Azure Dynamics Announces Second Quarter 2008 Results
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OAK PARK, MI, Aug. 12, 2008 -- Azure Dynamics Corporation (TSX: AZD, LSE: ADC & OTCQX: AZDDF) - ("Azure" or the "Company"), a leading developer of hybrid electric and electric powertrains for commercial vehicles, today reported its second quarter financial results for the period ending June 30, 2008. The Company also provided an update on product development activities.
Second Quarter 2008 Highlights
- Revenue for the second quarter totaled $3.4M representing an increase
of 470% compared to the same quarter last year
- The Company shipped a record number of units during the second
quarter: 35 Balance(TM) Hybrid Electric, 14 CitiBus(TM) Series Hybrid
Electric shuttle buses and 37 Force Drive(TM) Electric vehicle
systems
- Key deliveries were made to FedEx Express, AT&T, Pennsylvania
Department of Transportation and several others
- The Company signed its first four dealerships with a Sales & Service
agreement that allows each of the dealerships to service the growing
market demand for Azure's vehicles
"The second quarter was a watershed period in meeting Azure's commitment to commercialization," said Azure Dynamics' Chief Executive Officer, Scott T. Harrison. "Production began on our Balance(TM) Hybrid Electric, integrated on the Ford E450 Chassis, and orders and revenue are following. Customers using the vehicle report that it is meeting or exceeding expectations from both a performance and cost metric. The Balance(TM) Hybrid Electric was designed and built to serve the delivery vehicle market niche and all of our indicators, including increased sales and growing interest from potential customers, suggest that the market is responding favorably."
Product Developments
Series Hybrid Electric (G1):
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- Purolator's fleet of 49 G1 hybrid vehicles has accumulated over
700,000 miles as of June 30, 2008. The vehicles are deployed in
Montreal, Ottawa, Toronto and Vancouver. Two of the 19 diesel hybrids
have now surpassed three years in service, while the 30 G1 gas
hybrids will soon be approaching a year and a half in service.
- As of June 30, 2008 the Company had completed assembly of all 59
units in the G1 hybrid cab chassis production run at Product Concepts
Inc. Orders have been received for 15 of the 59 which were delivered
to Startrans for body build for various customers including
Pennsylvania DOT within the quarter.
Balance(TM) Hybrid Electric (P1):
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- The Company delivered 20 pre-production step vans to FedEx Express in
California and the vehicles began revenue service.
- The Company initiated the accelerated seven year Altoona durability
test on the shuttle bus variant. The Altoona testing is expected to
be completed in the third quarter, at which point the Balance(TM)
Hybrid Electric shuttle bus will be eligible for funding programs
administered by the Federal Transit Administration (FTA) in the
United States.
- An order for 15 hybrid chassis from AT&T was received. These AT&T
chassis were hybridized within the quarter and will begin service in
the third quarter once their body builds are complete.
LEEP Freeze(TM) & LEEP Lift(TM) (Low Emission Electric Power):
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- Within the quarter, Azure delivered one LEEP Freeze(TM) system to
Kidron which is being used for sales and marketing purposes.
- Within the quarter the Company continued the development and build of
the first demonstration LEEP Lift(TM) system as part of the
memorandum of understanding (MOU) with Altec, a leading manufacturer
of aerial boom trucks.
Force Drive(TM) (Electric Solutions):
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- During the quarter, Azure continued the controlled production of its
Force Drive(TM) systems planned for delivery against a 200 unit
release within the supply agreement with Electro Autos of Mexico.
Azure's scope of supply for the 1,000 Force Drive(TM) systems
includes the motor, controller, gearbox and 12 V converters.
In addition, a number of key sales initiatives are expected to contribute positively to Azure's performance in the second half of 2008, including the following:
- Production has commenced on the Company's largest order to date of
105 Balance(TM) Hybrid Electric systems for Purolator Courier Ltd.,
Canada's largest courier company
- The Company's plan to sign approximately 50 dealers over the next
year in major metro markets in the United States and Canada is on
target. This will broaden Azure's distribution network for its
Balance(TM) Hybrid Electric medium-duty trucks
- New fleets with over 5,000 estimated annual commercial vehicle
purchases are either currently engaged in an active product trial or
demonstration for the Balance(TM) Hybrid Electric, or are expected to
enter into one during the third quarter
- Beyond major fleet holders, Azure is attracting interest and orders
from marquee, civic-minded organizations like the West Harlem Art
Fund in Northern Manhattan and the Smithsonian Institution in
Washington D.C.
"On July 18, 2007, a barrel of oil cost $75. Exactly one year later, that same barrel cost $131. As a result, Americans drove 9.6 BILLION fewer miles in May 2008 compared to May 2007," said Jay Sandler, Azure Dynamics Vice President of Sales. "Most of our commercial customers don't have the option to simply stop driving. Instead, they need transportation to be more economical without sacrificing any performance or dependability. Our Balance(TM) Hybrid Electric is a valid solution offering significant economic advantages over conventionally equipped vehicles. The second quarter saw our sales and revenue ramp-up begin, and with increased attention from fleet managers, we expect to continue to grow share in the markets we serve."
Financial Results
Revenue for the second quarter of 2008 totaled $3.4 million compared to $0.6 million in the second quarter of 2007. For the six months ended June 30, 2008, revenue totaled $3.8 million compared to $0.7 million in the same period a year ago. The increase in revenue for the three and six months ended June 30, 2008 was due to shipments of Balance(TM) Hybrid Electric, Azure CitiBus(TM) and Force Drive(TM) Electric products. Net loss for the second quarter of 2008 was $8.1 million, or $(0.03) cents per share, compared to a loss of $6.9 million or $(0.03) cents per share in the second quarter of 2007. Net loss for the six months ended June 30, 2008 was $16.0 million, or $(0.06) per share, compared to a loss of $13.4 million or $(0.07) per share in the same period a year ago. The higher loss for the three and six months ended June 30, 2008 is primarily attributable to higher levels of engineering expenses and negative gross margin. Engineering expenses were higher as a result of the Company's ongoing technology development. Negative gross margin is primarily the result of negative production variances typically associated with lower volume early stage production.
Before contributions, the Company's engineering, operations and product development expenses for the quarter totaled $5.7 million (including $3.4 million in product development costs), compared to $4.2 million for the same period in 2007 (including $2.4 million in product development costs). For the first half of 2008, the Company's engineering and R&D expenses totaled $10.5 million (including $5.8 million in product development costs), compared to $8.5 million in the first half of 2007 (including $4.8 million in product development expenses). During the second quarter, the Company focused on the production and sale of its Balance(TM) Hybrid Electric program and component development, as well as ongoing production activities associated with a CitiBus(TM) a Series Hybrid Electric shuttle bus and Force Drive(TM) Electric components.
As of June 30, 2008, the Company's net cash and cash equivalents totaled $5.4 million, and working capital totaled $17.5 million, compared to cash and cash equivalents of $16.8 million, and working capital of $19.6 million, as at June 30, 2007, and cash and cash equivalents of $24.1 million, and working capital of $32.3 million, as at December 31, 2007. The reduction in net cash and cash equivalents from December 31, 2007 is mainly due to cash used in support of product development and the Company's ongoing efforts to commercialize its products.