BURNABY, BC, Aug. 10 /PRNewswire-FirstCall/ -- Day4 Energy Inc. (TSX: DFE), a solar electric technology developer and supplier of premium solar energy solutions, today reported operating results for the second quarter 2010.
"Throughout the second quarter we concentrated on building a number of fundamental components of our business that are required to reach the ultimate goal of sustainable long-term operating profitability," said George Rubin, president of Day4 Energy. "In addition to realizing the strongest sales quarter in our history with revenues of $44.8 million, another really significant event of the quarter was the progress we made in our long-term transition to a solution provider business model. We believe that, when completed, this transition will significantly alter the company's revenue model with higher profit margin sales and royalty streams becoming an increasingly larger component of the company's revenue mix over time."
Other key events of the second quarter: - Surpassed previous high set in the fourth quarter of 2009 and diversified revenues with almost 20% of total revenues generated outside of our core market in Germany; - Completed the expansion of our production capacity at Jabil to 10MW per month or 120MW annualized and transitioned most of our production output to the next generation Day4 Guardian Technology(TM) 60MC-I modules with intelligent shade protection; - Worked closely with our manufacturing partners and material suppliers to qualify and certify new production materials. We expect these changes that will be introduced gradually through the third quarter, to result in as much as a 19% reduction in our encapsulation material costs. These costs represent approximately 30% of our module cost; - Completed construction of two power projects for a total of 2.5MW and $7.6 million in revenues in record time of less than six weeks, expanding our turnkey power project business and contributing positively to our profit margins; and - Signed two manufacturing and licensing agreements that are expected to come on-line in 2011 and would provide approximately 1.9 million Euros per year in royalty revenue to Day4.
"During the second quarter the solar sector in general benefited from strong demand ahead of the German subsidy changes; however this was offset by substantial depreciation of the Euro which impacted our gross margin. We believe that, outside the foreign exchange dynamics, the fundamentals of our business have improved during the quarter and the company is positioned to take advantage of its recent investments in new business segments, strengthened teams, improved products and encapsulation cost reductions going forward," added Mr. Rubin.
Q2 2010 FINANCIAL RESULTS Worldwide Product Revenues
Second quarter revenues of $44.8 million increased by $39.1 million or 685% from the same period in 2009 and by $21.9 million or 95% from the prior quarter. Demand was particularly strong in the second quarter due to our sales efforts combined with the anticipation of the German subsidy adjustment on July 1, 2010.
Gross Margins
Gross margin was $0.9 million (2%) for the second quarter 2010 as compared to a gross margin of $1.7 million (7%) in the first quarter and gross loss of $10.8 million in second quarter 2009. We were able to maintain a positive gross margin in the second quarter despite the volatility experienced in the euro currency. Euro/USD foreign exchange declines contributed to approximately 4% decrease in the gross margin in the second quarter. Negative gross margins in the prior year mainly related to inventory write-down and period cost relating to low capacity utilization. Both of these costs did not occur in 2010.
Expenses
For the second quarter of 2010, general and administrative (G&A) expenses were $2.8 million, an increase of $0.8 million from expenses of $2.0 million for the same period in 2009. The increase in G&A expenses in 2010 primarily relates to costs relating to the due diligence activities for the acquisition of ACI. We expect to incur additional costs in the subsequent months relating to the integration of ACI.
Sales and marketing expenses of $1.2 million for the second quarter 2010 compared to $1 million in the same period in 2009. The lower expenditure in 2009 reflected the corporate restructuring and cost reduction activities. As we continue to take advantage of the economic recovery in 2010, we have strategically increased and strengthened our sales and marketing activities with the addition of seasoned management experience and leadership to meet expectations in the growing European markets. This focused and dedicated effort is a key requirement to address the rapidly expanding field of opportunities in each of our core markets as well as to align our infrastructure to roll out our turnkey manufacturing technology solution. Staffing levels in sales and marketing was twenty at June 30, 2010 compared to thirteen at June 30, 2009.
R&D expenses in the second quarter were $0.6 million compared to $0.5 million for the same period in 2009. During the quarter, we utilized the equipment in our Burnaby facility as a pilot line to produce our new 60MC-I Guardian technology modules. Most of the modules produced in this line were sold in the quarter resulting in lower R&D expenses compared to the first quarter expense of $0.9 million.
