EnSync Energy Reports Second Quarter Fiscal Year 2018 Results
MILWAUKEE, Feb. 13, 2018 /PRNewswire/ -- EnSync, Inc. (NYSE American: ESNC), dba EnSync Energy Systems ("EnSync Energy"), a leading developer of innovative distributed energy resources (DERs), today announced second quarter fiscal year 2018 financial results for the period ended December 31, 2017.
Recent Highlights
-- Revenue during the second quarter of fiscal 2018 increased by 179% to
$4.8 million compared to $1.7 million in the year ago period, with
revenue largely being contributed by 8 power purchase agreement ("PPA")
projects;
-- Gross margins improved to 24.2% during the second quarter compared to
0.3% in the year ago quarter, and gross margins of 12.5% in the
immediately preceding quarter as the Company becomes more efficient and
profitable on its PPA construction and sales efforts;
-- Closed the largest single sale in company history, a PPA for a large
multi-residential property on Oahu;
-- Completed commissioning of Time Warner project at a key data center site
on the island of Hawaii and commenced operation of two additional
projects on the island of Oahu;
-- Signed PPAs for three additional Hawaii projects including a PPA with
the Polynesian Cultural Center, a top tourist attraction in Hawaii,
operated by the Brigham Young University Hawaii campus;
-- Received a purchase order for a Micro-Utility system that will ship to
East Africa, the first order for EnSync on the continent;
-- Shipped a repeat order Matrix Energy Management system to Schneider
Electric;
-- Sold our Menomonee Falls building for net proceeds of $1.7 million; and
-- Signed a Partnership Agreement with Lower Electric LLC for rapid entry
into the high growth Illinois renewables market.
Management Discussion
"We are now solidly engaged in driving sales across several different markets," commented, Brad Hansen, CEO of EnSync Energy. "Specifically, we continue to make progress in our commercial and industrial ("C&I") markets in Hawaii and California, where we have 13 PPA projects in our backlog in various stages of execution. We recently sold the single largest C&I PPA project in EnSync Energy's history and have a number of others in our pipeline. In addition to our C&I opportunities, we are advancing our focus on the independent utility market where we recently announced an order for a micro-utility system in East Africa, and announced today's partnership with Lower Electric which is expected to enable us to enter the evolving Illinois market later this year. Finally, we are maintaining our focus on power electronic system sales where we continue to ship systems to Schneider Electric. Each of these market areas have the potential to dramatically increase Company revenues and margins, and our prospects for future growth remain very positive."
"We continue to perform well on selling and constructing PPA projects. Our gross margins in the second quarter of 24.2% were above our stated expectations of 10% to 20% as we enhanced efficiencies in the procurement, construction and sale process. Given the success we have had, we're now confident enough in our execution to adjust the gross margin target range to 15% to 25% going forward."
"Overall, we're extremely happy with our performance in the second quarter which is arguably the best operating quarterly performance in the Company's history. Our products and execution are yielding great results which we'll look to build upon going forward. With the success we have achieved with our existing markets, and now with new markets, partners, products and services being regularly announced, we feel it's a very exciting time at EnSync," Hansen concluded.
Financial Results
Total revenue for the second quarter of fiscal 2018 was $4.8 million compared to $1.7 million in the year ago period. Revenue during the second quarter of fiscal 2018 quarter was largely derived from PPA contracts in Hawaii that are recognized on a percent of completion basis. In addition to the PPA sales, revenue was also recognized from system sales of the Company's Matrix® Energy Management system and DER Flex(TM) platform.
Gross margins improved to 24.2% during the second quarter compared to 0.3% in the year ago quarter, and compares to gross margins of 12.5% in the immediately preceding first quarter. The improved gross margin is attributable to the elimination of numerous non-recurring charges incurred in the year ago period as part of entering the market with this new PPA business model, and further efficiencies in the procurement, construction and sale process. In particular, the margin improvement was primarily driven by lower procurement costs on certain PPA projects in the final stages of construction and favorable margin on a PPA project sold in the second quarter. The Company's expectation is that gross profit margins on future PPA sales should be between 15% and 25%.
