Maxwell Reports Third Quarter Results

While third quarter revenues were down from the previous quarter, Maxwell says it was in line with expectations due to challenging conditions in the China bus and other markets.

Maxwell Technologies, Inc. has reported operational and financial results for the 3 months ended September 30, 2016. Total revenues for the third quarter of 2016 were $25.5 million, compared with $34.1 million for the second quarter of 2016 and $45.1 million for the prior year quarter. Net loss for the third quarter of 2016 was $6.9 million, compared with net income of $2.2 million for the second quarter of 2016 and a net loss of $1.4 million for the prior year quarter. The company reported $(2.3) million of adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for the third quarter of 2016, compared with $(0.7) million for the second quarter of 2016 and $3.8 million for the prior year quarter. Non-GAAP net loss for the third quarter of 2016 was $5.6 million, compared with a non-GAAP net loss of $4.0 million for the second quarter of 2016 and non-GAAP net income of $0.2 million for the prior year quarter.

"Third quarter financial results were in line with our expectations. Although we continue to face challenging conditions in the China bus and wind markets, we have made great progress on our longer term strategic initiatives to solidify and diversify our business," says Dr. Franz Fink, Maxwell's President and Chief Executive Officer. "We remain vigilant about our cost structure as we navigate through these near-term challenges but we are prudently investing in exciting opportunities. Our investments show early promise in the auto market, where we have solidified new design wins and have growing confidence in the long-term growth opportunity."

Discussion of Financial and Operational Results for the Quarter

Revenue and Gross Margin

Total revenue for the third quarter of 2016 was $25.5 million, compared with $34.1 million for the second quarter of 2016, primarily due to a decrease in ultracapacitor revenue.

    • Ultracapacitor revenue for the third quarter of 2016 was $14.0 million, compared with $21.2 million for the second quarter of 2016, primarily driven by an expected decline in wind turbine deployments in China.
    • High-voltage revenue was $11.5 million for the third quarter of 2016, compared with $11.8 million for the second quarter of 2016.
    • The microelectronics product line was sold in the second quarter of 2016 and revenue of $1.1 million for the second quarter of 2016 reflects the 27 day period during which it was owned by Maxwell.

    Gross margin for the third quarter of 2016 was 29.9% compared with 29.2% in the second quarter of 2016.

    Non-GAAP gross margin for the third quarter of 2016 was 30.5% compared with 30.0% in the second quarter of 2016.

    Net Income (Loss), Adjusted EBITDA, Operating Expense & Operating Loss

    • Net loss for the third quarter of 2016 was $6.9 million, or $(0.21) per share, compared with net income of $2.2 million, or $0.07 per share, for the second quarter of 2016. The second quarter net income resulted primarily from a gain on the sale of the microelectronics product line.
    • Non-GAAP net loss for the third quarter of 2016 was $5.6 million compared with a non-GAAP net loss of $4.0 million for the second quarter of 2016.
    • Adjusted EBITDA for the third quarter of 2016 was $(2.3) million, compared with $(0.7) million for the second quarter of 2016. The quarter-over-quarter decrease was primarily driven by a decrease in revenue partially offset by reduced operating expenses.
    • Operating expense for the third quarter of 2016 was $13.6 million, compared with $13.8 million for the second quarter of 2016. The quarter-over-quarter decrease was primarily a result of savings from the sale of the microelectronics product line, increased funding from business partners and cost savings efforts, offset by the second quarter release of a tax liability which lowered expense in that quarter.
    • Non-GAAP operating expense for the third quarter of 2016 was $12.5 million compared with $13.4 million for the second 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 third quarter of 2016 was $5.9 million, compared with an operating loss of $3.8 million for the second quarter of 2016. The quarter-over-quarter increase in operating loss was primarily driven by a decrease in revenue partially offset by lower operating expenses.
    • Non-GAAP operating loss for the third quarter of 2016 was $4.7 million compared with a non-GAAP operating loss of $3.1 million for the second quarter of 2016.

    Capital Expenditures

    • Capital expenditures during the third quarter of 2016 were $1.1 million, compared with $1.4 million for the second quarter of 2016. Capital expenditures in the third quarter of 2016 primarily related to capital investments to support new technology and research and development activities.

    Business Outlook

    • Total revenue for the fourth quarter of 2016 is expected to be in the range of $24- $27 million.
    • Gross margin for the fourth quarter of 2016 is expected to be in the range of 26.5-29.5%.
    • Non-GAAP gross margin for the fourth quarter of 2016 is expected to be in the range of 27-30%.
    • GAAP operating expense for the fourth quarter of 2016 is expected to be in the range of $13.8-$14.2 million.
    • Non-GAAP operating expense for the fourth quarter of 2016 is expected to be in the range of $12.3-$12.7 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

    • Welcomed Olaf Müller as Senior Vice President of Global Sales. A veteran of the automotive industry with deep expertise in sales and business development, Müller is tasked with supporting Maxwell in its efforts for continued worldwide growth and demand for the company's energy storage and power delivery solutions.
    • Announced the first commercial application of lithium-ion capacitors to be used for regenerative braking energy storage in the Beijing subway system. As part of the strategic partnership with China Railway Rolling Stock Corporation (CRRC-SRI) Maxwell announced last year, the companies continue to collaborate to develop next-generation capacitive energy storage solutions for the China rail market.
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