Hot Stock under Review: EnSync, Inc. (NYSE: ESNC)

On Tuesday, Shares of EnSync, Inc. (NYSE: ESNC) showed the bearish trend with a lower momentum of -0.48% and ended its trading session at $0.23. The company traded total volume of 99,943 shares as contrast to its average volume of 304.11K shares. The company has a market value of $15.19M and about 66.38M shares outstanding.

EnSync, Inc. (NYSE: ESNC) declared financial results for the fourth quarter and fiscal year ended June 30, 2018.

Financial Highlights

  • Revenue for fiscal 2018 was $11.90M, contrast to $12.50M in fiscal 2017. The Company practiced construction delays for two power purchase agreement (“PPA”) projects, and a signing delay on a third, which resulted in the shifting of revenue to the first half of fiscal 2019. For the fiscal year, the Company recognized revenue from 13 PPA projects.
  • Significantly better operational performance in fiscal 2018 contrast to fiscal 2017. Gross profit improved by more than $3.00M in fiscal 2018 on about the same amount of revenue as contrast to fiscal 2017. Gross margins improved to 19.9% during fiscal 2018, contrast to a negative gross margin of (0.7) % during fiscal 2017. The Company continues to become more efficient and profitable on its PPA construction and sales efforts.
  • On September 5, 2018, the Company accomplished a registered direct offering of 11,334,616 shares of Common Stock at a price of $0.26 per share for net proceeds of $2.70M.
  • The Company has 12 PPA projects in backlog in various stages of execution. Estimated backlog value for PPA projects, components and systems as of the date of this declaration is about $16.40M.

Quarterly Financial Results

Total revenue for the fourth quarter of fiscal 2018 was $1.70M, contrast to $3.10Min the year ago period.  Revenue in the fourth quarter was influenced by the sale and construction delays for three PPA projects, which resulted in the shifting of revenue to the first half of fiscal 2019. Revenue during the fourth quarter of fiscal 2018 was mostly derived from 9 PPA contracts in Hawaii. Gross margins were 4.0% during the fourth quarter, contrast to 5.5% gross margin in the year ago period. The decline in gross margin in the fourth quarter relative to the noteworthy improvements during the first nine months of fiscal 2018, which resulted in a 22.4% gross margin for that period, was the result of inventory reserves and adjustments related to our legacy flow battery business, which resulted in a more pronounced impact on gross margin for the fourth quarter of fiscal 2018. Excluding the inventory reserves and adjustments of $0.30M and $(0.10)M for the fourth quarter of fiscal 2018 and fiscal 2017, respectively, adjusted gross margins would have been 21.9% in the fourth quarter of fiscal 2018, contrast to adjusted gross margins of 3.8% in the year ago period. The Company’s expectation is that gross profit margins on future PPA sales should be between 15% and 25%.

Advanced Engineering and Development costs reduced to $1.00M during the fourth quarter, contrast to $1.30M in the year ago period, mainly because of the completion of the EnSync Home Energy System in the fourth quarter of fiscal 2018.  Selling, General and Administrative expenses reduced to $2.70M during the fourth quarter, contrast to $2.80M in the year ago period. Total Advanced Engineering and Development costs plus Selling, General and Administrative expenses (excluding stock-based compensation of $0.40M and $0.60M, respectively) was $3.30M during the fourth quarter, contrast to $3.50M in the year ago period.

Net loss attributable to common shareholders was $(3.70)M, or $(0.07) per basic and diluted share, for the fourth quarter of fiscal 2018, contrast to net income of $9.20M, or $0.19 per basic and diluted share, in the fourth quarter of fiscal 2017, or an adjusted net loss of $(4.1)0M, or $(0.08) per basic and diluted share after excluding the $13.30M gain related to the termination of the SPI supply agreement in the fourth quarter of fiscal 2017.

Annual Financial Results

Total revenue for fiscal 2018 was $11.90M contrast to $12.50M in fiscal 2017. In fiscal 2018, the Company had 13 PPA contracts contribute to revenues.

Gross margins improved to 19.9% during fiscal 2018, contrast to (0.7)% gross margin in fiscal 2017.  Adjusted gross margins excluding the inventory reserves and adjustments of $0.40M and $0.20M, respectively, would have been 22.8% in fiscal 2018 and 0.7% in fiscal 2017. The improved gross margin is attributable to continued efficiencies in the procurement, construction and sale process.

Advanced Engineering and Development costs reduced to $4.40M during fiscal 2018, contrast to $4.80M in fiscal 2017.  Selling, General and Administrative expenses reduced to $10.30M in fiscal 2018, contrast to $11.10M in fiscal 2017. The improvement in Selling, General and Administrative expenses was mainly the result of a reduction in stock-based compensation.

Net loss attributable to common shareholders was $(13.30)M, or $(0.24) per basic and diluted share in fiscal 2018, contrast to a net loss attributable to common shareholders of $(4.40)M, or $(0.09) per basic and diluted share, in fiscal 2017, or an adjusted net loss of $(17.70)M, or $(0.37) per basic and diluted share after excluding the $13.30M gain related to the termination of the SPI supply agreement in fiscal 2017.

Balance Sheet and Backlog

Cash and cash equivalents at June 30, 2018 was $3.00M. On September 5, 2018, the Company accomplished a registered direct offering of a maximum shares presently available under its shelf registration of 11.30M shares at a price of $0.26 per share. The Company received net proceeds of $2.70M.

Estimated backlog value for PPA projects, components and systems as of the date of this declarement is about $16.40M.

Nonstatutory Inducement Stock Option Grant to New Employees

On April 24, 2018, two new non-executive employees were issued non-statutory inducement stock options to purchase a total of 160.0K shares of common stock.  The non-statutory inducement stock options are exercisable at a price of $0.39 per share (which was the closing price of a share of the Company’s Common Stock on the grant date) and vest in three equal annual installments.  The awards were approved by the Company’s independent Compensation Committee of the Board of Directors and were granted as an inducement material to the new employees entering into employment with the Company.  The Company is making this declaration as required by NYSE American rules.

The Company offered gross profit margin of 19.90%. ROE was recorded as -140.00% while beta factor was 0.70. The stock, as of recent close, has shown the weekly downbeat performance of -0.87% which was maintained at -42.35% in this year.

Grover Beam

Grover Beam has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. He is an active day trader spending the majority of her time analyzing earnings reports and watching commodities and derivatives. He has a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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