Eguana Technologies Inc. ("
Eguana" or the
"
Company") (TSX-V: EGT, OTCQB: EGTYF) today
announced results for its third quarter ended September 30, 2023.
The financial results for the third quarter
ended September 30, 2023, continue to reflect the impact of soft
consumer spending due to inflation and high-interest rates and the
resulting high channel inventory position. These factors constrain
Eguana’s sales into residential solar markets. The economic
downturn in the solar industry globally, in early 2023, was not
widely anticipated, and the Company has been managing through 2023
cautiously. Slow collection of the accounts receivable from the
Company’s primary customer has constrained liquidity and is
expected to continue to impact the Company’s short-term liquidity.
As a result of the slow industry recovery, many renewables stock
prices, including Eguana, remain under significant pressure. Until
the industry recovers, consumer spending rebounds and/or solar
energy incentives increase, management believes residential solar
sales, particularly in North American markets, will remain under
forecast. Australian and European markets, along with Virtual Power
Plant (“VPP”) channels, however, appear to be recovering at a
faster pace than direct North American consumer sales.
Additionally, we expect that the Company’s initiatives in VPPs
should be significantly less exposed to the above limiting factors
given their rebate and financing structures.
On November 23, 2023, the Company announced a
private placement, targeted at $2.0 million, to be closed in
multiple tranches. This financing is aimed to ease the current cash
flow constraints of the Company. The first tranche of the Offering
is expected to close on or about November 30, 2023. Through the end
of 2023 and into 2024, management anticipates funding the cash flow
needs of the business by continuing to collect historical
receivables from our primary customer, creating liquidity from the
Company’s current assets, increasing sales, and with the proceeds
from the Offering. In addition to examining operational
restructuring, management, along with the board of directors,
continues to pursue a number of additional options to ease
liquidity by increasing cash inflows and reducing cash
requirements.
Strategically, the Company continues its
progress in the VPP space with the acceptance into 7 VPP programs,
installer training enrollment numbers surpassing 1,200, and with
product development and lab certifications.
The Company has made positive progress pursuing
utility and distributed energy resource management (“DERs”)
partnerships, bringing the Company’s participation in VPPs to seven
across North America and Australia. The Eguana solution is
positioned to work with distributed energy resource provider
platforms that are fully integrated with the Eguana Cloud Platform,
and Eguana’s existing product line of energy storage solutions
(“ESS”). The Eguana energy storage platform has been developed to
support all grid-related VPP functions.
The Company believes increased adoption of ESS
in the VPP space will drive sales growth in 2024 as utilities
reduce the upfront cost for consumers through rebate, credit, and
financing programs. The recent announcement of the multi-year VPP
Referral and Promotion partnership with a long-time major utility
partner in Australia, is just one example. The announced exclusive,
multi-year, partnership with Duesseldorf based FinanzDesk, a modern
financial service provider, with a specialty in renewables, is
expected to promote and finance the sale of the Eguana Enduro, to
its existing residential rooftop solar customers. Further, the
Company anticipates that our existing partnerships and additional
VPP or strategic partnerships will provide sales momentum and
product demand.
Alongside VPP partnerships, Eguana’s installer
training, through Eguana University, continues to exceed
expectations, with over 1,200 enrollments year to date,
representing more than 200 installation companies. Trained
installers are key to the consumer interface and experience,
through both distribution and VPP channels.
Offsetting these positive strategic successes is
the overall lagging industry tied to macro-industry factors.
Increased inventory levels from a year ago, coupled with high
interest rates impacting consumer access to capital, slowed
consumer spending and sell-through in the distribution network and
negatively impacted the industry globally.
Business Highlights
During the Quarter
- Continued
integration with additional DERMS providers, in various markets, to
pursue VPP opportunities, spanning the US and Canadian
markets.
- Signed a multi-year
VPP Referral and Promotion partnership with a long-time utility
partner, to deploy Eguana’s ESS to Australian electricity
customers. The initial rollout across South Australia, Victoria,
Queensland, and New South Wales will engage the utility partner’s
retail network of approximately 750,000 customers with direct
marketing campaigns outlining upfront rebates and monthly on-bill
credits. In addition, the partner has also incentivized referrals
for new customers.
