EnSync Energy Reports First Quarter of Fiscal Year 2019 Results
MILWAUKEE, Nov. 12, 2018 /PRNewswire/ -- EnSync, Inc. (NYSE American: ESNC), dba EnSync Energy Systems ("EnSync Energy," "we," "us," "our," or the "Company"), which is creating the future of electricity with innovative residential, commercial and industrial distributed energy resource ("DER") systems and Internet of Energy ("IOE") control platforms, today announced financial results for the first quarter ended September 30, 2018.
Financial Highlights
-- Revenue for the first quarter of fiscal 2019 was $2.7 million, compared
to $2.4 million in the first quarter of fiscal 2018. For the first
quarter of fiscal 2019, the Company recognized revenue from 10 power
purchase agreement ("PPA") projects.
-- On September 5, 2018, the Company completed a registered direct offering
of 11,334,616 shares of Common Stock at a price of $0.26 per share for
net proceeds of $2.7 million.
-- The Company has 10 PPA projects in backlog in various stages of
execution. Estimated backlog value for PPA projects, components and
systems as of the date of this announcement is approximately $13.8
million.
Recent Business and Product Backlog Highlights
-- Announced the sale and signing of a 20-year PPA for Oceanic Institute to
build an affordable solar energy system for Hawai'i Pacific University's
("HPU") not-for-profit aquaculture research center, an affiliate of
Oceanic Institute in Oahu. The agreement will finance a 211 kW
photovoltaic ("PV") system on four buildings. This marks EnSync Energy's
3(rd) PV installation in partnership with HPU.
-- In October, Schneider Electric announced it had a contract to design,
engineer and build a new microgrid at the Port of Long Beach in southern
California. The microgrid will include the preconfigured hardware
solution, Energy Control Center - DC coupled and merged with
technologies from EnSync Energy.
-- Announced the sale and signing of a 20-year PPA for Kona Brewing to
produce "Liquid Aloha" beer using on-site clean energy. The
solar-plus-energy storage installation consists of a 336 kWh
roof-mounted PV system and an EnSync DER SuperModule(TM) that contains a
122 kWh battery system to capture and store excess solar energy
generation.
-- In August, announced the sale of a 20-year PPA with California
Department of Forestry and Fire Protection to Standard Solar, marking
the Company's entry into the California marketplace.
-- In July, announced the sale of a 20-year PPA with two community
facilities, Polynesian Cultural Center, a tourist destination, and
Kohala Village HUB, a community organization. The Polynesian Cultural
Center agreement marks the first commercial on-bill financing project in
Hawaii using the Hawaii Green Infrastructure Authority's Green Energy
Money Saver ("GEM$") On-Bill program.
-- In July and again in September, showcased the Company's Smart Home
Energy System at the Solar Power International conference and
demonstrated True Peer-to-Peer(TM) at Intersolar North America in San
Francisco.
-- Secured a total backlog of approximately $6.0 million for the EnSync
Smart Home Energy System.
-- In August 2018, received a purchase order for a DER SuperModule(TM)
system shipping to an unannounced customer in Ohio.
Management Discussion
Brad Hansen, CEO of EnSync Energy, commented, "The market environment for our products and services continues to be positive, driven by a shifting of the energy production mix from carbon emitting sources to renewable sources, and by the increasingly favorable economics for solar energy, energy storage, and combined solar plus storage systems for self-generation. We are very pleased with our progress, especially in the residential energy systems segment and the traction we are getting with our Smart Home Energy System."
"Residential energy system deployments continue to expand, with expectations that on a dollar value basis, the market will be greater than commercial and industrial and approximately equal to the Utility storage systems market in 2018. We expect the residential energy storage systems market to be worth about $9.0 billion over the next 5 years based upon the desire of consumers to have more control over their energy. We're experiencing very strong pull from the market for our EnSync Smart Home Energy System as it provides more capability and performance than any other product for individual homes or multi-family properties. Our backlog is validation of our product advantages, including the ability to not only manage the energy supply from PV or batteries, but also actively manage home energy loads to enable energy independence. Our backlog includes a multi-family property where we are using our True Peer-to-Peer(TM) energy exchange capability, enabling excess energy supply from any unit to be consumed by another unit in the DC-linked network that has a need for that electricity. Each unit in the network is connected behind their respective utility meters and the overall system can also be deployed as a non-exporting installation. This is a completely unique technology that enables maximum sizing and utilization of PV generation across a property and it is vital to the zero net energy communities that are now being contemplated in places like California. We are also looking to expand towards the individual family home market through a developer network, where we'll begin shipping systems to channel partners shortly to begin the qualification process. Our system is ideally timed and designed to capitalize on the phenomenal market growth that is now under way."
