|Conference Call - Valence Technology Financial Results (Q2 FY2007)|
Wed, Nov 8, 2006, 4:00 pm
Conference Call Notes (Note: This note is subject to errors. Check SEC filing for accurate information. Ram)
Akridge - Summary remarks
Tom Mezgar - Q2 FY2007 Financial results
Akridge - Recent business activity (Marketing and Sales)
Q & A
Akridge: Generated a record revenue in Q2 2007. Financial performance was notably improved. Continues to increase revenue, reduce manufacturing costs, cut operating expense, and strengthen operating cash flow. Has realized a positive margin from manufacturing operations - again. This improved performance over two consecutive quarters is the culmination of company-wide effort to drive raw material costs down, and driving productivity and efficiency up.
On Oct 31, 2006, Dean Bogues resigned as President of Worldwide Sales and Marketing. Akridge assumes Dean's responsibility. He has created three regional sales manager positions for USA. Have hired two experienced sales and marketing people. They along with one current salesperson will fill these three sales manager positions. The new hires are battery veterans that have worked with him (Akridge) and know each other previously. Their battery knowledge will serve VLNC well.
Went to London in August to discuss the current biz plan and new opportunities. Europe will continue to be handled by their seasoned battery representatives.
Just returned after three weeks in China. Dr. ChunTai Guo, President of Asia Pacific will assume additional marketing and sales responsibilities for China and Asia Pacific with the existing sales force in that region. Both worked with vendors and sales groups in China for three weeks. They are exploring opportunities to increase VLNC presence in China and Asia Pacific - the very active regions of the world. Spent a significant time at their factory in Suzhou, China. The factory has excellent staff, professionally organized and managed. The powder production is operating smoothly. The quality and output are first-rate. The staff will continue to focus on cost control, quality processes and products, improved productivity and higher revenue, while advancing the company toward profitability.
Tom Mezger: For the Q2 FY2007 VLNC reports a record revenue of 6.4 million vs. 5.5 million in Q2 FY2006, a 15.5% increase for the Q2 YoY. Large format systems represented 69% of the total revenue for the Q2 FY2007, up 63% from Q2 FY2006. As planned large format revenue continued to increase. Gross margin for Q2 FY2007 was a positive $1.1 million or 16.9% of sales compared to -$1.8 million or -33.1% for Q2 FY2006.
The company has realized significant cost reductions in its China Operations from lower raw material costs, lower transportation costs, improved yields and scrap reductions, and many production process improvements. Operating expenses for Q2 FY2007 were $4.2 million compared to $4.9 million for Q2 FY2006, a decline of 13.4% QoQ. Excluding $442,000 of share-based capitalization expense under a new accounting rule, operating expenses declined 22.4% over Q2 FY2006. These savings were the result of VLNC cost reduction programs for the last 12 months. For the Q2 FY2007, the company reported a net loss available to common stockholders of $4.8 million, or $0.05 per basic and diluted share compared to a net loss of $8.1 million, or $0.09 per basic and diluted share in the second quarter of fiscal 2006, This represents 40.8% improvement over Q2 FY2006.
For the 6 months FY2007, revenues were $9.5 million vs. $8.9 million for the same period FY2006. This represents a 7% increase in revenue. Gross margin for the six months of FY2007 were a positive $1.1 million or 11.5% of revenue compared to a negative $3.7 million or -42% for the six months in FY2006. Operating expenses for the first six months of FY2007 were $8.4 million vs. $7.2 million for the same period in FY2006. This represents a 17.7% decrease. Excluding the $621,000 gain on the sale of property, plant, and equipment reported in FY2006, and $706,000 reported as share based capitalization expense for FY2007, operating expense declined by $3.1 million or 28.9%. Net loss available to common stockholders for the first six months in FY2007 were -$10.4 million or 11 cents per basic and diluted share compared to -$16.3 million or 18 cents per basic and diluted share for the same period of FY2006. This represents 35.8% improvement YoY.