Advanced Engineering and Development costs were $1.2 million during the second quarter of fiscal 2018, compared to $1.1 million in the year ago period. Selling, General and Administrative expenses decreased to $2.4 million during the second quarter of fiscal 2018 compared to $3.0 million in the year ago period due to decreases in legal expenses and stock-based compensation. Total Advanced Engineering and Development costs and Selling, General and Administrative expenses (excluding stock-based compensation of $0.2 million and $0.8 million, respectively) was $3.4 million during the second quarter of fiscal 2018 compared to $3.3 million in the second quarter of fiscal 2017. The Company intends to hold at or below these levels going forward.
Net loss attributable to common shareholders was $(2.6) million, or $(0.05) per basic and diluted share, for the second quarter of fiscal 2018, compared to $(4.4) million, or $(0.09) per basic and diluted share, in the second quarter of fiscal 2017.
Cash balance at December 31, 2017 was $5.9 million compared to $9.1 million at September 30, 2017.
Estimated backlog value for PPA projects, components and systems as of the date of this announcement is approximately $11.4 million.
Conference Call Information
Date: Tuesday, February 13, 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 #: 10116984
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 10116984, through February 20, 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 (EnSync Energy), 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, and DCfusion LLC, a power system engineering and design, consultancy and policy firm. 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 operation 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 Matrix® 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 described 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.
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
(602) 889-9700
esnc@lythampartners.com
EnSync, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended December 31, Six months ended December 31,
------------------------------- -----------------------------
2017 2016 2017 2016
---- ---- ---- ----
Revenues $4,846,707 $1,736,569 $7,208,755 $9,393,130
Costs and expenses
Cost of product sales 3,672,506 1,731,558 5,739,416 9,497,701
Cost of engineering and
development - - - 937,725
Advanced engineering and
development 1,178,584 1,077,140 2,285,928 2,078,468
Selling, general and
administrative 2,435,077 3,035,704 5,079,351 5,588,155
Depreciation and
amortization 86,018 201,712 183,410 356,069
Impairment of long-
lived assets - - 447,000 -
Total costs and expenses 7,372,185 6,046,114 13,735,105 18,458,118
--------- --------- ---------- ----------
Loss from operations (2,525,478) (4,309,545) (6,526,350) (9,064,988)
Other income (expense)
Equity in loss of
investee company (88,438) (25,387) (138,463) (1,732)
Interest income 6,862 11,269 13,995 22,627
Interest expense (10,917) (13,107) (22,175) (26,104)
Other income 6,527 - 76,525 8,432
Total other income
(expense) (85,966) (27,225) (70,118) 3,223
------- ------- ------- -----
Loss before benefit for
income taxes (2,611,444) (4,336,770) (6,596,468) (9,061,765)
Benefit for income taxes - - - -
--- --- --- ---
Net loss (2,611,444) (4,336,770) (6,596,468) (9,061,765)
Net loss attributable to
noncontrolling interest 75,761 60,065 168,991 142,338
Net loss attributable to
EnSync, Inc. (2,535,683) (4,276,705) (6,427,477) (8,919,427)
Preferred stock dividend (85,359) (77,331) (168,636) (152,776)
Net loss attributable to
common shareholders $(2,621,042) $(4,354,036) $(6,596,113) $(9,072,203)
=========== =========== =========== ===========
Net loss per share
Basic and diluted $(0.05) $(0.09) $(0.12) $(0.19)
Weighted average shares
-basic and diluted 55,854,270 47,849,343 55,702,381 47,801,474
EnSync, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
2017 2017
---- ----
Assets
Current assets:
Cash and cash equivalents $5,871,135 $11,782,962
Accounts receivable, net 416,830 469,906
Inventories, net 1,566,273 2,482,013
Costs and estimated earnings in
excess of billings 2,299,876 87,318
Prepaid expenses and other current
assets 849,338 630,998
Total current assets 11,003,452 15,453,197
