Eguana Technologies Inc. ("
Eguana" or the
"
Company") (TSX- V: EGT, OTCQB: EGTYF) today
announced results for its second quarter ended June 30, 2023.
“Utilities have begun rolling out virtual power
plant (“VPP”) pilots across the US and Australia, including
attractive rebate and bill credit programs for consumers, while at
the same time opening up recurring revenue opportunities for energy
storage fleet aggregators, like the Eguana Cloud platform,”
commented Eguana CEO Justin Holland. “We believe this industry
engagement will drive technology mass adoption and put a focus on
energy storage product platforms that have the control and accuracy
to respond to utility signals, as we transition to a distributed
power grid.”
Utility companies will promote energy storage
solutions, where the Eguana energy storage platform has
demonstrated key advantages with its advanced power control
platform specific to accuracy and measurement, to remove renewable
generation intermittency, to enhance grid reliability, and to build
out required infrastructure, supporting massive projections for
electric vehicle and growing energy demand. The International
Energy Association (IEA) report estimates global electricity demand
will rise by 20 to 30 percent by 20301. Eguana fits well between
the utility companies and the consumer to ensure seamless, cost
efficient and renewable energy solutions for the distributed power
grid.
Mr. Holland added, “Increased inventory levels
resulting from distributor investment throughout the second half of
2022, coupled with sequential interest rate increases impacting
consumer access to capital, slowed consumer spending through the
first half of the year. However, we are now seeing increasing
shipments from our partners, a trend we expect to continue through
the second half of 2023 and into 2024, where VPP adoption is
expected to be a key growth driver.”
Business Highlights
- Modernized and expanded the Eguana Cloud platform, developed
fleet control API, and added features to the onsite energy
management system used in the Evolve energy storage product line to
enhance VPP capabilities.
- Advanced Virtual Peaker partnership, a cloud-based DERMS
(distributed energy resource management system) company that
empowers modern utilities, aiming to be the most responsive
distributed energy platform in the market. The partnership provides
utilities and consumers with dynamic options to leverage batteries
to benefit the power grid, while reducing energy costs and
providing recurring revenue opportunities for the Company.
- Completed utility integration, testing and acceptance into
Portland General Electric’s (PGE) Smart Battery program, and now
listed as a preferred supplier on PGE’s website. Progressive
utility companies are expected to accelerate and drive mass
adoption through VPP programs, adding controlled renewables to
strengthen grid reliability, to add electricity supply and to
transition to a distributed energy system.
- Began software integration with additional DERMS providers, in
various markets, to pursue VPP opportunities, spanning the US and
Canadian markets.
- Completed the UL 1741 SB certification of redesigned 5kW PCS,
to provide simplified whole home installations for installer
partners.
- Simplified energy storage installation processes with the
completion of two new Eguana hubs, 100 and 200 amp, which removes
the need to install backup load panels during product
installation.
- Surpassed the 500 plus enrollment target in Eguana University,
Eguana’s comprehensive partner training platform, which includes
system design, sales, installation, and commissioning.
- Completed frequency control auxiliary services (FCAS) VPP
services in Australia, including accuracy and reporting, for the
major utility company Simply Energy.
- Recertified our European Enduro ESS, with additional battery
module options and commenced shipments.
“The team had another busy quarter across the
business, with multiple DERMS software integrations completed,
attaining UL1741SB product certification, and exceeding our
September Eguana university installer enrollment target of +500,
which all drive towards distribution channel growth and VPP program
execution in the second half. With utility engagements now spanning
US, Canada, Australia, and European markets, and installer training
metrics ahead of schedule, our storage technology solutions are
positioned for success.” commented Eguana COO Brent Harris.
Fiscal Q2 2023 Financial
Highlights
- As a general reference note, the Company changed its fiscal
year-end from September 30 to December 31, with December 31, 2022
being the first financial year-end with the new date and comprised
of five quarters. As a result, the comparative period for the
second quarter of 2023 is technically the third quarter of 2022,
both at June 30th, in the respective years.
- Q2 2023 revenue of $2.1 million, a slight decline from the
comparative quarter in June 2022 with revenue of approximately $2.3
million. This is related to macro-economic factors in the industry,
and in general, with respect to consumer spending, which has slowed
sell-through within renewable distribution networks. Generally, the
rate of change related to consumer interest rates quelled consumer
spending, and, in the industry, peer companies have been impacted
by elevated inventory positions within the distribution network.
Management remains cautious in near-term market growth, however, we
anticipate that the second half of 2023 will be stronger, driven by
the early success of our partner training programs and in line with
cyclical year-end demand. Currently, we are seeing increased
inventory movement and some easing of these negative factors, which
may take into early 2024 to see a return to normal.
- Q2 2023 gross margin is eroded at these low levels of activity
and was approximately 0%, the same as the prior comparative quarter
for June 2022. Management anticipates 4%- 6% margin growth in the
coming quarters, as a result of lower freight costs, battery price
reductions, and the removal of import tariffs, resulting from a
prior shift of certain components and sub-assemblies out of China.
The increases in margin are expected to take effect when current
inventories procured in 2022 are consumed. Longer-term cost
reduction activities are also planned, with battery module and
advanced power electronics cost reductions, which are expected to
drive an additional 12%-14% margin in 2024.
- Q2 2023 operating loss of $4.2 million, an increase from a $2.6
million operating loss for the comparative June quarter in 2022.
