New Energy Systems Group Reports 335% Increase in Revenue for Second Quarter 2010
New Energy Systems Group announced financial results for the second quarter ended June 30, 2010.
Nian Chen, New Energy’s Chief Executive Officer, commented, "We are pleased to report another strong quarter with solid revenue and earnings growth. We experienced organic growth in all four of our business lines and continued to benefit from the accretive acquisitions of Anytone, completed in December 2009, and NewPower, completed in January 2010. The past six months have been a very active time for us. We completed and integrated two major acquisitions, repaid almost all of our debt, significantly increased our profitability, and listed our stock on NYSE Amex. We have transformed the company into a fully integrated manufacturer that is now well-positioned to benefit from the increasing world-wide demand for our products. As a result, we are excited about our accomplishments to date, and we are even more excited about our New Energy’s future. Now that we have finished integrating our acquisitions, we can focus more on growing our business in China and in large markets where we currently have very limited presence, such as North America, Europe and Japan. With our healthy balance sheet, excess manufacturing capacity, and a reputation for frequent and innovative new product introductions, we are well-positioned to capitalize on our industry’s favorable outlook. World-wide demand for our products is projected to increase significantly in the coming years as a result of the growing popularity of portable electronic devices including iPhones, iPads, Blackberries, Androids and other smart phones. Finally, management is committed to generating shareholder value, which we intend to achieve not only by increasing earnings, but also by maintaining high corporate governance standards and by actively increasing our awareness among the U.S. investment community."
Chen continued, "We are comfortable with our previously announced guidance, and we expect our 2010 adjusted net income will be at least $15.6 million, or $1.23 per diluted share, based on approximately 12.6 million fully diluted shares. This represents an increase of approximately 38% in adjusted diluted EPS despite the fact that our effective tax rate is expected to be approximately 22% for 2010 compared to only about 12% for 2009."
Revenue for the three months ended June 30, 2010, was approximately $23.4 million as compared to $5.4 million for the three months ended June 30, 2009, an increase of 335.2%. Sales in the battery segment, which includes the newly acquired Anytone and NewPower businesses, grew 469.1% to approximately $20.9 million in the second quarter of 2010 compared to $3.7 million in the second quarter of 2009. Sales in the battery shell and cover segment grew 45.5% to approximately $2.5 million in the second quarter of 2010, compared to $1.7 million in the second quarter of 2009. Anytone, which was acquired in December 2009, contributed revenue of approximately $10.8 million in the second quarter of 2010. NewPower, which was acquired on January 12, 2010, contributed approximately $8.3 million of revenue in the second quarter of 2010. On a standalone basis, sales for Anytone and NewPower in the second quarter of 2010 increased 86.1% and 53.8%, respectively, compared to the same period last year prior to the acquisitions. Excluding the contributions from Anytone and NewPower, revenue from the battery assembly and distribution business increased approximately 34.6% compared to the second quarter of 2009.
Gross profit was approximately $6.1 million, or 26.3% of total revenue, for the three months ended June 30, 2010, as compared to $1.6 million, or 30.1% of total revenue, for the three months ended June 30, 2009. The decline in gross margins reflects the inclusion of NewPower for a full quarter, which has lower gross margins than the other business lines, coupled with slightly higher production and material costs.
Operating income was approximately $4.6 million for the three months ended June 30, 2010, as compared to $1.5 million for the three months ended June 30, 2009. For the second quarter of 2010, general and administrative expenses included $697,000 in non-cash amortization expense and $169,000 in non-cash stock compensation expense, compared to $18,000 of non-cash amortization expense and zero non-cash stock compensation expense for the second quarter of 2009. Operating income excluding these non-cash items was approximately $5.4 million for the three months ended June 30, 2010, as compared to $1.5 million for the three months ended June 30, 2009.
Net income for the three months ended June 30, 2010, was approximately $3.6 million, or $0.28 per diluted share, compared to net income of $1.3 million, or $0.22 per diluted share, for the three months ended June 30, 2009. Excluding non-cash stock-based compensation expense and amortization expense, adjusted net income, was approximately $4.4 million, or $0.35 per diluted share, for the three months ended June 30, 2010, as compared to $1.4 million, or $0.22 per diluted share, for the three months ended June 30, 2009.
As of June 30, 2010, the company had cash and cash equivalents of approximately $3.8 million, working capital of $12.6 million, no long-term debt and stockholders’ equity of $59.3 million. During the second quarter of 2010, the company made a final payment related to the Anytone acquisition which reduced cash, offset by a reduction in accounts payables, by approximately $4.0 million.