The company continues to require funding from outside sources. On August 17, 2006, West Coast Venture Capital, an affiliate of Chairman Carl Berg, purchased three 535,000 shares of common stock for $1 million. On August 3, 2006, West Coast Venture Capital purchased 1.3 million common shares for $2 million. In July 2006, the company issued convertible promissory notes in the aggregate principal amount of $2 million and $1 million to Berg and Berg. These notes with accrued interest were converted into 1.9 million shares of common stock on July 25, 2006. In June 2006, the company issued convertible promissory note in the aggregate principal amount of $2 million to Berg and Berg. The note and the accrued interest were converted into 1.2 million common shares on July 25, 2006. For the stock issuance through the Cantor and Fitzgerald controlled equity offering, from April 21, 2006, through November 3, 2006, the company raised appx. $4.2 million on the sale of 2.8 million shares of common stock. The revenue forecast for the thrid quarter FY2007 will be in the range of $4-6 million. In conclusion, the financial performance in the second quarter FY2007, has been realized in every part of the company both in USA and China.
Akridge: (Business Update)
Small format business - Orders for NCharge I systems increased 85.5% QoQ and declined 21.2% YoY due to the UL re-certification in Q1 FY2007. As you are aware, Sony has recently recalled millions of notebook battery packs. VLNC realized an increase in their sales due to the recall. Their products are not direct replacements for the notebook or cellular applications. However, VLNC is using the recent recall to emphasize alternate technologies with a better safety profile. Personally spoke to many industrial analysts and technical reporters regarding VLNC products and the need for safer and high performance battery systems. They have been getting some excellent coverage in the press. Their message is being heard. The lithium-cobalt oxide technology and its variations have been accepted as the standard for portable consumer electronics. Small format lithium-cobalt oxide battery packs are strongly entrenched in the portable power applications. Replacement of this technology is not going to occur immediately. VLNC will however continue to concentrate on markets and trade channels where the safety characteristics offer a clear advantage. Research is on going throughout the industry for the replacement technology for the lithium-metal oxide. Battery technology improvement is a slow process because of the technologically intense complex issues involved in developing the battery chemistry. Market changes slowly from legacy technology to new technology. VLNC is continuing the development of Saphion II technology. This represents the next uptick in the energy density for VLNC over the Saphion I technology. They have been working in a difficult technical area and will continue to develop processes for Sapion II. It will take time before it is ready for production. Prototype cell manufacturing will begin before this calendar year end. Remember that a new battery technology is difficult and requires substantial effort and skill to properly bring to market. VLNC will continue to develop Saphion II technology as rapidly as possible. We have and will continue to be in discussions with key players in the market that will benefit from Saphion I and II technologies. Saphion II cell samples should be available for evaluation and testing in Q3 FY2007.
Their large format business continues to drive revenue. For example, Swiss post office which is the national postal company of Switzerland, recently chose Oxygen's electric scooters powered by VLNC Saphion I technology for a more efficient and environment-friendly mail-delivery fleet. Please recall VLNC began deploying their batteries with Oxygen this summer with the national postal company of Belgium, La Poste. They believe VLNC will realize a greater acceptance of this large format technology as the need for innovative mobility solutions that reduce overall pollution continue to grow.
On October 23, 2006, they announced Enova Systems, a leading supplier of efficient, environmentally friendly electric hybrid power vehicles, ordered several UCharge XP power systems. Enova Systems, in collaboration with IC Corporation, the nation's largest school bus manufacturer, the nation's largest school bus manufacturer, recently won a bid with Advanced Energy to provide up to 21 hybrid school buses to 11 states. This project provides operational benefits to school districts while also providing reduced emissions desired by the US Environmental Protection Agency and a valuable return on investment to school boards. The hybrid school buses are expected to attain a 100% increase in fuel efficiency which becomes even more essential with rising fuel costs. VLNC Saphion phosphate batteries are selected over other batteries for their inherent safety profile which demonstrates an awareness of the safety limitations of traditional lithium ion chemistries.