Loss per Share
The net loss for the second quarter 2010 was $4.2 million ($0.12 per share) compared to $14.1 million ($0.38 per share) for the same period in 2009. The higher net loss in the second quarter of 2009 was mainly attributed to the inventory write-down and fixed overhead period cost due to low capacity utilization. These costs did not occur in 2010. The net loss of $4.2 million during the second quarter 2010 was affected by one-time expenses relating to production capacity expansion, transitioning to the new product design and ACI acquisition and restructuring costs. It was further affected by the unfavorable Euro/USD foreign exchange trends that when compared to the first quarter have contributed approximately $2.0 million to cost of goods sold during the quarter. The total combined negative impact of these events was approximately $2.9 million.
Cash and Short-Term Investments
Cash and cash equivalents, restricted cash and short-term investments totaled $21.0 million at June 30, 2010, an increase of $4.7 million from $16.3 million at March 31, 2010 and a decrease of $6.2 million from $27.2 million at December 31, 2009. Cash and cash equivalents have decreased since December 31, 2009 primarily due to the utilization of funds to finance operations.
Detailed financial results and management's discussion and analysis can be found on our website at http://www.day4energy.com/ or on SEDAR at http://www.sedar.com/.
About Day4 Energy
Day4 Energy Inc. is a Canadian company dedicated to providing high performance photovoltaic (PV) solutions for residential, commercial and utility scale installations. By fundamentally improving on the design and assembly of solar cells and modules, the Company produces unique PV panels of high power density, increased lifetime and uncompromised aesthetic appearance. Day4 Energy partners with international technology leaders to develop and deliver IEC- and UL-certified solar products to customers around the world. Day4 Energy is listed on the Toronto Stock Exchange under the symbol "DFE". For more information, please visit http://www.day4energy.com/.
Conference Call Information
Day4 Energy's management will conduct a conference call at 8:30am (ET) August 10, 2010 to review the company's second quarter 2010 financial results. The call can be accessed by dialing 1-800-319-4610 (Canada and US) or 1-604-638-5340 (International) prior to the start of the call. Following the call a recording of the conference call will be archived on Day4 Energy's website, http://www.day4energy.com/
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements include, among other things, statements relating to our expectations regarding our revenues, expenses, cash flows, operating performance and future profitability. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target", and similar words suggesting future events or future performance.
The forward-looking statements contained in this news release are based on assumptions, which include, but are not limited to, our ability to continue to successfully outsource the majority of our annual PV manufacturing capacity; our ability to manage and meet demand for our products; our ability to obtain an adequate spread between our module average selling price and cost of raw materials, including PV cells; achieving increased PV cell and PV module efficiencies; expanding our existing product line; building the Day4 brand, attracting customers and developing and maintaining customer and supplier relationships; continuing our strong relationships with our suppliers; effectively managing foreign exchange risks; protecting our intellectual property rights and not infringing on the intellectual property rights of third parties; timely processing by certification agencies of new products; and complying with applicable governmental regulations and standards.
Such forward-looking statements are subject to risks, uncertainties and other factors, including those listed in our Annual Information Form filed with Canadian securities regulatory authorities, many of which are beyond our control and each of which contributes to the possibility that our forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. These risks, uncertainties and other factors include, but are not limited to, the impact of general economic, market or business conditions; risks related to the implementation of outsource manufacturing and our dependence on Jabil for the manufacture of our products; the meeting of conditions precedent to the completion of the acquisition of ACI; ACI's ability to fulfill orders in a timely fashion for equipment needed to manufacture Day4 products; our dependence on a limited number of PV cell suppliers; price fluctuations that may impact relations with existing customers; risks relating to the protection of our intellectual property and intellectual property infringement claims by third parties; our reliance on a limited number of suppliers; government subsidies and economic incentives for PV power could be reduced or eliminated; the financial strength of our competitors; competition from other forms of renewable energy; our ability to manage growth effectively; our ability to open up new markets for our products; demand for PV modules may reduce; technological advances from competitors that may render our products uneconomic or obsolete; the impact of global events; and other factors, many of which are beyond our control.