"In the commercial market, we continue to be the microgrid technology leader with proven operating and bankable systems that can perform multiple applications in real time to deliver a building the most economic electricity available. In Hawaii, we have now contracted 27 commercial projects, accounting for more than $42.8 million in electricity sales over the terms of the agreements. EnSync Energy's project development and financing support is helping to enable Hawaii's state goal to achieve 100 percent renewable energy by 2045. On the mainland, Schneider Electric, our partner in the microgrid segment, recently won a contract to develop a microgrid at the Port of Long Beach, where our systems will be installed. We also recently received a PO for a microgrid installation in Ohio. Finally, for the utility market, we have submitted six sites in Illinois to ComEd for interconnection approval."
Mr. Hansen concluded, "Several factors are fueling the growth in our markets: utility rates and rate structures, declining cost in energy storage systems and a desire for energy independence. The inflection point for self-generation and energy independence has been reached, especially in the residential energy systems segment. We are excited about the position EnSync Energy is in to capture an accelerating share of this market due to our differentiated products, technology and business models that enable clients to achieve energy independence."
Quarterly Financial Results
Total revenue for the first quarter of fiscal 2019 was $2.7 million, compared to $2.4 million in the year ago period. Revenue during the first quarter of fiscal 2019 was largely derived from 10 PPA contracts under construction.
Gross margins were 13.2% during the first quarter, compared to 12.5% gross margin in the year ago period. Although the gross margin increased from the prior year, gross margin for the first quarter of fiscal 2019 was below our expected range of 15% to 25%, primarily a result of accepting two key PPAs that allowed new market penetration. The Company continues to expect gross profit margins on future PPA sales to be between 15% and 25%.
Advanced Engineering and Development expenses decreased to $1.2 million during the first quarter of fiscal 2019, compared to $1.4 million in the year ago period. Selling, General and Administrative expenses decreased to $1.9 million during the first quarter of fiscal 2019, compared to $2.3 million in the year ago period. The decrease from the year ago period was largely driven by a reduction in legal and consulting services, and other cost saving measures. Total Advanced Engineering and Development plus Selling, General and Administrative expenses (excluding stock-based compensation of $0.3 million and $0.4 million, respectively) was $2.8 million during the first quarter, compared to $3.3 million in the year ago period.
Net loss attributable to common shareholders was $(2.9) million, or $(0.05) per basic and diluted share, for the first quarter of fiscal 2019, compared to a net loss of $(4.0) million, or $(0.07) per basic and diluted share, in the first quarter of fiscal 2018.
Balance Sheet and Backlog
Cash and cash equivalents at September 30, 2018 was $3.0 million. On September 5, 2018, the Company completed a registered direct offering of the maximum shares currently available under its shelf registration of 11.3 million shares at a price of $0.26 per share. The Company received net proceeds of $2.7 million.
Estimated backlog value for PPA projects, components and systems as of the date of this announcement is approximately $13.8 million.
Conference Call Information
Date: Monday, November 12, 2018
Time: 4:30 p.m. ET (3:30 p.m. CT)
Domestic participant dial in #: (877) 283-0524 or (412) 317-5232
Conference code #: 10126134
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.
Interested parties can also listen to a live internet webcast available in the investor section of the Company's website at www.ensync.com.
A teleconference replay of the call will be available at (877) 344-7529 or (412) 317-0088, confirmation code 10126134, through November 19, 2018. A webcast replay will be available in the investor section of the Company's website at www.ensync.com for 90 days.