Additionally VLNC recently announced a partnership with a plug-in hybrid conversion company, EnergyCS, to deliver a fuel-efficient concept car for evaluation by the Sacramento Municipal Utility District, SMUD. The California-based electric company is testing VLNC UCharge battery powered plug-in vehicle to determine its fuel economy and the fleet adaptability. SMUD recently completed its first 1000 miles of testing and will continue to measure the vehicle performance over the next 2 to 3 years. Data from the first 1000 miles and additional testing from last summer will be presented along with other early adapted fleet data this fall. SMUD's pre-commercial plug-in hybrid demonstrator is based on a 2005 Toyota Prius outfitted with VLNC's Saphion I based rechargeable batteries and custom electronics designed by EnegyCS to achieve increased efficiency and expand operation in all-electric or zero-emission operating mode. VLNC is re-evaluating the telecommunications, backup power, and the power tools markets. They may not be successful in all of those markets but they will look and evaluate more opportunities for their technology. Their experienced sales team will continue to drive top line revenue by seeking new business opportunities for Saphion I technology and look for future applications for Saphion II technology. Opportunities for VLNC also exist in applications that are not large format. They'll look to large format as a replacement for metal hydride and lead acid batteries and to smaller, higher margin applications where battery safety is a consideration or paramount. They are encouraged by the momentum and interest they are experiencing in the target markets and expect new markets to play a role in the coming quarters. There is a lot of work ahead of them. They are pleased with the progress they have made. Last week VLNC's Q3 is in line with Q2. They'll remain focused on new businesses bringing innovative products to the market. That concludes the update.
Q1a: The company seems to be turning around financially. How you were able to achieve 17% margin? Is there room for further margin improvement, and if yes, where would it come from?
Ans: Much of the improvement in the gross margin was due to the hard work by their staff in China, specifically, a reduction in just about all phases of their manufacturing cost - lower raw material cost, reduced scrap, lower shipping cost, you name it... lower cost across the board. They are not finished with cost reductions. They realize that the key to their success is to raise the revenue and drive down manufacturing costs.
Q1b: Powder production and powder quality in China seem to be satisfactory. How is the Saphion II production coming along viz. ability to increase the energy density of the current powder or future powder materials - ie., vanadium? How close are you?
Ans: The Saphion I which is the iron phosphate (VLNC proprietary technology) has some room to grow in energy density mainly through improvements in the assembling process, binding technology, etc. that are common areas for improvement in the industry. After you establish a large scale, commercial production, you start tweaking various manufacturing steps. They are doing that and look to where they can gain additional capacity. Saphion I to Saphion II, they will employ similar manufacturing approach and try to tweak the processes. Saphion II has an uptick in energy because the voltage is 3.6 vs. 3.2 for the Saphion I material. In addition to the voltage advantage, they can squeeze out additional capacity (over and above the voltage advantage for Saphion II) using proper cell design and binding, etc. There is still a slight improvement in energy density is possible with Saphion I chemistry. Saphion II has an uptick in energy.
Q1c: You have achieved a significant margin. 17% was never seen in history. What will be holding the company back from achieving a revenue of $20-40 million per qtr? Is it just sales or something else?
Ans: Sales drives the majority of what you are asking. They also need to look to expand and leverage their technology possibly on the large format. They are going to take look at that. The revenue and the sales will be drivers here. They want to make sure the quality is high and provide excellent customer service.
Q1d: You have hired a new Engineering Manager. How is he working out for you?
Ans: He is an excellent individual, with a lot of experience in the electronics area.
Q1e: Tom, regarding the 17% margin. With continuing work, how much higher you can drive these margins?
Ans: They need to turn around the net operating loss into a positive area - increasing revenues, holding the costs down, etc.