- Completed the
necessary work and steps for self-certification development and
compliance testing and was awarded ISO/IEC 17025 accreditation. The
ISO/IEC 17025 accreditation requires a rigorous assessment process
to meet very stringent guidelines and minimum standards. This
achievement underlines Eguana’s ability to conduct grid compliance
and safety tests independently. By having the ability to conduct
self-testing processes, Eguana gains a significant advantage to not
only certify new products for AC grid interconnection compliance
but also introduce alternate components quickly, while saving time
and money through the certification process. Self-certification
accreditation enables the Company to be in control of our
certification schedules and timing, improving speed to market.
- Entered into a new
partnership with AutoGrid, an industry leader in harnessing DERs
for VPPs, to open additional VPP opportunities for power providers
around the globe. Companies are expected to integrate Eguana’s
residential ESS into the AutoGrid Flex™ platform, to support
utility companies in promoting rapid residential storage adoption
and consumer participation in energy transition. AutoGrid Flex™
supports Eguana’s technology by enabling automated demand response
during periods of peak demand, directing the energy storage devices
to offset home energy loads, discharge energy back into the grid,
and charge up when energy cost is low or from renewable sources. As
a result, VPP operators can overcome shortfalls in supply,
eliminate outages, avoid additional transmission infrastructure,
and bypass the need for heavily polluting peaker power plants.
Further, Eguana joins AutoGrid’s growing network of device makers
aggregated and orchestrated into multi-asset VPPs by AutoGrid’s
AI-driven Flex™ platform. In combination, the two companies’
solutions, along with utility rebate programs, are expected to help
consumers reduce the initial cost of energy storage, cut their
ongoing energy costs, and support the integration of clean,
renewable energy into the grid.
- Signed a
multi-year, exclusive partnership with Duesseldorf based
FinanzDesk, to bring the Eguana Enduro and future Eguana products,
to its residential rooftop solar customer base of over 8,000. The
Eguana Enduro, which was developed specifically for European
markets, is a complete all-in-one custom-engineered energy storage
platform. The Enduro provides a simple and fast installation
process, dashboard control of all storage and consumption data, and
customizable battery management alerts to allow consumers to make
better decisions on their energy consumption, optimize power bill
savings, and support energy security.
- Launched the Eguana
Essential Whole Home ESS, specifically designed for North American
mid-sized homes, as an economical option for homes with existing
100-amp service panels. Initial deliveries to Puerto Rico, started
in September 2023, spurred by the US Department of Energy’s Puerto
Rico Energy Resilience Funding, announced in July 2023, that
anticipates 30,000-40,000 residential installations. The Essential
Whole Home ESS has simplified installation and remote commissioning
processes, delivering installer efficiency and improved homeowner
experience, in terms of both cost and installation times.
- Entered into a
partnership, along with Virtual Peaker, a cloud-based distributed
energy company, to join the Massachusetts Municipal Wholesale
Electric Company (MMWEC) NextZero Connected Homes Program. This
partnership is the newest addition to its rapidly growing roster of
US utility operator partners, as VPPs continue to expand across the
United States energy storage market. The Connected Homes program
offers customers of participating Member utilities technology to
better utilize smart appliances and devices, such as Eguana’s home
energy storage battery systems, to better manage their electric
load. This is expected to generate cost savings and reduce the
carbon footprint of both the utility and its customers. Homeowners
are expected to benefit from upfront rebates on Eguana’s systems
and monthly rewards for participating in the program. Eguana’s
Fleet Control can be tailored for participation in a variety of
grid solutions, depending on the utility and grid requirements.
Eguana’s Energy Management System (EMS) works in conjunction with
its Fleet Control, to provide one of the industry’s best
distributed storage solutions, for residential environments.
- Surpassed 1,200
enrollments year to date, representing more than 200 installation
companies in Eguana University, Eguana’s comprehensive partner
training platform, which includes system design, sales,
installation, and commissioning.
