SatCon Technology's CEO Discusses Q2 2012 Results - Earnings Call Transcript

SatCon Technology Corporation (SATC)

Q2 2012 Earnings Call

August 8, 2012, 05:00 pm ET

Executives

Steve Rhoades - President & CEO

Aaron Gomolak - CFO

Analysts

Dale Pfau - Cantor Fitzgerald

Carter Driscoll - CapStone Investments

Jeff Osborne - Stifel Nicolaus

Joe Maxa - Dougherty & Company

Presentation

Operator

Good afternoon and welcome everyone to Satcon’s second quarter 2012 conference call. Today’s call is being recorded. You may listen to the webcast on Satcon’s website located at www.satcon.com. In addition, today’s news release is posted on the site for those of you who did not receive it by email.

With us today are Satcon’s President and Chief Executive Officer Steve Rhoades and Executive Vice President and Chief Financial Officer, Aaron Gomolak.

At this time for opening remarks, I would like to turn the call over to Mr. Gomolak. Please go ahead sir.

Aaron Gomolak

Thank you and welcome to the call everyone.

Before we begin, please note that the comments made on this conference call today may include statements that are not historical facts or that apply prospectively. These forward-looking statements are identified by the use of terms and phrases such as will, intends, beliefs, expects, plans, anticipate and similar expressions.

Investors should not rely on forward-looking statements because they are subject to a variety of risks and uncertainties and other factors that could cause actual results to differ materially from the company's expectation. These risks and uncertainties include the company's history of operating losses, its ability to maintain compliance with the NASDAQ marketplace rules for continued listing, its ability to meet demand for its products, its ability to meet required covenants under its existing loan agreements, the availability of third-party financing arrangements for its customers, its ability to maintain it’s technological expertise, the availability of sufficient funds for our corporate needs as well as other risk factors contained in the company's SEC filings including its annual report on Form 10-K for the year ended December 31, 2011 and other periodic reports subsequently filed with the SEC.

Forward-looking statements contained in this press release speak only as of the date of this release. Subsequent events or circumstances occurring after such date may render these statements incomplete or out of date. The company expressly disclaims any obligation to update the information provided in this conference call.

With that, I will turn the call over to our President and CEO Steve Rhoades. Steve?

Steve Rhoades

Thanks Aaron, good afternoon everyone. Let me begin by providing an overview of our performance and then Aaron will take you through the financials before we turn the call over to the operator for your questions.

Overall I am satisfied with our second quarter topline results and our consistent progress in lowering our overall cost structure. Q2 revenues were $23.7 million which was just below our guidance of $24 to $28 million. The shortfall in revenue was directly attributed to our decision late in the quarter to be more conservative on revenue recognition for one deal which was worth a little over $4 million; a portion of that revenue was recorded in the quarter with the rest moving to Q3. Without that deferral, revenue would have been $26.3 million in the middle of our guidance.

The majority of our revenues continue to come from domestic sales with Europe continuing to show weakness in the large scale central and go-to-market segment and the Asian market experiencing typical seasonal slowdown in the first half of the year. While we are seeing growing demand in the second half in the U.S. Canada and Asia, we don’t expect to see much change in the European market in the back half of the year.

We achieved significant improvements in our gross margin, attaining 20% in Q2, up from 1% in the first quarter of 2012, and without a revenue referral I mentioned before, gross margin would have been 22%. These gains resulted from the major efforts we have put in place to size our company to the new market environment, including the reduction of quarterly operating expenses from $13.5 million in Q1 to $11.2 million in Q2.

In addition, we begun to realize the benefits of over a year of efforts by our engineering and operations organizations to lower the cost of our core products. In the second half of this year, we anticipate further cost reductions to be achieved in our newer products such as the second generation of our Equinox central inverters, Equinox LC line of light commercial inverters and our flagship medium voltage solutions, the Equinox Prism Platform.

Bookings for the quarter were $25.1 million and award letters received totaled an additional $15 million. Total bookings plus awards totaled $40.1 million, just short of our Q1 total of $46 million.

Our confidence in the second half of the year is founded in both our backlog and the significant awards that received in the quarter that will be recognized in bookings in Q3. Satcon has been selected to provide 34 of our new 1.5 megawatt Equinox Prism Platform medium voltage solutions totaling 51 megawatt. This Southern California installation will be interconnected to the San Diego Gas and Electric Grid as a qualified facility for a large generator interconnection agreement under California’s Independent System Operator Corporation and will be one of the largest solar power plants in the state. Construction for this site is expected to begin in Q4 of this year.

In addition we received an order for 20 megawatts of our Equinox Prism Platforms that are now reflected in the quarter’s bookings for a project in New Jersey that is scheduled to start construction in late Q4 of this year. Our commitment to developing and delivering the industry’s highest performing and most cost efficient solar inverter systems has positioned us well in North America’s strong utility scale market where demand for our next-generation 1.5 megawatt and 1.25 megawatt Equinox Prism Platform solutions has been robust. We have already received orders for a 101 megawatt for the 1.5 megawatt product in the first half of this year and we’ll start delivery of the solution for a 20 megawatt marquee project with one of the industry’s largest EPCs in the US Southeast beginning this month.

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