Q2a: With respect to the UL re-certification and its impact on revenue last quarter. Can you quantify the order amount you could not fill last quarter and how these additional sales helped with the margin in this quarter? Also eloborate on competition? Who you are seeing out there? There has been discussion about A123 systems. Have you come across them in any potential orders? Also about Altair that got some business from Phoenix Motor Cars with which VLNC has been working in the past?
Ans: Approximately $1 million in the revenue slip could be contributed to the UL re-certification delay in Q1 and the revenue was recovered in Q2. They do not release gross margin data by individual product lines.
Was it a positive influence or inline?
Ans: It had some influence, but it was not an overriding factor in the gross margin.
Review the competitor environment? There has been discussion about A123. Altair got some business from Phoenix Motor Cars. Review?
Ans: Jim As he said earlier on other calls, VLNC does not worry too much about the competition. VLNC needs to focus on technology and their strengths in the market place and see if they have the right products, customers, and service the market well. Competition serves to increase the market. The fact that others are entering validates VLNC's business model: (1) they do have the right system and (2) they do have the right technology. Besides validation, if you want to drive a large global market you must have more than one supplier because you can not drive it as a sole source supplier. Competitors help them validating their technology and opening up other channels. They are happy to compete with them. They are fully capable of competing in their market space.
Q3a: Any patent infringement by the A123 battery?
Ans: Their legal department has to answer that question. If you submit that in writing, they will answer it.
Q3b: How about the suit by the University of Texas? Something left over from last year? How is it coming along?
Ans: All legal issues have to be answered by their legal department. Submit questions in writing. Their legal department will answer them.
Q3c: How good is the reliability of your battery for use in electtric cars? How many charges you can get? What kind of life you can get out of it?
Ans: VLNC battery meets the requirements for the USABC for the most part. These requirements are published items for cycle life and re-chargeability, and so forth. As you know, the Saphion I technology has extremely good cycle life, over 1000 cycles at full depth of discharge. If you are in a hybrid mode, you do not discharge the battery fully but rather 20-30% discharged. In that case you get thousands of cycles. If you are in a full EV (electric vehicle) mode where you are drawing down the battery to, say, 60-80%, they have enough cycle life to match the requirements of the system which is over 1000 cycles and up to 5000 cycles. As you back down on the depth of discharge, the cycle life of the system increases dramatically. It is not a linear function, it is more an exponential function. So the Saphion I technology is quite robust. They do believe they have enough cycle life and performance characteristics for that system to be very competitive in these market places.
Q3d: Nickel metal hydride. Nickel price is going up. Also it is quite heavier than your battery. Are you working to replace the nickel metal hydride batteries?
Ans: You bet! They have discussed this in the past. Replacing nickel metal hydride is no brainer, especially since the metal prices are increasing. It is getting easier and easier. They are pushing into that area, aggressively. Deep discharge lead acid is also an immediate replacement target market. Low care of their cell or no care, long cycle life, light weight, higher energy density makes replacement over the life time a very good value proposition to customers.
Q3e: It is not happening yet though? What is keeping your technology back from being able to be introduced and to replace these batteries?
Ans: They are. The clients they are getting have evaluated nickel metal hydride battery and lead acid. When they do their numbers based on these batteries, they do not get the desired performance in their vehicles or their devices to meet the market requirements. They come to VLNC or they go to them and when they try VLNC battery, they get an immediate sale. The accounts they get, press releases that they release are a result of people realizing that VLNC technology is a good value proposition and that they have evaluated nickel metal hydride and lead acid batteries for their applications and they abandoned them. That is the driver that increases sales.
Q3f: My take on why VLNC is not selling well (1) you are dealing with China - an iffy situation if US relations sour, (2) VLNC lacking the total investment needed to commence a large scale production of millions and millions of cells, (I don't see VLNC close to being set up for such a large scale production). How reliable VLNC will be to supply car manufacturers on a large scale?
