New Energy Systems Group Reports Record Revenue and EPS for First Quarter of 2010
New Energy Systems Group announced financial results for the quarter ended March 31, 2010. Revenue for the three months ended March 31, 2010, was approximately $22.5 million as compared to $2.6 million for the three months ended March 31, 2009, an increase of 753%. Sales in the battery segment, which includes the newly acquired Anytone and NewPower businesses, grew 993% to $19.4 million in the first quarter of 2010 compared to approximately $1.8 million in the first quarter of 2009. Sales in the battery shell and cover segment grew 256% to approximately $3.1 million in the first quarter of 2010, compared to $857,662 in the first quarter of 2009.
Anytone, which was acquired in December 2009, contributed revenue of approximately $10.3 million in the first quarter of 2010. NewPower, which was acquired on January 12, 2010, contributed approximately $7.7 million of revenue in the first quarter of 2010. On a standalone basis, sales for Anytone and NewPower in the first quarter of 2010 increased 72% and 31%, respectively, compared to the same period last year prior to the acquisitions. Excluding the contributions from Anytone and NewPower, revenue in the battery segment increased approximately 70% compared to the first quarter of 2009.
Gross profit was approximately $6.4 million, or 28.6% of total revenue, for the three months ended March 31, 2010, as compared to $713,380, or 27.1% of total revenue, for the three months ended March 31, 2009. The improvement reflects increased sales in each of the segments, including the battery shell and cover segment, which has higher gross margins.
Operating income was approximately $4.9 million for the three months ended March 31, 2010, as compared to $594,194 for the three months ended March 31, 2009. For the first quarter of 2010, general and administrative expenses included $696,777 in non-cash amortization expense and $251,507 in non-cash stock compensation expense, compared to $28,104 of non-cash amortization expense and zero non-cash stock compensation expense for the first quarter of 2009. Operating income excluding these non-cash items was approximately $5.9 million for the three months ended March 31, 2010, as compared to $622,298 for the three months ended March 31, 2009.
Net income for the three months ended March 31, 2010, was approximately $3.8 million, or $0.30 per diluted share, compared to net income of $504,282, or $0.09 per diluted share, for the three months ended March 31, 2009. Excluding non-cash stock-based compensation expense and amortization expense, adjusted net income, was approximately $4.7 million, or $0.37 per diluted share, for the three months ended March 31, 2010, as compared to $532,386, or $0.09 per diluted share, for the three months ended March 31, 2009.
As of March 31, 2010, the Company had cash and cash equivalents of approximately $8.5 million. Included in the Company’s accounts payables is an approximately $4.0 million liability, which is scheduled to be paid in cash by June 30, 2010, as a final payment related to the Anytone acquisition which was completed in December 2009.
Mr. Nian Chen, New Energy’s new Chief Executive Officer, commented, "We are extremely pleased with our first quarter 2010 results, which is the first quarter that includes the full impact of the recent Anytone and NewPower acquisitions. Our strong results this quarter reflect not only rapid organic growth within each of our businesses, but also the successful integration and benefits of these accretive acquisitions which significantly transformed our company. Specifically, Anytone brings significant R&D capabilities and expands our offering to include higher margin end-user branded products. NewPower provides us a captive source for battery components that enables us to keep costs below our competitors’ and improve margins in our direct-to-consumer and finished battery distribution businesses. Given the positive trends in the consumer electronics market, we continue to see increasing demand for our products. We are well positioned to capitalize on this demand due to our reputation for producing high quality and innovative products. We continue to generate strong free cash flow, have a solid balance sheet, and have unused manufacturing capacity, which will allow us to continue growing without incurring significant capital expenditures."
Chen continued, "We remain confident that our adjusted 2010 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 would represent approximately 38% growth in adjusted diluted EPS, despite the fact that our 2010 effective tax rate will be approximately 22% for 2010 versus approximately 12% for 2009. We are very excited about the outlook for the company and look forward to keeping our shareholders updated on our progress."
