EARNINGSDay4 Energy Continues Expansion and Growth During Third Quarter
Day4 Energy Inc. (TSX: DFE), a solar electric technology developer and manufacturer of superior performance solar modules, today reported operating results for the third quarter and first nine months of 2008.
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"Together with significant increases in revenues, the company achieved progress in its operating efficiencies during the third quarter", said George Rubin, president of Day4 Energy. "When adjusted for the foreign exchange fluctuations our third quarter gross margins were 3.3% compared to 2.5% during the previous quarter."
He added, "Importantly, we are being proactive in addressing the factors that affected our reported gross margins this quarter. We currently hedge our foreign exchange exposure through forward contracts and this quarter the foreign exchange fluctuations were more than compensated for by the gains on our foreign exchange forward contracts on a market to market basis. We continue to work to achieve our cost reduction objectives through a number of avenues that includes outsourcing options."
<< 2008 3Q FINANCIAL RESULTS Worldwide Product Revenues >>
Third quarter revenues increased 111% from the prior quarter revenue. The increase reflects the successful ramp-up of new production capabilities designed to capitalize on the company's sales and marketing efforts and rapid adoption of the company's products in target markets around the world. Revenue was $31.7 million for the third quarter up from the $15 million for the second quarter of 2008 and 197% greater than revenues recorded in the third quarter in 2007. Revenue rose to $60.2 million for the nine months ended September 30, 2008.
<< Gross Margins >>
Gross margin was impacted negatively by foreign exchange, and ramp-up costs, including the commissioning and optimization of new production lines associated with our four-fold increase in annualized production capacity. Significant fluctuations in the foreign exchange affected both revenues and cost sides of the company's business, and had an overall negative impact on the company's profit margins. Simultaneous strengthening USD and weakening Euro foreign exchange resulted in a negative 4.7% impact on the operation. In the short term the economic impact of the foreign exchange fluctuations was substantially mitigated by the foreign exchange hedging program implemented by the company. In the medium to long term the company will adjust aspects of its supply chain and operations to maximize natural hedging opportunities thus minimizing the overall FX exposure of the business.
When adjusted for foreign exchange fluctuations, gross margin for the third quarter 2008 improved to 3.3% compared to 2.5% recorded during the previous quarter. This improvement is mainly attributable to reduced production costs due to economies of scale and overall manufacturing experience.
For the nine months ended September 30, 2008 foreign exchange adjusted gross margin was 2.8% compared to a gross margin loss of 18% for the same period in 2007.
<< Expenses >>
For the third quarter of 2008, general and administrative expenses were $2.0 million an increase of 41% over the prior quarter and in line with increases in staff and business activities relating to our volume growth in operations. G&A expenses as a percentage of revenues were 7% for the nine months ended September 30, 2008 down from 9% for the same period in 2007.
Sales and marketing expenses were $0.9 million for the third quarter, a decrease of 33% over the prior quarter and a reflection of second quarter one- time costs associated with expansion initiatives including customer relations and sales channel development. Sales and marketing expenses as a percentage of revenues have improved to 5% of sales in the nine months ended September 30, 2008 compared with 6% of sales for the same period in 2007.
The 17% increase in R&D expenses in the third quarter compared to the second quarter of 2008 represents increased project costs, consulting contracts and personnel costs as we continue the development of opportunities provided by the Day4 Electrode including the development of new products. While absolute costs have increased, R&D expenses as a percentage of revenues have improved to 3% of sales for the nine months ended September 30, 2008 compared with 8% of sales for the same period in 2007.
<< Earnings Per Share (EPS) / Loss Per Share >>
The net loss for the third quarter 2008 was $1,692,100 ($0.05 per share) compared with $2,466,815 ($0.07 per share) the prior quarter and $4,829,202 ($0.26 per share) for the same period in 2007. Net loss as a percentage of revenue for the nine months ended September 30, 2008 was 8% compared to 49% for the same period in 2007.
<< Cash and Short-Term Investments >>
At September 30, 2008, we had $43.6 million in cash and short term investments, including restricted cash of $11.2 million, down from total cash and short term investments at June 30, 2008 of $57.7 million.
Cash used by operations and purchase of Property Plant and Equipment was $8.4 million and $6.1 million respectively, totaling $14.5 million for the third quarter of 2008. For the nine months ending September 30, 2008 cash used by operations was $27.6 million and the purchase of Property Plant and Equipment was $23.8 million totalling $51.4 million, an increase of $32.6 million or 173% over the same period in 2007.
Detailed financial results and management's discussion and analysis can be found on SEDAR at: https://www.sedar.com.
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