Ans: Volume of production is high for the automotive market. Go back a little bit in the battery technology area. The infrastructure for lithium-cobalt battery is directly usable for lithium-phosphate Saphion I technology. The infrastructure and the investment to make billions of cells per year already exist. VLNC is using that and can plug into that. The investment is there. There is additional investment of $100's of millions in infrastructure for the technology of lithium-cobalt and phosphate. Vendors are working with VLNC on that to expand their production capability to manufacture phosphate batteries. All of the billions of infrastructure dollars invested for the lithium-cobalt battery system are usable for the VLNC Saphion I phosphate battery production. They are in a good position because VLNC does not have to re-capitalize the infrastructure that already exist. That is one of the strengths of VLNC proprietary technology. We do need a large production, but the infrastructure is there to do it.
As he (Jim) traveled around China, he is not seeing the exactly same thing that "the questioner" is seeing any governmental policies preventing VLNC from expanding in the market. On the contrary, he saw a lot of opportunities in USA, China and Europe. As he said earlier, legacy technology takes a while to replace. They are gaining inroads. The gains are accelerating in these areas.
Q3g: Status of cost reduction per whr? Lower cost will help the automotive use.
Ans: The automobile market is heavily price-driven. A lot of the gains and battery pricing (cost per whr) and so forth are driven by production volume. We have talked about that in the past. As they engage in higher and higher levels of EV, HEV, and other large format sales, and the volume of production goes up and they engage greater and greater infrastructure usage in China, their cost structure will go down. That is a common and very well-known element of the battery industry. The higher volume the better cost structure you will have. They are moving in the right direction with cost reductions in the company as Tom has reviewed. They are working with their vendors in China to control their costs, gain more efficiency of production, better conversion, lower scrap, and so forth. They are approaching the right price point to fully engage EV and HEV markets. They will get there.
Q3h: GE recently announced that they are going to work with A123 systems. What happened? Did GE approach VLNC? GE is going to put a lot of money into A123.
Ans: Missed that announcement. Jim has to go back and take a look at that. Not sure what the application is.
Q4a: How do you see your business model in the future - continue manufacturing of batteries or look at licensing for royalty income or a combination of both?
Ans: As they grow as a company with customers in new application areas, They have to continually re-evaluate what they have to do both with their assets and any investor funding that they get, to make sure that they deploy it properly. It is a combination of both (licensing + manufacturing). Take a look at what they are doing currently, adding to manufacturing some of their products (from powder all the way to cells, if it makes sense cost-wise). Discuss the business plan with people everyday. As they change, they will change the model according to the opportunity presented in the future.
Q4b: Are you pursuing a licensing strategy in parallel with the manufacturing strategy?
Ans: Subject to on-going discussion along with all of the other things that they are doing at this time. Licensing has not been ruled out as a strategy.
Q4c: With respect to Sony's battery recall, does it make sense to begin licensing negotiations for NCharge instead of talking about increasing NCharge production by VLNC?
Ans: It certainly make sense to discuss licensing.
Q5a: Regarding the laptop battery space, you characterized your current technology as an alternative vs. replacement. Why it is not a direct replacement at this time? What will it take to get a viable replacement battery? Why your technology would be superior to other technologies available in the market?
Ans: The infrastructure for the cobalt technology is centered around the voltage profile of lithium-cobalt which is 3.6 or 3.7 volts depending upon whether there is a soft or hard carbon for the anode. The phosphate Saphion I technology operates at 3.2 volts. That is not a direct voltage-to-voltage match. There is an infrastructure and the number of cells issue for direct replacement. The other item is that the density of cobalt oxide is higher than the density of Saphion I, so the electrode capacity per square cm is not as high. So Saphion I batteries do not have the high energy density. Therefore the run time of a computer if you just make a battery pack for 12V out of Saphion I vs. cobalt, it is not going to run the machine as long in the same space. That is a simple calculation to make for the design of batteries. They have those two issues that they push against very entrenched notebook infrastructure. The run time for their small, portable power devices are not going to be that high. In their chosen market area of metal hydride and lead acid batteries, VLNC Saphion I has much higher energy density and offer much higher value proposition as a replacement of these legacy technologies. Those legacy technologies represent a very large market for them. They are targeting where they have particular strength and substantial market advantage - in the large format space.