- ITOCHU Corporation,
a strategic investor in the Company, converted $1,164,493.14 of
interest owing under the Company’s 7% unsecured convertible
debenture into 13,580,094 common shares of Eguana, in full
satisfaction of the interest payment due on September 1, 2023. In
connection with the interest conversion, Eguana issued 13,580,094
Common Shares at a deemed price of $0.08575 per share on September
28, 2023. All of the Common Shares are subject to a four-month and
one-day hold period, in accordance with applicable Canadian
securities laws.
Private Placement
On November 23, 2023, the Company announced its
intention to complete a non-brokered private placement offering of
up to 50,000,000 units of the Company (the “Units” or “Unit”) at a
price of $0.04 per Unit, for aggregate gross proceeds of up to $2.0
million. The Company has the option, in its sole discretion, to
increase the size of the offering to up to $2.5 million (the
“Offering”). For additional details on the Offering, see the
Company’s news release dated November 23, 2023.
The Company anticipates using the net proceeds
of the Offering to fund operations and working capital. Closing of
the Offering is expected to occur in one or more tranches, with the
first tranche expected to close on or about November 30, 2023. The
Offering remains subject to final approval by the TSXV.
Fiscal Q3 2023 Financial
Summary
- 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 third quarter
of 2023 is technically the fourth quarter of 2022, both at
September 30th, in the respective years.
- Overall negative
macro-economic factors continue to constrain the renewable energy
industry, and consumer spending is soft, due to inflation and
high-interest rates. These factors have impacted sales and revenue
for the third quarter. Q3 2023 revenue of $2.6 million, was
consistent with the comparative three months ended September 30,
2022, of $2.6 million. This is related to macro-industry factors,
in general, and with respect to consumer spending, which has slowed
sell-through within renewable distribution networks. Generally, the
rapid increases in 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 as it approaches the December 31, 2023
year end.
- Q3 2023 gross
margin for the three months ended September 30, 2023, after
adjusting for inventory impairment, was 4.1%, as compared to gross
margin of negative $249,800 or negative 9.6% in the comparative
quarter of 2022. In the comparative quarter of 2022, margin was low
due to one-time transactions, which had a negative impact on the
margin. Management anticipates improved margin 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
improve margin in 2024.
- As a response to a
lagging market, in October 2023, the Company proceeded with a staff
rationalization, across all geographies, and reduced headcount by
approximately 22 percent. With restructuring of functional areas
and focus on near-term priorities, management believes this
reduction will not affect near or medium-term operations or
objectives. The Company will continue to explore further prudent
staff rationalizations.
- Q3 2023 operating
loss of $3.5 million, an increase from a $3.0 million operating
loss for the comparative September quarter in 2022. This increase
is largely due to an inventory impairment recorded for certain
inventory components for older generation systems, which have
limited future economic value. There were offsetting variances in
regular expenses such as increases in general and administration of
approximately $0.3 million, sales, marketing, and business
development of approximately $0.2 million, and operations of
approximately $0.2 million. These expense increases are due to
overall company growth in geographic regions of the USA and
Australia. This was partially offset by saving in product
development of $0.2 million, as less new development or
enhancements occurred.
- Working capital at
September 30, 2023, was $17.8 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 September 30,
2023, the Company has a large accounts receivable balance from one
customer of which approximately $17.2 million is over 90 days. The
customer continues to be delayed in making payments however,
progress payments have been received steadily. 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 September 30, 2023, an additional estimated
credit loss was recognized of $1.2 million. 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, however, until the industry recovers, consumer spending
rebounds and/or solar energy incentives increase, management
believes the slower than usual collection on account receivable
will continue to constrain Eguana’s financial position, into
2024.
- 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. In September 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 nine months ended September 30, 2023, are
available on SEDAR at www.sedarplus.ca.
Conference Call
Given the first tranche closing of the Offering,
anticipated on November 30, 2023, management has rescheduled the
Eguana conference call from November 29, 2023, at 3:00 p.m. eastern
time (ET) to December 1, 2023, at 10:30 a.m. eastern time (ET).
Note that the link published in the November 23, 2023 news release
is no longer valid, due to the date change. Please use the link
below. The quarterly call will provide an overview of Q3 results, a
business update, and allow for a question and answer period.