This increase is largely due to higher expenses in product
development of approximately $0.8 million and for sales, marketing,
and business development of approximately $0.6 million, both
expenditures are expected to support strategic growth
objectives.
- Working capital at June 30, 2023 was $22.6 million, a decrease
from $33.7 million at December 31, 2022. The decrease relates to
ongoing cash used in operations, and the inventory loss from the
product theft, which is detailed below.
- At June 30, 2023, the Company has a large accounts receivable
balance from one customer of which approximately $14.5 million is
over 90 days, The customer continues to be delayed in making
payments however, progress payments have been increasing steadily
as the market gradually opens up. The Company originally recognized
an expected credit loss provision at year-end December 31, 2022 and
adjusts the estimate on a quarterly basis, in line with generally
accepted accounting principles. For the three months ended June 30,
2023, an additional estimated credit loss was recognized of
$503,516. The expected credit loss is calculated based on
customer-specific factors, expected timing of future cash receipts,
and discount rates to account for time value of money when
required, taking into consideration historical default rates, and
forecasted economic conditions, amongst other factors. As a major
customer, the Company continues to work with the customer to
collect payments and review future sales and ordering. Given the
close working relationship between the two parties, management
believes the full amount will be collected.
- In June 2023, the Company experienced a theft of three
truckloads of inventory components, when it was being transferred
between warehouse locations. Through the initial investigation it
was discovered that additional truckloads, impacting several
companies, including Eguana, were redirected to unknown locations.
The Eguana inventory items had a cost of $2.1M and were written off
in the Company records, resulting in a loss reported in Other
Expense of $2.1 million. The theft was immediately reported to the
police and all pertinent documentation sent to insurers. The
Company is insured and is anticipating full recovery, however at
period end, it had not received any proceeds. Subsequent to June
30, 2023, the Company received partial insurance proceeds of
$623,913 USD and further proceeds are expected and being pursued
with the insurer for the balance of the loss.
The Condensed Unaudited Consolidated Financial
Statements and the Management Discussion and Analysis thereof, for
the three and the six months ended June 30, 2023, are available on
SEDAR at www.sedarplus.ca.
1 IEA (2022), World Energy Outlook 2022, IEA,
Paris https://www.iea.org/reports/world-energy-outlook-2022,
License: CC BY 4.0 (report); CC BY NC SA 4.0 (Annex A)
Conference Call
Eguana will also host a conference call on Aug 29,
2023, at 5:30 p.m. eastern time (EDT) to discuss the results,
provide a business update, and hold a question and answer
period.
Canada/USA Toll Free: 1-800-319-4610 International
Toll: +1-604-638-5340
https://services.choruscall.ca/links/eguanatechnology2023q2.html
Annual General Meeting (“AGM”) Date
Confirmed
The Company is pleased to announce that the
Board of Directors have set a date for the Company’s AGM. The AGM
will be held on November 2, 2023, at 4:00 pm mountain time, in
Calgary Alberta, and virtually with an online portal. Further
information regarding the AGM will be included in a management
information circular, being prepared by the Company that will be
distributed to shareholders, in advance of the AGM.
About Eguana Technologies Inc.
Based in Calgary, Alberta Canada, Eguana
Technologies Inc. (EGT: TSX.V) (OTCQB: EGTYF) designs and
manufactures high performance residential and commercial energy
storage systems. Eguana has two decades of experience delivering
grid-edge power electronics for fuel cell, photovoltaic and battery
applications, and delivers proven, durable, high-quality solutions,
from its high-capacity manufacturing facilities in Europe,
Australia and North America.
With thousands of its proprietary energy storage
inverters deployed in the European and North American markets,
Eguana is one of the leading suppliers of power controls for solar
self- consumption, grid services and demand charge applications at
the grid edge.
To learn more, visit www.EguanaTech.com or follow
us on Twitter @EguanaTech.
Company Inquiries
Justin HollandCEO, Eguana Technologies
Inc.+1.416.728.7635Justin.Holland@EguanaTech.com
Forward Looking Information
The reader is advised that some of the
information herein may constitute forward-looking information or
forward-looking statements (collectively, “forward-looking
information”) within the meaning assigned by National Instruments
51-102 and other relevant securities legislation. Other than
statements of historical fact, we include information and
statements contained herein constitute forward-looking information,
including but not limited to the value of our power controls to the
energy storage market, estimates of global energy demand, expected
credit losses, achieving strategic growth objectives, the Company’s
margin in 2024, management’s expectations regarding consumer
interest rates and market growth, and statements concerning future
financings, the use of proceeds, future sales, recurring revenue
opportunities, gross margin, expenses, operating results, capital
management, market opportunities, liquidity, including collection
of outstanding accounts receivable and future insurance recoveries
and the Company's ability to obtain necessary approvals from the
TSX Venture Exchange.
Forward-looking information is not a guarantee
of future performance and involves a number of risks and
uncertainties. Many factors could cause the Company's actual
results, performance or achievements, or future events or
developments, to differ materially from those expressed or implied
by the forward-looking information. Readers are cautioned not to
place undue reliance on forward-looking information, which speaks
only as of the date hereof. Readers are also directed to the Risk
Factors section of the Company’s most recently audited Financial
Statements which may be found on its website or at sedar.com. The
Company does not undertake any obligation to release publicly any
revisions to forward-looking information contained herein to
reflect events or circumstances that occur after the date hereof or
to reflect the occurrence of unanticipated events, except as may be
required under applicable securities laws.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
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