Q5b: You think that the upgrade of Saphion I to II will give you the voltage boost required for the laptop replacement market?
Ans: They have more work to do on Saphion II. The higher voltage of Saphion II will move closer to the current cobalt battery but it is not a match. However Saphion II will take them closer within a striking distance with better safety characteristics.
Q5c: So you will let someone else move first into the laptop replacement market while you stay with the large format market?
Ans: They are going to retain their large format advantage. They are going to push into portable power market as they see Saphion I having an advantage. They have some traction and reputation in the large format market. Large format is the correct business model for them. At the same time they are starting to look for new opportunities for the small format batteries in other areas and expand in these areas.
Q6a: Guidance on lower revenue for the next quarter? Besides the additional sales in this quarter due to the UL re-certification, do you expect other issues impacting revenues - seasonality of Segway sales? Cash flow?
Ans: UL re-certification issue did push up some revenue from Q1 to Q2. Their guidance is pretty much in line. May have a slight up tick in inventory. Improvement in cash flow. Last year they needed $18 million/qtr. This qtr required only $12 million for operation.
Q6b: Are you seeing new business as a result of Sony's battery recall and from where?
Ans: It is not a huge amount of increases. NCharge is an extra runtime battery. Relative to the safety issues brought to light with the recall, they have received a number of additional orders for NCharge. Other customers have approached them on that product. They are getting it from that direction, not as a direct replacement but a desire for their long runtime battery. They are seeing an up tick. The trend is positive. The recall resulted in more customer calls interested in NCharge and UCharge batteries because of their safety, reliability, and price.
Q6c: Segway. Sales will be the same as last quarter? How you are doing with their product sale ?
Ans: They do not talk about individual customers. But Segway has been an extremely good customer. The sales reflect the level of engagement they have with them. They are doing well.
Q6d: Seasonality impact on sale?
Ans: There is seasonality all through the battery industry regardless of customers. Expect seasonality to impact all across their product lines.
Q7: Saphion II. Why is it taking more time for that? When the product will be released for sale?
Ans: It is hard to make that kind of forecast. As they work through the processes, there are things that they learn as they scale up. As they continue the scale up to many tons of quantities, subtle things in the processes can shift on you. They have to work through all of those items and come to a stable quality base. They target mid 2007 or latter part of 2007 for the Saphion II product to hit the market. In 2007 they hope to sell Saphion II cell packs. Currently they are developing the processes and getting the equipment ready. They have been talking about this a long time. He mentioned it because people have interest and have asked questions in many conference calls. Developing the raw material for the battery is a complex and a very difficult process. They want to be cautious how rapidly they can scale up because they can end up burning a lot of cash if mistakes are made. As a conservative, Jim wants to take one step at a time. He expects Saphion II around mid 2007 but probably by the year end.
Q8: Manufacturing batteries from beginning to end. If the market place does not mind exploding batteries, is there any way you can alter the energy density and give them some exploding battery?
Ans: They do not want to do that... All of the battery industry is extremely cautious on safety. There is a lot of chemistry. They put a lot of energy in a small package... Remember that children play with batteries also. You need a "fail safe", "containment", be sufficiently strong for the intended use, and have characteristics that they fail safe under abuse, etc. Sony's recall is disturbing to everyone in the industry. Switching to VLNC, you have an idea there. He will look into what they can introduce, what they introduce in the market place has good space, and they have ways to sell it and that it is safe so that they don't have issues with the consuming public with the use of products and the devices.
Q9a: A couple of quarters ago I heard that a very large number of prospective customers, in the 1500 range. How many prospective customers have sampled the batteries?
