulse is planning to build out its European presence and eventually its Asia Pacific
presence. There is a significant barrier to entry with establishing relationships with project specifiers. While we believe Lumenpulse
should gradually gain traction in these new markets by expanding its footprint through potential M&A transactions and a general
increase in its brand awareness, an inability to penetrate these markets would dent Lumenpulse’s growth opportunities.
Valuation: Lumenpulse is still in its early stages as a company with a modest level of profitability which results in a relatively high P/E
ratio. This implies some valuation risk.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability
categories, is available for Raymond James at rjcapitalmarkets.com/Disclosures/index and for Raymond James Limited at
www.raymondjames.ca/researchdisclosures.
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your Financial Advisor for additional details and to determine if a particular security is eligible for purchase in your state.
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persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be
classified as Retail Clients.
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exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Canada Research | Page 40 of 41
Lumenpulse Inc.
Raymond James International and Raymond James Euro Equities are authorized by the Autorité de contrôle prudentiel et de résolution in
France and regulated by the Autorité de contrôle prudentiel et de résolution and the Autorité des Marchés Financiers.
Proprietary Rights Notice: By accepting a copy of this report, you acknowledge and agree as follows:
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Additional information is available upon request. This document may not be reprinted without permission.
RJL is a member of the Canadian Investor Protection Fund. ©2014 Raymond James Ltd.
Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Lumenpulse Inc.
EQUITY RESEARCH
HEAD OF EQUITY RESEARCH
DARYL SWETLISHOFF, CFA
Canada Research | Page 41 of 41
RAYMOND JAMES LTD. CANADIAN INSTITUTIONAL EQUITY TEAM WWW.RAYMONDJAMES.CA
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