Long-term assets:
Property, plant and equipment, net 2,830,849 3,446,253
Investment in investee company 1,809,265 1,947,728
Goodwill 809,363 809,363
Right of use assets-operating
leases 1,170,793 150,214
Other assets 93,862 7,502
Total assets $17,717,584 $21,814,257
=========== ===========
Liabilities and Equity
Current liabilities:
Current maturities of long-term
debt $556,950 $726,256
Accounts payable 1,884,332 487,185
Billings in excess of costs and
estimated earnings 50,888 456,950
Accrued expenses 1,341,678 1,231,714
--------- ---------
Total current liabilities 3,833,848 2,902,105
Long-term liabilities:
Long-term debt, net of current
maturities 331,827 331,827
Deferred revenue 422,638 422,638
Other long-term liabilities 1,156,124 249,920
Total liabilities 5,744,437 3,906,490
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, preference in
liquidation of $5,799,722 and
$5,631,086
as of December 31, 2017 and June
30, 2017, respectively 23 23
Series C convertible preferred
stock ($0.01 par value, $1,000
face
value), 28,048 shares authorized,
issued, and outstanding,
preference
in liquidation of $6,173,422 and
$12,276,682 as of December 31,
2017
and June 30, 2017, respectively 280 280
Common stock ($0.01 par
value),300,000,000 authorized,
56,061,961 and 55,200,963 shares
issued and outstanding as of
December 31, 2017 and June 30,
2017, respectively 1,268,934 1,260,324
Additional paid-in capital 142,473,190 141,822,317
Accumulated deficit (131,067,121) (124,639,644)
Accumulated other comprehensive
loss (1,584,169) (1,584,578)
Total EnSync, Inc. equity 11,091,137 16,858,722
Noncontrolling interest 882,010 1,049,045
Total equity 11,973,147 17,907,767
---------- ----------
Total liabilities and equity $17,717,584 $21,814,257
=========== ===========
EnSync, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended December
31,
--------------------------
2017 2016
---- ----
Cash flows from operating activities
Net loss $(6,596,468) $(9,061,765)
Adjustments to reconcile net loss to net
cash provided by
(used in) operating activities:
Depreciation
of
property,
plant and
equipment 180,080 290,132
Amortization
of
customer
intangible
assets 3,330 68,044
Stock-
based
compensation,
net 601,472 1,055,105
Equity in
loss of
investee
company 138,463 1,732
Provision
for
inventory
reserve 57,988 181,197
Gain on
sale of
property
and
equipment (76,521) (8,432)
Interest
accreted
on note
receivable (6,049) (6,049)
Impairment
of long-
lived
assets 447,000 -
Changes in assets and liabilities
Accounts
receivable 53,076 (203,639)
Inventories 857,752 (150,332)
Costs and
estimated
earnings
in excess
of
billings (2,212,558) -
Prepaids
and other
current
assets (227,821) 1,785,328
Deferred
PPA
project
costs - 5,690,307
Other
assets (86,360) -
Accounts
payable 1,397,147 112
Billings
in excess
of costs
and
estimated
earnings (406,062) -
Accrued
expenses (4,897) 271,467
Deferred
revenue - 422,638
Other
long-
term
liabilities - 137,983
Net cash
provided
by (used
in)
operating
activities (5,880,428) 473,828
Cash flows from investing activities
Expenditures
for
property
and
equipment (16,169) (9,149)
Proceeds
from sale
of
property
and
equipment 81,500 9,754
Payments
from note
receivable 12,000 -
Net cash
provided
by
investing
activities 77,331 605
Cash flows from financing activities
Repayments
of long
term debt (169,306) (165,083)
Proceeds
from
issuance
of common
stock 96,674 -
Proceeds
from the
exercise
of stock
options - 68,400
Payments
of tax
withholding
related
to stock-
based
compensation (38,663) -
Contribution
of
capital
from
noncontrolling
interest 1,956 -
Net cash
used in
financing
activities (109,339) (96,683)
Effect of
exchange
rate
changes
on cash
and cash
equivalents 609 (568)
Net
increase
(decrease)
in cash
and cash
equivalents (5,911,827) 377,182
Cash and
cash
equivalents
-
beginning
of period 11,782,962 17,189,089
---------- ----------
Cash and
cash
equivalents
-end of
period $5,871,135 $17,566,271
========== ===========
Supplemental disclosures of cash flow
information:
Cash paid
for
interest $22,543 $26,332
Supplemental noncash information:
Right of
use asset
obtained
in
exchange
for new
operating
lease 1,020,579 102,943
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SOURCE EnSync, Inc.