Ans: He does not have the actual number but there are scores of them. The process is what market area they are targeting and who has products in those markets. Then they visit them or they get calls. They take a look at the application. They get a specification from the customer and match it against specifications of VLNC batteries to see if there is a match. If there is a match, they agree on a test evaluation period with the battery in that device and see everything matches up. This process is going on with many, many, many customers. As all of those evaluation periods end, a large percentage of those evaluators become customers. Can not tell you how many they are going to get. They have a lot of irons in the fire, out there now. They are working to develop more, looking for other customers and work with additional market space. Constantly looking for new customers and testing in new markets. A large percentage of them do convert to Saphion technology. But it is a slow conversion because it is hard to convince the legacy technology users.
Q9b: Is it fair to say that VLNC had inquiries from at least 1000 sources? Most of them do not turn into battery sales or there are only about 100 serious customers for VLNC batteries?
Ans: They rate customer inquires for the most business potential. They look at those customers with the most business potential and focus on them so that they do not spread thin.
Q9c: If you were to receive a large order in a year or two from a couple of different customers (say $20 million per customer or multiple orders), would you have the production capability to supply the cells on that scale - one or two orders of that size for the initial period of production or would you have to got to the infrastructure that you have commented on earlier to get the job done? Can you handle a couple of orders without going to the infrastructure? Do you have the capacity to handle those orders? If you do not have, how long would it take another company to get up to speed to produce the Saphion?
Ans: Are you talking about raw cells or packs?
Any way you want to put it. Do you have the capacity right now, to produce large format batteries for a couple of large orders in your plant as opposed to going outside?
Ans: They can expand. Their plant is not totally utilized right now. They are quite fast on their feet. If they were to get such an order, say $20 or 50 million over a period of time (2 or 3 years), they can expand their current plant to meet that demand.
Q9d: If you were to license your technology, how long would it take for the other company (licensee) to be up to speed after you show them the process to the point of producing cells?
Ans: Getting a new technology into an existing plant, training the work force, getting the products in the production line, debugging, etc. takes 9-12 months.
Valence Technology Reports Financial Results for the Second Quarter of Fiscal 2007
Wednesday November 8, 2:21 pm ET
AUSTIN, Texas--(BUSINESS WIRE)--Valence Technology Inc. (NASDAQ:VLNC - News), providers of Saphion® energy storage systems, the industry's first commercially available, safe, large-format lithium-ion phosphate rechargeable batteries, today reported results for the three-month period ending September 30, 2006.
Second Quarter Highlights:
Achieved record quarterly revenue of $6.4 million.
Reported a record 16.9 percent gross margin.
Reduced operating expenses by 13.4 compared to second quarter of fiscal 2006.
Decreased operating cash flow by 32.8 percent year-over-year.
Reduced net loss available to common stockholders by 40.8 percent compared to second quarter of fiscal 2006.
"I am pleased with our cost reduction programs and enhanced manufacturing processes, as well as the momentum we are experiencing for our large-format Saphion® batteries," said Dr. James R. Akridge, president and chief executive officer of Valence Technology Inc. "We will remain focused on cost control, quality processes and products, improved productivity and higher revenue, while diligently working to bring the Company to profitability."
Valence Technology reported record revenue for the second quarter of fiscal year 2007 of $6.4 million, an increase of 15.5 percent over the second quarter of fiscal 2006, and an increase of 101.3 percent over first quarter of fiscal 2007. The substantial increase in revenue is a result of the small-format N-Charge system orders that were scheduled to ship in the first quarter but were postponed due to the Company's UL recertification process. Large-format systems represented 69.0 percent of total revenue for the second quarter.
The company reported a net loss available to common stockholders of $4.8 million, or $0.05 per basic and diluted share. This compares to a net loss available to common stockholders of $8.1 million, or $0.09 per basic and diluted share in the second quarter of fiscal 2006, and a net loss of $5.7 million, or $0.06 per basic and diluted share in the first quarter of fiscal 2007.