Maxwell Technologies Inc. has reported operational and financial results for the three months ended June 30, 2016. Total revenues for the second quarter of 2016 were $34.1 million, compared with $35.2 million for the first quarter of 2016 and $37.8 million for the prior year quarter. Net income for the second quarter of 2016 was $2.2 million, compared with a net loss of $6.8 million for the first quarter of 2016 and a net loss of $9.4 million for the prior year quarter. The company reported $(0.7) million of adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for the second quarter of 2016, compared with $(1.3) million for the first quarter of 2016 and $0.7 million for the prior year quarter. Non-GAAP net loss for the second quarter of 2016 was $4.0 million, compared with $4.3 million for the first quarter of 2016 and $3.2 million for the prior year quarter.
"Second quarter financial results came in about where we expected despite a lack of clarity around changes to China's bus subsidy policy. Our third quarter outlook reflects continued weakness from the China bus market and a new challenge presented by a sudden slowdown in wind turbine deployments in China as we believe local governments are slowing down new installations in order to address local economic issues," says Dr. Franz Fink, Maxwell's President and Chief Executive Officer. "The proactive steps we took last year to restructure the company will allow us to withstand these more difficult near-term challenges. As we look at our growth prospects, we are making good progress executing our strategy of diversifying our business and we are establishing important partnerships that will allow us to transition our business to a very large, future market opportunity."
Discussion of Financial and Operational Results for the Quarter
Revenue and Gross Margin
Total revenue for the second quarter of 2016 was $34.1 million, compared with $35.2 million for the first quarter of 2016, primarily due to a decrease in ultracapacitor revenue and the sale of the microelectronics product line.
- Ultracapacitor revenue for the second quarter of 2016 was $21.2 million, compared with $23.5 million for the first quarter of 2016, primarily driven by an expected decline in the China hybrid bus market.
- High-voltage revenue was $11.8 million for the second quarter of 2016, compared with $8.2 million for the first quarter of 2016, primarily driven by a strong market in China following the release of China's new 5-year plan at the end of the first quarter.
- Microelectronic revenue for the second quarter of 2016 was $1.1 million, compared with $3.5 million for the first quarter of 2016. The microelectronics product line was sold in April 2016 and revenue for the second quarter of 2016 reflects the 27 day period during which it was owned by Maxwell, compared with a full quarter of results in the first quarter of 2016.
Gross margin for the second quarter of 2016 was 29.2% compared with 27.4% in the first quarter of 2016, primarily reflecting an increase in high-voltage revenue.
Non-GAAP gross margin for the second quarter of 2016 was 30.0% compared with 28.4% in the first quarter of 2016.
Net Income (Loss), Adjusted EBITDA, Operating Expense & Operating Loss
- Net income for the second quarter of 2016 was $2.2 million, or $0.07 per share, compared with a net loss of $6.8 million, or $(0.22) per share, for the first quarter of 2016.
- Non-GAAP net loss for the second quarter of 2016 was $4.0 million compared with a non-GAAP net loss of $4.3 million for the first quarter of 2016.
- Adjusted EBITDA for the second quarter of 2016 was $(0.7) million, compared with $(1.3) million for the first quarter of 2016. The quarter-over-quarter improvement was primarily driven by margin improvements from increased high-voltage product sales and reduced operating expenses.
- Operating expense for the second quarter of 2016 was $13.8 million, compared with $15.9 million for the first quarter of 2016, primarily driven by the release of a tax liability during the quarter, the sale of the microelectronics product line and several non-recurring items that resulted in higher first quarter operating expense.
- Non-GAAP operating expense for the second quarter of 2016 was $13.4 million compared with $13.7 million for the first quarter of 2016 and excludes stock-based compensation, legal expenses associated with SEC and FCPA matters, the release of a tax liability, and other non-standard charges not reflective of the on-going costs to run the business.
- Operating loss for the second quarter of 2016 was $3.8 million, compared with an operating loss of $6.2 million for the first quarter of 2016. The quarter-over-quarter improvement was primarily driven by higher gross margins and lower operating expenses.
- Non-GAAP operating loss for the second quarter of 2016 was $3.1 million compared with a non-GAAP operating loss of $3.7 million for the first quarter of 2016.
Capital Expenditures
Capital expenditures during the second quarter of 2016 were $1.4 million, compared with $2.2 million for the first quarter of 2016. Capital expenditures of $1.4 million in the second quarter of 2016 primarily related to the manufacturing consolidation and capital investments to support new technology and research & development activities.
Business Outlook
- Total revenue for the third quarter of 2016 is expected to be in the range of $24-27 million.
- Gross margin for the third quarter of 2016 is expected to be in the range of 28-31%.
- Non-GAAP gross margin for the third quarter of 2016 is expected to be in the range of 29-32%.
- GAAP operating expense for the third quarter of 2016 is expected to be in the range of $13.8-$14.2 million.
- Non-GAAP operating expense for the third quarter of 2016 is expected to be in the range of $12.5-$12.9 million.
The company has reconciled expected GAAP and Non-GAAP gross margin, operating expenses, adjusted EBITDA, net loss and net loss per share at the midpoint of expectations. However, the company is not able to estimate additional potentially excluded and reconciling amounts due to the substantial uncertainties involved. The effect of these excluded items may be significant.
Other Business & Operational Highlights
- Completed sale of microelectronics product line to Data Device Corporation for $21 million. The sale included all assets and certain liabilities related to the microelectronics product line. Thirty-seven employees transitioned from Maxwell to DDC as part of the transaction.
- Welcomed Steve Bilodeau and Jörg Buchheim to Maxwell's board of directors. The two new members bring strong backgrounds in operational and executive management as well as key company and industry experience to complement Maxwell's already experienced board.