About EnSync Energy Systems
EnSync, Inc. (NYSE American: ESNC), dba EnSync Energy Systems, is creating the future of electricity with innovative distributed energy resource (DER) systems and internet of energy (IOE) control platforms. EnSync Energy ensures the most cost-effective and resilient electricity, delivered from an electrical infrastructure that prioritizes the use of all available resources, such as renewables, energy storage and the utility grid. As project developer, EnSync Energy's distinctive engagement methodology encompasses load analysis, system design consulting, and technical and financial modeling to ensure energy systems are sized and optimized to meet our customers' objectives for value and performance. Proprietary direct current (DC) power control hardware, energy management software, and extensive experience with numerous energy storage technologies uniquely positions EnSync Energy to deliver fully integrated systems that provide for efficient design, procurement, commissioning, and ongoing operation. EnSync Energy's IOE control platform adapts easily to ever-changing generation and load variables, as well as changes in utility prices and programs, ensuring the means to make or save money behind-the-meter, while concurrently providing utilities the opportunity to use DERs for an array of grid enhancing services. In addition to direct system sales, EnSync Energy includes power purchase agreements (PPAs) in its portfolio of offerings, which enables electricity savings for customers and provides a stable financial yield for investors. EnSync Energy is a global corporation, with joint venture Meineng Energy in AnHui, China, and energy project development subsidiary Holu Energy LLC in Hawaii. For more information, visit www.ensync.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the "safe harbor" created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as "believe," "expect," "may," "will," "should," "could," "seek," "intend," "plan," "goal," "estimate," "anticipate" or other comparable terms. All statements other than statements of historical facts included in this press release regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding project completion timelines, our ability to monetize our PPA assets, statements regarding the sufficiency of our capital resources, expected operating losses, expected revenues, expected expenses and our expectations concerning our business strategy. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our historical and anticipated future operational losses and our ability to continue as a going concern; our ability to raise the necessary capital to fund our operations and the risk of dilution to shareholders from capital raising transactions; our ability to successfully commercialize new products, including our EnSync Smart Home Energy System, Matrix(TM) Energy Management, DER Flex(TM), DER Supermodule(TM), and Agile(TM) Hybrid Storage Systems; our ability to lower our costs and increase our margins; our product, customer and geographic concentration, and lack of revenue diversification; the length and variability of our sales cycle; our dependence on governmental mandates and the availability of rebates, tax credits and other economic incentives related to alternative energy resources and the regulatory treatment of third-party owned solar energy systems; and the other risks and uncertainties discussed in the Risk Factors and in Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recently filed Annual Report on Form 10-K and our subsequently filed Quarterly Report(s) on Form 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
In this press release, we have included several non-U.S. GAAP financial measures, including the measure of Total Advanced Engineering and Development plus Selling, General and Administrative expenses excluding stock-based compensation, as our management believes this information is useful to investors to aid in comparisons with other periods. The non-U.S. GAAP information has limitations as an analytical tool and should not be considered in isolation from or as a substitute for U.S. GAAP information.
Media Relations Contact:
Antenna
Shreema Mehta
ensync@antennagroup.com
(646) 416-9853
EnSync Energy Media Contact:
Michelle Montague
mmontague@ensync.com
(262) 735-5676
Investor Relations Contact:
Lytham Partners, LLC
Robert Blum, Joseph Diaz, or Joe Dorame
esnc@lythampartners.com
(602) 889-9700
EnSync, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,
June 30,
2018 2018
---
Assets
Current assets:
Cash and cash equivalents $2,981,785 $2,984,532
Accounts receivable, net 17,504 215,009
Inventories, net 1,487,477 1,220,448
Costs and estimated earnings in excess of billings 863,841 528,266