Canada/USA TF: 1-800-319-4610 |
International Toll: +1-604-638-5340 |
Link
Access: https://services.choruscall.ca/links/eguanatechnology2023q3.html |
About Eguana
Technologies Inc.
Eguana Technologies Inc. (EGT: TSX.V) (OTCQB:
EGTYF) designs and manufactures high performance residential and
commercial energy storage systems. The Company also markets and
sells a suite of micro inverter products, which are integrated with
its energy storage platform providing consumers with full solar +
storage system architecture, for residential and commercial
applications. Eguana has over 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, Eguana is one of the leading suppliers of power controls
for solar self-consumption, grid services and demand charge
applications at the grid edge. Focused on distributed energy
storage applications located at the point of energy consumption,
Eguana provides cost-effective solutions to modernize the power
grid, from the consumer to the electricity retailer, the
distribution utility, and the system operator.
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 all information
herein, other than statements of historical fact, may constitute
forward-looking statements and forward-looking information
(together, "forward-looking statements") within the meaning
assigned by National Instrument 51-102 - Continuous Disclosure
Obligations and other relevant securities legislation.
Forward-looking statements include, among other
things, statements regarding the timing and completion of the
Offering, the use of proceeds of the Offering, receipt of TSXV
approval, successful accounts receivable collection, creating
additional liquidity with the Company’s current assets, increasing
sales, the Company being able to continue business operations due
to cash flow constraints, whether the results of the Company’s
reduction of headcount will help ease cash flow constraints,
exploration of alternative refinancing options and operational
restructuring, the impact of current economic conditions on the
Company’s initiatives in VPPs, further reduction of cash
requirements, the increase of cash inflows, the positioning of the
Eguana solution, the ability of the Eguana energy storage platform
to support all grid-related VPP functions, the increased adoption
of ESS in the VPP space and the effects of the same, the effects of
the partnership with FinanzDesk, the Company’s existing
partnerships and additional VPP or strategic partnerships ability
to increase sale momentum and product demand, the deployment of
Eguana’s ESS to Australian electricity customers, the timing and
effects of the rollout across South Australia, Victoria, Queensland
and New South Wales, the effects of Eguana’s receipt of ISO/IEC
17025 accreditation the ability to conduct self-testing processes,
the effects of the Company’s partnership with AutoGrid, the timing
and effects of companies integrating Eguana’s residential ESS into
the AutoGrid Flex platform, the effects of utilizing Eguana’s home
energy storage battery systems, the improvement of margins in the
coming quarters, the effects of the Company’s staff
rationalization, the Company successfully collecting the full
accounts receivable balance from its largest customer, the
insurance payout in connection with the theft which occurred in
June 2023, and the successful and ongoing strategy with respect to
product solutions and product development. Forward-looking
statements are not a guarantee of future performance and involve 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. Such factors
include, but are not limited to, risks associated with: failure to
obtain necessary regulatory approvals to close the Offering;
failure by the Company to close the Offering as contemplated;
failure by the Company to properly allocate use of proceeds for
immediate needs, such as debt service, payroll and payments;
failure by the Company to collect accounts receivable in a timely
manner; failure by the Company to create additional liquidity from
the Company’s current assets; failure by the Company to raise
additional funds to fund working capital requirements or to solve
its current cash flow constraints, which would impact the viability
of the business to continue operating as a going concern or the
viability of the business to continue operating altogether; the
continued weak economic market and business conditions in general
and more specifically in the renewable energy industry; competitive
factors; failure of the Company to deliver on or execute VPP
agreements; warranty or product failures, the Company achieving its
strategic objectives; and other factors as set out in the "Risk
Factors" section of the Company's management's discussion and
analysis for the three and nine months ended September 30, 2023 and
annual information form dated November 29, 2023, which may be found
on its website or at www.sedarplus.ca.
Readers are cautioned not to place undue
reliance on forward-looking information, which speaks only as of
the date hereof. The Company does not undertake any obligation to
release publicly any revisions to forward-looking statements
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 TSXV nor its Regulation
Services Provider (as that term is defined in the policies of the
TSXV) accepts responsibility for the adequacy or accuracy of this
news release.
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