Carmanah Technologies Corporation: Financial Results for Q2 2008
The second quarter of 2008 represented a further milestone for Carmanah as the Company completed the final phase of its strategic renewal, entering into some significant partnerships, increasing sales, further reducing expenses, improving efficiency and achieving its second profitable Adjusted EBITDA (adjusted for restructuring charge) quarter in a row.
Highlights for the Quarter
- Increased sales: quarter-over-quarter sales up approximately 13.2%, after adjusting for the late 2007 sale of the home power business
- Gross margin up: 32.5% for 2008, up from 20.1% in 2007
- Operating costs reduced: $5.0 million (excluding restructuring costs), down from $6.7 million for the same period of 2007
- Improved bottom line: Net loss of $0.4 million compared to $3.0 million for the same period of 2007
- Higher Adjusted EBITDA: Adjusted EBITDA of $0.4 million compared to $(3.9) million for the same period in 2007
- Continued positive cash flow from operations: $1.5 million, compared to $2.2 million for the same period in 2007
- Cash balance increased: $5.5 million, up from $1.5 million for the same period of 2007
Summary of Results
The second quarter of 2008 saw considerable change, as Carmanah embarked on the next phase in its restructuring with the goal of increasing its focus and returning the Company to sustained, profitable growth. According to Ted Lattimore, Carmanah CEO, these changes have laid the groundwork for a more focused and responsive organization. "Based on the findings of our Company-wide evaluation completed in the first quarter of 2008, it became clear that some significant changes were necessary to return the Company to a more profitable footing," said Lattimore. "On June 25th we implemented these changes, and now with the majority of this transition behind us, the Company is free to move ahead as a more agile and responsive business. By focusing on our core strengths, controlling costs, and increasing the scalability and efficiency of our supply chain, we're now free to focus on what we do best: delivering quality solar-powered lights and power systems. And we can do it more efficiently and effectively than ever before."
Confirming this assessment, Roland Sartorius, Carmanah CFO, commented that throughout the second quarter of 2008, the Company has maintained its positive growth trend, showing increased sales and improved earnings over the same period last year, while benefiting from lower operating costs and a healthy cash balance. "Even with the costs and strategic challenges of implementing this comprehensive restructuring, the Company has achieved its second quarterly positive Adjusted EBITDA in a row," said Sartorius. "As expected, the restructuring charge, which will be recorded over the next several quarters, is on schedule and to be recovered during the 2009 fiscal year. With increased cash, no bank debt, and continued positive cash flow, we're going into the next quarter looking stronger than ever."
Sales for the second quarter of 2008 were $15.7 million, $0.3 million higher than the same period in 2007. Solar LED sales provided strong growth in the quarter, with our solar marine, aviation and obstruction beacons leading the way. This growth was offset by lower sales in Solar Power Systems, primarily due to the fact that a significant grid tie project in Prince Edward Island was completed in the second quarter of 2007. There were no such comparable large scale projects in the second quarter of 2008. A summary of revenues from each of the Strategic and Tactical business segments is shown below:
Summary of EBITDA and Net Income
- Adjusted EBITDA for Q2 2008 was $0.4 million, compared to $(3.9) million for the same period in 2007.
- Adjusted EBITDA year to date was $1.1 million, compared with $(4.2) million for the same period in 2007.
- Net loss for Q2 2008 was $0.4 million compared to $3.0 million for the same period of 2007.
- Net loss year to date was $0.3 million compared to $3.5 million for the same
- period in 2007.
The Company uses certain non-GAAP measures to assist in assessing its financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. One such non-GAAP measure used for assessing financial performance is net income (loss) before interest, income taxes, amortization, and restructuring charge ("Adjusted EBITDA").
Progress During the Quarter (including subsequent events)
With a 2008 second quarter Adjusted EBITDA of $0.4 million compared to loss of $(3.9) million for the same period of 2007, the second quarter of 2008 continues the momentum initiated in the first quarter of 2008. During this quarter, Carmanah announced a decision based on first-quarter results and market trends in both of strategic and tactical segments to further refine and accelerate the Company's focus on its strategic direction. As a result, four major restructuring initiatives were announced, effective June 25th, 2008:
- Outsourcing of manufacturing: To help maximize the efficiency of its supply chain while providing a flexible infrastructure for scalable growth, the Company partnered with electronics manufacturing services provider Flextronics International to outsource production of its solar technology products to Flextronics' manufacturing facilities around the world.