The forward-looking statements made in this news release relate only to events or information as of the date indicated above. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Day4 Energy Inc. Consolidated Balance Sheets As at June 30, 2010 and December 31, 2009 ------------------------------------------------------------------------- June 30 December 31 2010 2009 $ $ (unaudited) ---------------------------- Assets Current assets Cash and cash equivalents 15,327,241 17,804,941 Restricted cash 185,000 335,000 Short-term investments 5,510,494 9,067,397 Accounts receivable 11,747,244 3,598,384 Investment tax credits receivable 658,174 600,000 Other receivables 2,406,406 8,447,806 Inventory 10,877,325 11,078,173 Prepaid expenses 923,288 564,336 --------------------------- 47,635,172 51,496,037 Property, plant and equipment 18,694,881 21,679,300 ---------------------------- 66,330,053 73,175,337 ---------------------------- ---------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 19,392,949 13,321,691 Taxes payable 830,000 830,000 Short-term debt 1,162,947 1,143,521 Deferred revenue 554,744 322,331 ---------------------------- 21,940,640 15,617,543 Shareholders' Equity Share capital Authorized Unlimited number of common shares Unlimited number of preferred shares Issued and outstanding 37,059,366 (2009 - 36,739,366) common shares 131,075,529 130,972,498 Contributed surplus 2,791,929 2,581,508 Warrants 2,279,890 2,279,890 Accumulated other comprehensive income (10,573,267) (3,201,330) Deficit (81,184,668) (75,074,772) ---------------------------- 44,389,413 57,557,794 ---------------------------- 66,330,053 73,175,337 ---------------------------- ---------------------------- Day4 Energy Inc. Consolidated Statements of Operations and Deficit For the three and six months ended June 30, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- Three-months ended Six-months ended June 30, June 30, ------------------------------------------------------ 2010 2009 2010 2009 $ $ $ $ Revenues 44,811,143 5,729,904 67,735,291 10,074,449 Cost of revenues 43,914,378 16,506,946 65,153,257 21,315,103 ------------------------------------------------------ Gross margin (loss) 896,765 (10,777,042) 2,582,034 (11,240,654) ------------------------------------------------------ Expenses General and administrative 2,778,288 1,980,493 5,298,361 4,985,194 Research and development 585,194 522,684 1,435,908 1,038,391 Less: Government assistance (94,130) - (171,149) - Selling and marketing 1,245,418 970,691 1,996,489 1,621,549 Depreciation 443,904 209,408 923,263 212,825 ------------------------------------------------------ 4,958,674 3,683,276 9,482,872 7,857,959 ------------------------------------------------------ Loss before undernoted 4,061,909 14,460,318 6,900,838 19,098,613 ------------------------------------------------------ Foreign exchange gain (loss) (223,317) 355,396 723,951 2,278,430 Interest and other income 62,191 48,783 110,190 114,504 Interest expense (21,733) (24,517) (43,199) (55,649) Gain (loss) on disposal of property, plant and equipment - - - 26,730 Gain on disposition of subsidiary - - - 24,677 Accretion expense - (6,656) - (12,990) ------------------------------------------------------ (182,859) 373,006 790,942 2,375,702 ------------------------------------------------------ Loss before non- controlling interest 4,244,768 14,087,312 6,109,896 16,722,911 Non-controlling interest - - - (11,323) ------------------------------------------------------ Loss for the period 4,244,768 14,087,312 6,109,896 16,711,588 Deficit - Beginning of period 76,939,900 57,315,661 75,074,772 54,691,384 ------------------------------------------------------ Deficit - End of period 81,184,668 71,402,973 81,184,668 71,402,973 ------------------------------------------------------ ------------------------------------------------------ Net loss per share - basic and diluted 0.12 0.38 0.17 0.46 ------------------------------------------------------ ------------------------------------------------------ Weighted average number of shares outstanding - basic and diluted 36,767,498 36,679,366 36,753,510 36,679,366 ------------------------------------------------------ ------------------------------------------------------ Day4 Energy Inc. Consolidated Statements of Cash Flows For the three and six months ended June 30, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- Three-months ended Six-months ended