Prepaid expenses and other current assets 482,129 929,379
Total current assets 5,832,736 5,877,634
Long-term assets:
Property and equipment, net 812,886 775,545
Investment in investee company 1,624,108 1,640,054
Goodwill 809,363 809,363
Right of use assets-operating leases 1,011,620 1,087,249
Other assets 91,087 91,087
Total assets $10,181,800 $10,280,932
===
Liabilities and Equity
Current liabilities:
Accounts payable $877,913 $1,142,256
Billings in excess of costs and estimated earnings 258,257 176,294
Accrued expenses 1,027,702 1,236,680
Total current liabilities 2,163,872 2,555,230
Long-term liabilities:
Long-term debt 331,827 331,827
Deferred revenue 711,359 538,937
Other long-term liabilities 1,029,766 1,072,120
Total liabilities 4,236,824 4,498,114
Commitments and contingencies -
Equity
Series B redeemable convertible preferred stock ($0.01 par value,
$1,000 face value), 3,000 shares authorized and issued, 2,300 shares
outstanding 23 23
Series C convertible preferred stock ($0.01 par value, $1,000 face
value), 28,048 shares authorized, issued, and outstanding 280 280
Common stock ($0.01 par value),300,000,000 authorized,
68,014,385 and 56,609,115 shares issued and outstanding as of
September 30, 2018 and June 30, 2018, respectively 1,388,458 1,274,406
Additional paid-in capital 145,911,154 143,008,995
Accumulated deficit (140,381,353) (137,609,659)
Accumulated other comprehensive loss (1,587,702) (1,587,702)
Total EnSync, Inc. equity 5,330,860 5,086,343
Noncontrolling interest 614,116 696,475
Total equity 5,944,976 5,782,818
Total liabilities and equity $10,181,800 $10,280,932
===
EnSync, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended September 30,
2018 2017
---
Revenues $2,738,206 $2,362,048
Costs and expenses
Cost of sales 2,377,268 2,066,910
Advanced engineering and
development 1,242,446 1,447,947
Selling, general and
administrative 1,927,308 2,303,671
Depreciation and
amortization 38,344 97,392
Impairment of long-
lived assets 447,000
Total costs and expenses 5,585,366 6,362,920
---
Loss from operations (2,847,160) (4,000,872)
Other income (expense)
Equity in loss of
investee company (15,946) (50,025)
Interest income 483 7,133
Interest expense (2,559) (11,258)
Other income 11,129 69,998
Total other income
(expense) (6,893) 15,848
---
Loss before benefit for
income taxes (2,854,053) (3,985,024)
Benefit for income taxes -
Net loss (2,854,053) (3,985,024)
Net loss attributable to
noncontrolling interest 82,359 93,230
Net loss attributable to
EnSync, Inc. (2,771,694) (3,891,794)
Preferred stock dividend (91,922) (83,277)
Net loss attributable to
common shareholders $(2,863,616) $(3,975,071)
Net loss per share
Basic and diluted $(0.05) $(0.07)
Weighted average shares
-basic and diluted 59,758,292 55,550,492
EnSync, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended September 30,
2018 2017
---
Cash flows from operating activities
Net loss $(2,854,053) $(3,985,024)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation of property,
plant and equipment 38,344 97,392
Stock-based
compensation, net 314,642 435,608
Equity in loss of
investee company 15,946 50,025
Provision for inventory
reserve 57,265 54,928
Gain on sale of property,
plant and equipment (11,124) (70,000)
Interest accreted on note
receivable (3,024)
Impairment of long-lived
assets 447,000
Changes in assets and liabilities
Accounts receivable 197,505 265,250
Inventories (324,294) 84,523
Costs and estimated
earnings in excess of
billings (335,575) (504,873)
Prepaids and other
current assets 447,250 (151,826)
Accounts payable (264,343) 1,003,940
Billings in excess of
costs and estimated
earnings 81,963 (331,603)
Accrued expenses (175,958) (184,366)
Deferred revenue 172,422
Net cash used in
operating activities (2,640,010) (2,792,050)
Cash flows from investing activities
Expenditures for property
and equipment (75,430)
Proceeds from sale of
property, plant and
equipment 11,124 70,000
Payments from note
receivable 6,000
Net cash provided by
(used in) investing
activities (64,306) 76,000
Cash flows from financing activities
Repayments of long term
debt (84,348)
Net proceeds from
issuance of common stock 2,701,569 119,459
Contribution of capital
from noncontrolling
interest 1,956
Net cash provided by
financing activities 2,701,569 37,067
Net decrease in cash and
cash equivalents (2,747) (2,678,983)
Cash and cash equivalents
-beginning of period 2,984,532 11,782,962
---
Cash and cash equivalents
-end of period $2,981,785 $9,103,979
Supplemental disclosures of cash flow information:
Cash paid for interest $2,559 $11,452
Supplemental noncash information:
Right of use asset
obtained in exchange for
new operating lease (75,629) (19,467)
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SOURCE EnSync, Inc.
