October 14, 2009

Los Gatos, CA, USA: Akeena Solar Announces Third Quarter 2009 Results

Net sales for the third quarter of 2009 were $7.7 million compared to $10.6 million in net sales in the third quarter of 2008, and $5.9 million in the second quarter of 2009. The decline in the third quarter compared to the same quarter last year reflects a decline in commercial revenue due to the tight credit market and overall economic conditions.

The increase from the second quarter reflects a higher level of residential sales. Residential installations were $6.8 million in both the third quarter of 2009 and the third quarter of last year and $4.7 million in the second quarter of 2009. Commercial sales were $484,000 in the third quarter of 2009 compared to $3.1 million in the third quarter of 2008, and $665,000 in the second quarter. Net sales for the first nine months of 2009 were $21.2 million, compared to $29.9 million in the same period last year reflecting a decline in commercial revenue of $9.5 million and the absence of East coast and Colorado residential installations.

"Our third quarter results demonstrate the growing demand for residential solar installations and the improving leverage in our business model," said Barry Cinnamon, president and chief executive officer of Akeena Solar. "The benefits of our differentiated Andalay panels and lower Andalay installation costs drove gross margin to 24.7%, double last year's level, and up nicely from 19.7% in the second quarter. Tighter expense management continued and we reduced cash burn to $2.1 million. We ended the quarter with a backlog of $8.3 million, up from $7.5 million at June 30th."

Gross profit for the third quarter of 2009 was $1.9 million, or 24.7% of sales, compared to $1.3 million, or 12.7% of sales, in the third quarter of 2008 and $1.2 million, or 19.7% of sales, in the second quarter of 2009. The increase in gross margin compared to the third quarter last year reflects primarily lower panel prices in the third quarter and lower direct labor costs due to efficiencies gained with Andalay panels, offset somewhat by lower average system prices. The increase in gross margin compared to the second quarter of 2009 reflects lower panel prices and higher subcontractor costs in the second quarter associated with our exit from the Colorado direct installation business. For the first nine months of 2009, gross profit was $5.3 million, compared to $4.8 million for the same period last year; gross profit margin for the first nine months of 2009 was 25.1% compared to 16.1% last year, primarily due to lower panel prices and lower direct labor costs, offset somewhat by lower average system prices.

Total operating expenses for the third quarter of 2009 were $5.1 million compared to $6.8 million for the same period last year, and $4.3 million in the second quarter of 2009. Compared to the third quarter of 2008, the $1.7 million reduction consisted of lower sales and marketing expenses of $874,000 and lower general and administrative costs of $878,000, reflecting the full impact of cost cuts made in the fourth quarter of 2008 and the first quarter of 2009. Stock-based compensation expense was $862,000 in the third quarter of 2009 compared to $1.1 million for the same period last year and $458,000 in the second quarter. Cash operating expenses (adjusted for stock-based compensation expense and depreciation and amortization expense) were $4.0 million in the third quarter of 2009 compared to $5.6 million for the same period last year and $3.7 million in the second quarter of 2009. Total operating expenses for the first nine months of 2009 were $15.1 million compared to $20.1 million in the first nine months of 2008.

The number of employees at quarter end was 137 full time equivalents, an increase from 125 at the end of the second quarter of 2009 and a decrease of 71 from 208 at September 30, 2008.

Net loss for the third quarter of 2009 was $2.4 million, or $0.07 per share, compared to a net loss of $5.5 million, or $0.19 per share, in the third quarter of 2008, and a net loss of $4.7 million, or $0.14 per share, in the second quarter of 2009. The third quarter net loss includes a favorable $758,000 non-cash adjustment to reflect the fair value of common stock warrants accounted for as a liability in accordance with provisions of the warrant agreements. Excluding the adjustment to the fair value of warrants, net loss for the third quarter of 2009 was $3.2 million, or $0.09 per share, an improvement of $0.10 per share compared to the third quarter of 2008 due to operating expense reductions of $1.8 million and the increased gross profit.

Installations for the quarter amounted to approximately 1,027 kilowatts compared to approximately 1,290 kilowatts in the same quarter last year and approximately 716 kilowatts in the second quarter of 2009. Backlog as of September 30, 2009 was $8.3 million reflecting primarily California residential sales.

Cinnamon continued, "During the quarter, we continued advancing our strategy to diversify our revenue streams and scale our business. These initiatives are intended to create a platform for continued revenue growth in 2009 and beyond, while moving us closer to cash flow breakeven. We are making progress expanding our distribution of Andalay panels into four new channels: direct sales to solar installers in the U.S., sales to the low-income housing and new home construction markets, sales to solar installers in Europe and sales to big box retailers.

Concluded Cinnamon, "In all, our strategy to diversify our revenue streams is unfolding according to plan. Though clearly still in the early stages, opportunities in each of the four distribution channels appear very promising. Tight cost controls and continued financial discipline are improving our profitability as we transition the business to a more rapidly scalable model. We are optimistic that 2010 will bring a resumption of revenue growth."

For the fourth quarter of 2009, management expects installation results to be generally consistent with those in the third quarter, with residential sales representing 90% of installation revenues. Distribution channel sales are expected to grow sequentially and represent an increasing percentage of total revenue

Further details about: Akeena Solar