- Exiting of certain tactical distribution businesses: Faced with increased commoditization and pricing pressures on its solar component and solar-powered bus shelter distribution businesses, Carmanah consolidated its operations by initiating the closure of its US solar component distribution business, Santa Cruz, California warehouse, and Calgary, Alberta office and warehouse.
- Moving to a more efficient regional geographic sales model: To increase the efficiency of its sales organization and improve customer service, Carmanah restructured its global sales force from a vertical-specific format to a regional geographic model. The more versatile regional sales model is expected to create new opportunities for sales representatives and customers by making all Carmanah products accessible to all complementary markets.
- Simplifying and reducing the cost of its organizational structure: To increase operational efficiency and effectiveness while further reducing operating costs, Carmanah streamlined its organizational structure and reduced staff across various departments including operations, marketing, and general and administrative departments.
Other highlights during this quarter included:
- Carmanah announced the appointment of Grant Byers and Rob Cruickshank to the Board of Directors, with Carmanah founder Dr. David Green accepting the role of Chairman of the Board, in place of Art Aylesworth (June 19)
- Carmanah provided solar-powered airfield lights for a United States Air Force installation in the Middle East. The $463,000 order will upgrade the facility's five-year-old system of A702 solar-powered airfield lights with wireless, high-visibility A704-5 GEN II runway lights. (June 13)
- Carmanah received an additional purchase order of $1.1 million from Trueform Engineering Ltd. for London Bus Stop systems as part of an ongoing commitment to equip Transport for London transit routes with solar-powered lighting and communications technology. (May 29)
- Innovation Award: In a competitive category filled with more than 20 outdoor lighting products from industry leaders such as GE, Cooper Lighting and Philips, Carmanah's EverGEN™ solar -powered LED area light received the "Judges' Citation" Innovation Award at LIGHTFAIR International 2008 -- North America's premier annual lighting industry event for architectural and commercial lighting products and services. (May 28)
- Carmanah and Beta Lighting partnered to deliver a BetaLED™ solar-powered lighting solution. BetaLED developed an LED lighting fixture designed specifically for Carmanah's EverGEN™ solar engine to make Carmanah's award-winning EverGEN solar area light even better. (May 20)
- Carmanah formerly announced a new $10.0 million, three-year committed operating facility arrangement with BMO Financial Group that will offer greater convenience, flexibility and stability for the long term. (May 13)
- Carmanah received an order to supply solar-powered portable airfield lights for Bariven S.A. in Venezuela, a subsidiary of PDVSA. The $800,000 order will provide the tools to equip Venezuela's Carúpano Airport with a stand-alone system of solar-powered LED aviation lights. (April 02)
Complete set of Financial Statements and Management Discussion & Analysis
A complete set of the second quarter 2008 Financial Statements and Management's Discussion & Analysis are available on Carmanah's corporate website. To view full financials, visit:
Conference Call Details
To discuss the second quarter 2008 results, Carmanah has scheduled a conference call for 2:00 pm PT (5:00 pm ET) on Wednesday August 13, 2008. To access this conference call by telephone, dial 1.888.882.9090 (Canada and US) or +1.403.770.0861 (international) approximately five to ten minutes before start time. When prompted for the participant code, enter 2510558.
A recording of the conference will also be available on Carmanah's corporate website within three business days. For more information, visit www.carmanah.com.
About Carmanah Technologies Corporation
As one of most trusted names in solar technology, Carmanah has earned a reputation for delivering strong and effective products for industrial applications worldwide. Industry proven to perform reliably in some of the world's harshest environments, Carmanah's LED lights and power systems provide a durable, dependable and cost effective energy alternative. Carmanah is a publicly traded company, with common shares listed on the Toronto Stock Exchange under the symbol "CMH" and on the Berlin and Frankfurt Stock Exchanges under the symbol "QCX". For more information, visit www.carmanah.com.
Carmanah Technologies Corporation
Roland Sartorius, Chief Financial Officer
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