Maxwell Technologies Inc. (MXWL) reported a marginally weaker-than-expected third-quarter loss per share of 7 cents, which was below the Zacks Consensus Estimate of a loss of 4 cents. In the year-ago period, the company reported a loss of 22 cents per share.

Operating loss for the quarter was $1.7 million, compared with $4 million in the year-ago quarter. Net loss was $4.6 million, or 18 cents per share Incorporatedluding a non-cash charge of $2.8 million, or 11 cents per share, reflecting a mark-to-market valuation of conversion features and warrants associated with convertible debentures issued in 2005. In the year-ago quarter, the company registered a net loss of $5.7 million, or 27 cents per share Incorporatedluding a non-cash charge of $1 million or 5 cents per share for the conversion feature valuation.

Revenues, however, rose 22% year over year to $26.1 million, with ultracapacitor sales increasing 38%. The other two segments (high voltage capacitor & microelectronics) grew a combined 13%.

Gross margins grew significantly, benefiting from the shift of ultracapacitor production to China along with higher volumes. Gross margin in the reported quarter was 38%, compared with 29% in the year-ago period. Similarly, gross profit increased to $9.9 million, a hike of 62% compared with the year ago quarter. This is commendable since the company generated no sales in the reported quarter from the high margin license fee and service revenue unlike the year-ago quarter. In the reported quarter, the company generated its whole top line from product sales.

As of Sept 30, 2009, Maxwell Technologies had approximately $30.2 million in cash and cash equivalents. Long-term debt increased to $9.8 million in the reported quarter from $0.6 million in the year-ago quarter. We maintain our market Neutral recommendation on the shares.

Zacks Investment Research
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