2nd Q Revenue Up From 1st Q -Reaffirms Strategy and Record 2nd Half
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Investor Conference Call Tomorrow, Thursday, August 3rd, at 11:00AM (Eastern)
WALLINGFORD, Conn., Aug. 2 /PRNewswire-FirstCall/ -- Distributed Energy Systems Corp. (Nasdaq: DESC - News), which serves the energy marketplace by giving users greater control over the cost, quality and reliability of electric power, today reported revenues of $9.4 million for the second quarter of 2006. Second-quarter revenues rose from $7.6 million during the first quarter of 2006 but were below record revenues of $12.2 million in the same period last year.
Ambrose L. Schwallie, Distributed Energy's chief executive officer, commented that "We are solidly on the trajectory that we laid out for our shareholders in March. That trajectory envisioned a sluggish first half due to contract delays, followed by rapid growth to record third and fourth quarters and strong momentum going into 2007. The results we report today and that we will discuss tomorrow lay the foundation for that strong second half. Specifically, backlog remains solid at $33 million. Several projects where booking is imminent, along with one project on which significant work has already proceeded even though we are not yet recognizing revenues, give added visibility to revenue growth and margin expansion in the months ahead."
"Our confidence that backlog will grow derives from the rapidly expanding pace of engineering studies, in which customers pay us to evaluate project feasibility and prepare cost estimates (the first stage of the selling process). We currently have $38 million of projects in the paid study phase, roughly twice the level that we have averaged over the past year. The forces driving our business -- end user demand to gain more control over cost, reliability, and environmental footprint of their energy needs -- are as strong as ever, and end users continue to look to Northern Power to help respond to those forces. Rounding out the Northern Power story, revenues of our operations and maintenance (O&M) segment, which we formalized less than a year ago, have grown to $2.3 million in the quarter. That O&M running rate is more than double where it was at the beginning of the year. The value of Northern's long term (2-10 year) O&M contracts now stands at $23.5 million, only $4.9 million of which gets reported as current backlog."
Mr. Schwallie continued: "During the first and second quarters, we continued to build the company to handle the growth in the pipeline. Northern Power added nearly 50 people. The cost of adding those people contributed to our cash draw-down in the first half; with the necessary people and systems now largely in place, the outlook for cash use in the second half is for a very significant reduction."
Regarding the company's commercial hydrogen business, Mr. Schwallie said: "Our industrial gas distribution channels are embracing our proprietary on-site hydrogen systems operated to cool power plant generation equipment. That acceptance is accelerating, as we and our established distribution channel partners roll out the leasing/service model we are developing jointly with them. This new marketing approach is beginning to stimulate more rapid deployment of our large HOGEN® H-series ultra-pure hydrogen-producing systems and the recently introduced StableFlow Control System for enhancing electric power generator efficiency and capacity."
In the second quarter of 2006, the company's Proton unit produced and delivered a record number of HOGEN S-series hydrogen generators, more than doubling the number of these mid-sized systems shipped during the same period of last year. Proton develops, manufactures and sells these advanced systems to power generation, heat-treating, semiconductor manufacturing, research and other customers requiring reliable, on-site, ultra-pure hydrogen. In addition, the company's Hydrogen Technology Group continued to make progress in its research, development and pilot programs, contributing to the advancement of hydrogen usage as a fuel for back-up power and fuel-cell-related transportation applications.
The company attributed its revenue results during this year's second quarter to previously-announced timing delays of signed contracts for new orders in its engineering services business. Results reflected an additional temporary delay in receiving approved state-sponsored renewable energy funding for a signed engineering services contract announced in March, requiring Distributed Energy to defer revenue recognition of approximately $1 million for the quarter.
Financial Summary
For the second quarter ended June 30, 2006, Distributed Energy's net loss was $6.5 million, or $0.17 per share, on revenues of $9.4 million, compared with last year's second quarter loss of $4.5 million, or $0.13 per share, on $12.2 million in revenues. Consolidated gross margin fell sharply during the June quarter, reflecting the lower overall volume, and the impact of accelerated staffing in response to backlog growth. This year's second quarter net loss included approximately $0.03 per share attributable to required compliance with the Statement of Financial Accounting Standard 123 (revised 2004), "share-based payment" or SFAS123® and other non-cash stock compensation charges. (The company adopted SFAS123® in the first quarter 2006 as required, and historical results do not include such charges.)
For the first six months of 2006, the company reported revenue of $17.0 million, and a net loss of $13.9 million, or $0.36 per share including approximately $0.09 per share attributable to compliance with SFAS123® and other non-cash stock compensation charges. One year ago, the company reported six month revenue of $21.7 million, and a net loss of $9.2 million, or $0.26 per share, including less than $0.01 per share attributable to non-cash stock compensation charges.
Cash and marketable securities as of June 30, 2006, totaled $31.9 million, compared with $40.7 million as of December 31, 2005. The decrease of approximately $8.8 million during the first half of 2006, compared with $13.3 million for the same period a year ago, reflects net losses and working capital requirements offset by financing activities completed in the second quarter of 2006. Working capital is defined as current assets minus current liabilities excluding cash and marketable securities.
Conference Call
The Company will host a conference call tomorrow, Thursday, August 3, 2006 at 11:00 a.m. EDT to discuss second quarter results and other matters of interest to investors and shareholders. Individuals wishing to participate in the conference call should dial (866) 713-8562 or for international calls (617) 597-5310. For interested individuals unable to join the call, a replay will be available through Wednesday, August 16, 2006, by dialing (888) 286- 8010 or for international calls (617) 801-6888, pass code 24289810, or on the company's web site. The call will also be broadcast live over the Internet, and can be accessed by all interested parties at vcall.com or through the investors' section of the Distributed Energy Systems website at distributed-energy.com |
