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Company News:
Xantrex Technology Inc. Reports First Quarter 2007 Results
VANCOUVER, BC, May 1, 2007 — Xantrex Technology Inc. (TSX:XTX) reported financial results for the first quarter ended March 31, 2007. All currency amounts are reported in US dollars unless otherwise indicated, and financial results are reported in accordance with accounting principles generally accepted in Canada. For the first quarter, revenue rose 15 percent to $39.9 million from $34.7 million for the year-ago quarter. Elgar Holdings, Inc. which Xantrex acquired on March 12, 2007, contributed $3.0 million in revenue. Net loss for the quarter was $108,000, or $0.00 per diluted share, compared with net income of $705,000, or $0.02 per diluted share, a year ago. Adjusted EBITDA, a non-GAAP measure, was $1.5 million in the quarter compared to $2.0 million a year ago. Mr. Mossadiq S. Umedaly, Chairman of Xantrex, commented, "From a strategic standpoint, Xantrex had an excellent quarter, led by the continued high growth in Renewable Power revenue. Supply agreements signed with OEMs for our wind and solar products, and the major product development program now underway will create an outstanding line of residential and commercial solar inverters which are being introduced during the course of this year. Other strategic highlights include the acquisition of Elgar Holdings, Inc. which transformed our Programmable Power business into a market leader; the joint venture agreement with Shanghai Electric Group to design, manufacture, and sell solar and wind products for the growing renewable energy market in China; and the partnership agreement with Duracell to brand Xantrex's Portable Power products." John Wallace, Xantrex's CEO stated, "In the first quarter, operating results were mixed, consistent with the weaker first half outlook we described in our last report. Renewable Power revenue rose 70 percent from the year ago quarter, led by solar and wind product sales. We also received a large follow on order from Solon for solar inverters valued at $7.5 million and yesterday signed an agreement with Clipper to supply a portion of their wind converter requirements through 2009. The value and timing of shipments under this contract will be determined in the next few weeks.” Mr. Wallace added, “During the quarter we continued the major program of modifying and re-certifying our single-phase residential solar inverters, and developing and introducing a new line of three-phase commercial inverters. All will meet UL regulatory standards for North America that become effective in May 2007. While this redesign program added costs to the quarter, our solar inverter line will be the most modern and competitive that we have ever had." Mr. Wallace continued, “Programmable Power revenue rose 45 percent, reflecting the inclusion of Elgar's revenues from March 12, 2007. Programmable Power revenue, without Elgar, was flat compared with the strong year-ago quarter. Integration of Xantrex's and Elgar's programmable power businesses is well underway. Mobile Power revenue was down 21 percent from a year ago, and off 7 percent from the sequential fourth quarter. We have changed our focus to new Mobile applications with strong growth potential, and launched a line of Converters for the RV towables market. While sales were lower there were signs the market may be starting to stabilize. We are in the midst of a strategic repositioning of the Portable Power segment, with initial development of the Duracell partnership, and early responses from the marketplace have been extremely positive. Portable Power revenue fell 36 percent from a year ago, but rose 10 percent from the fourth quarter.” For the first quarter, the gross margin improved to 30.9 percent from 29.8 percent of revenue due to sales of higher margin programmable products, partially offset by lower margin earned on sales of solar products to certain OEMs and high product returns in the portable business. Operating income was lower than the year ago quarter, as higher gross margin was offset by higher expenses in support of the solar re-design program, higher compensation expenses, the effects of a higher Canadian dollar on Canadian dollar-denominated expenses, and a bad debt expense. Mr. Wallace concluded, “In our previously stated outlook for 2007, which did not include Elgar, we expected revenue growth to be in the same range of our 2006 increase, and profitability to improve, with the second half of 2007 to be stronger than the first half. We maintain that view. In addition, we expect Elgar (from March 12, 2007) to add approximately $55 million to $58 million in revenue for the year 2007. Turning to profitability, we expect our gross margin as a percentage of revenue for 2007 to improve primarily as a result of the inclusion of Elgar, but the consolidation and rationalization of our manufacturing facilities for Programmable and Solar products will entail costs and production inefficiencies during this period that will partially offset the improvement. We expect significant savings from these actions to be realized in 2008.”
Note: On March 31, 2007, the Bank of Canada’s exchange rate for one Canadian dollar was $0.87 compared with $0.86 on March 31, 2006. Cautionary Note on Forward-looking Information Non-GAAP Financial Measure The following table provides a reconciliation of adjusted EBITDA to net income for the periods indicated. (Expressed in thousands of dollars)
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