Dynex Power Reports Shrinking Revenues and Margins in Q2 of 2018

August 30, 2018 by Paul Shepard

Dynex Power Inc. announced its financial results for the second quarter ended June 30, 2018, including first quarter revenue of $10.6 million which was 8% lower than the corresponding quarter of last year, or, 10% lower before the impact of exchange rates. Gross margin was 2.5% of revenue, compared with a gross margin of 8.6% in the corresponding quarter in 2017. The reduction in gross margin in 2018 reflects lower revenues and an unfavorable product mix in a high fixed cost business.

The combination of other income, expenses and costs represented 19.0% of revenue in the second quarter compared to 18.4% in the corresponding period in 2017. The absolute level of such expenditure decreased by $120,000 compared to the corresponding period of last year.

As a consequence of these results, the Company recorded a loss before tax of $1,748,000 compared to a loss before tax of $1,135,000 in the corresponding quarter of last year. The net loss after tax for the quarter was $1,426,000 or $0.02 per share, compared with a net loss of $944,000, or $0.01 per share, in the corresponding period of last year.

EBITDA for the quarter was negative $299,000 compared with a positive $270,000 in the corresponding period last year.

Operating cash outflow was $1,501,000 for the quarter compared with an inflow of $2,099,000 in the corresponding period of last year.

Clive Vacher, President and Chief Executive Officer, commented, "In my Q1 report, I stated that the second quarter performance would be broadly similar to that of the first, albeit with modest cash usage, and this has indeed been the case. The losses are attributable to the diminished order book in the first half of the year.  However, the increased focus on improvements in sales and marketing are starting to show positive results. Our June order intake was the highest since July 2016 in sterling terms, and the full-quarter book-to-bill was 1.1.

"More importantly, our focus on new product introduction, improved product quality and cost reduction is starting to yield dividends in terms of orders. We are seeing improved customer interest across our new IGBT module lines, and expect volume orders for our new 3.3kV and 4.5kV modules during quarters 3 and 4 2018. This, coupled with new bipolar and power assemblies order discussions that are at an advanced stage, gives Management confidence to expect that the quarter 3 book-to-bill will continue to show improvement.

"In addition, we are now able to demonstrate, to customers, improved performance of Dynex IGBT modules, versus competitor products. This is in line with our aim to turn Dynex into a technological leader in the industry on the latest-generation power semiconductors. It has also given us the confidence to launch a project aimed at a substantial increase in manufacturing capacity, to be on-line in late 2018 and early 2019, in anticipation of the refreshed and expanded product range yielding significant incremental orders.

"The timing of the volume orders for our new products continues to present us with a short-term challenge, due to the timeframes of qualification by customers. Management expects that quarter 3 results will be similar to quarters 1 and 2. Our expectation for quarter 4 is to show improvement in financial results, as we start to execute the improved order book. Thereafter, our performance will largely depend on successfully turning the current customer interest into firm orders during the second half of 2018.

"Overall, therefore, we are continuing to position Dynex for a bright future.  However, it will take some more time for this to translate into our commitment to sustained profitability."

Liu Ke'an, the Chairman of Dynex, added, "While the financial results are still a considerable distance from where they need to be, the Dynex team delivered on their quarter 2 guidance. I am impressed with the improvements in product development and quality over the first half of 2018. All indications are that, in releasing new products, Dynex will be able to capitalize on future market opportunities. I look forward to progressive improvement to profitability over the coming quarters."