June 30, June 30, ------------------------------------------------------ 2010 2009 2010 2009 $ $ $ $ Cash flows from operating activities Loss for the period (4,244,768) (14,087,312) (6,109,896) (16,711,589) Items not affecting cash Stock-based compensation 133,458 118,913 233,451 268,546 Depreciation and amortization 758,477 676,801 1,499,382 1,093,734 Loss (gain) on sale of property, plant and equipment - (26,730) Gain on disposal of subsidiary - (24,677) Unrealized foreign exchange (gain) loss (122,996) 139,212 (877,449) 38,622 Change in value of derivative instruments - (2,157,218) Non-controlling interest - (11,323) Changes in non-cash working capital items Accounts receivable (6,925,154) 2,419,496 (8,977,284) 3,149,510 Investment tax credit receivable (58,174) - (58,174) - Other receivables 4,446,869 846,165 5,242,533 (2,600,414) Inventory 6,610,139 11,504,374 (1,317,416) 4,090,154 Prepaid expenses (481,492) (4,638) (456,235) (10,174) Accounts payable and accrued liabilities 5,499,803 (2,309,702) 7,669,401 1,779,910 Deferred revenue 165,690 25,810 289,457 8,367 ------------------------------------------------------ 5,781,852 (670,881) (2,862,230) (11,113,282) ------------------------------------------------------ Cash flows from investing activities Purchase of short-term investments (1,500,000) (5,000,000) (1,500,000) (9,000,000) Proceeds from sale of short-term investments 5,000,000 - 5,000,000 - Change in restricted cash - 4,667,065 150,000 10,668,745 Purchase of property, plant and equipment (822,097) (920,745) (1,348,694) (2,507,932) Proceeds from sale of property, plant and equipment - - - 8,213,638 Proceeds from sale of subsidiary - net of cash included in sale of 29,098 - - - 9,590 ------------------------------------------------------ 2,677,903 (1,253,680) 2,301,306 7,384,041 ------------------------------------------------------ Cash flows from financing activities Proceeds from exercise of stock options 80,000 - 80,000 ------------------------------------------------------ 80,000 - 80,000 - ------------------------------------------------------ Effect of foreign exchange rate changes on cash (332,914) 334,884 (1,996,776) 364,211 ------------------------------------------------------ Increase (decrease) in cash and cash equivalents 8,206,841 (1,589,677) (2,477,700) (3,365,030) Cash and cash equivalents - Beginning of period 7,120,400 12,954,941 17,804,941 14,730,294 ------------------------------------------------------ Cash and cash equivalents - End of period 15,327,241 11,365,264 15,327,241 11,365,264 ------------------------------------------------------ ------------------------------------------------------ Supplemental cash flow information Cash paid for interest 1,249 1,185 2,426 2,968 Cash received for interest 106,572 3,105 106,616 18,463 Day4 Energy Inc. Consolidated Statements of Comprehensive Loss and Accumulated Other Comprehensive Loss For the three and six months ended June 30, 2010 and 2009 (unaudited) ------------------------------------------------------------------------- Three-months ended Six-months ended June 30, June 30, ------------------------------------------------------ 2010 2009 2010 2009 $ $ $ $ Loss for the period 4,244,768 14,087,312 6,109,896 16,711,589 Unrealized foreign exchange losses on translation of consolidated financial statements to the presentation currency 2,632,214 - 7,371,937 - ------------------------------------------------------ Comprehensive Loss 6,876,982 14,087,312 13,481,833 16,711,589 ------------------------------------------------------ ------------------------------------------------------ Three-months ended Six-months ended June 30, June 30, ------------------------------------------------------ 2010 2009 2010 2009 $ $ $ $ Accumulated Other Comprehensive Loss - Beginning of period 7,941,053 - 3,201,330 - Unrealized foreign exchange losses on translation of consolidated financial statements to the presentation currency 2,632,214 - 7,371,937 - ------------------------------------------------------ Accumulated Other Comprehensive Loss - End of period 10,573,267 - 10,573,267 - ------------------------------------------------------ ------------------------------------------------------
Day4 Energy Inc.
CONTACT: Contacts: Therese Hayes, Head, Corporate Development, Day4
Energy Inc., (604) 296-0434, thayes@day4energy.com; Justin Lacey, Media
Contact, Day4 Energy Inc., (604) 297-0449, media@day4energy.com
