CORPORATE PARTICIPANTS
Jody Burfening
Lippert/Heilshorn & Associates - IR
Barry Cinnamon
Akeena Solar, Inc. - President, CEO
Gary Effren
Akeena Solar, Inc. - CFO
Steve Daniel
Akeena Solar, Inc. - EVP Sales & Marketing
Jim Curran
Akeena Solar, Inc. - COO
CONFERENCE CALL PARTICIPANTS
Mehdi Hosseini
Friedman, Billings, Ramsey & Co. - Analyst
Mark Manley
Natixis Bleichroeder - Analyst
Colin Rusch
Broadpoint Capital - Analyst
Adam Krop
Ardour Capital Investments - Analyst
Brian Yerger
Jesup & Lamont Securities Corp. - Analyst
George Santana
Global Hunter Securities, LLC - Analyst
Mark Bachman
Pacific Crest Securities - Analyst
Rob Stone
Cowen And Company - Analyst
Paul Clegg
Jeffries & Co. - Analyst
Dan Ries
Collins Stewart - Analyst
Ted Kundtz
Needham & Company - Analyst
Rob MacArthur
Alternative Research Services, Inc. - Analyst
Alec Stryzinowski
Grand Viewpoint Capital - Analyst
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
PRESENTATION
Operator
Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2007 Akeena Solar Earnings Conference Call. My name is [M.T.] and I'll be your coordinator for today. At this time, all participants are in listen-only mode. We'll facilitate a question-and-answer session towards the end of this conference.
(OPERATOR INSTRUCTIONS)
I would now like to turn the presentation over to your host for today's call, Ms. Jody Burfening. Please proceed, ma'am.
Jody Burfening - Lippert/Heilshorn & Associates - IR
Thank you, operator, and thank you, everyone, for joining us today for Akeena Solar's fourth quarter earnings conference call. This is Jody Burfening of Lippert/Heilshorn & Associates. With us from management are Barry Cinnamon, President and Chief Executive Officer, and Gary Effren, Chief Financial Officer.
Before starting the call, I'll review the Safe Harbor Provisions and then turn the call over to Barry. Statements made on this conference call that are not historical in nature constitute forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that are difficult to predict.
Therefore, actual results may differ from those expressed in our forward-looking statements, and these differences could be material. Forward-looking statements can be affected by many factors, including those described in the Risk Factors of the Company's filings with the Securities and Exchange Commission. These documents are available online at Akeena's website, www.akeena.com. All forward-looking statements included on today's conference call are made as of this date, and Akeena Solar assumes no obligation to update any such forward-looking statements.
With that, I would now like to turn the call over to Barry. Barry?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thank you, Jody, and thanks, everyone, for joining us today on our fourth quarter 2007 earnings conference call. I've asked Jim Curran, our Chief Operating Officer, and Steve Daniel, our Executive Vice President of Sales, to join us on this call. In addition to Gary and me, Jim and Steve will be available to answer questions on today's call. I'm going to start the call with an overview of the fourth quarter, and after Gary's review of the financial results, I'll come back and talk about our specific plans to reach profitability.
I'll start with an overview of the fourth quarter. We ended the year on a strong note, exceeding our expectations for full-year revenue growth of 135% and hitting our first quarter of more than $10 million in revenue. Revenue of $10.3 million for the fourth quarter grew by 141%, bringing the full-year revenue to $32.2 million.
As we grew the top line, we also significantly expanded our infrastructure. We more than doubled our sales office footprint and added engineering, marketing, and sales staff for both the residential and commercial market segments to help take us to the next stage of growth. These were necessary expansions to hit our goals, and the resulting expenses were planned.
During the fourth quarter, we installed just over 1,300 kilowatts of solar power compared to around 1,000 kilowatts in the third quarter and 515 kilowatts in the same quarter last year. This brings the total amount of solar power we've installed since 2001 to over 7,500 kilowatts with a track record of over 2,000 customers. Over the expected 30 year life of these installations, we will be saving over $175 million for our customers and eliminating over 450 million pounds of CO2 that would have otherwise been dumped into the air.
Our average selling price was $7.80 a watt compared to $8.05 last quarter and $8.71 in the same quarter of 2006. This change in average selling price is to be expected as we complete proportionately more commercial jobs, and installation costs for solar get closer to grid parity. Among the dozen or so commercial projects we completed this quarter, four were in the winery industry that we're focusing on.
On last quarter's call, I talked about the introduction of Andalay, our patent pending solar panel technology. In the fourth quarter, we continued to roll Andalay out as planned. We are well on our way to making a complete transition to Andalay by the end of 2008. The Andalay marketing messages are resonating with customers and other key influencers in the solar industry. And our installation teams are reporting that the labor savings and performance improvements are living up to their promise. And because the Andalay panels create a rigid, integrated structure on the roof, our installations require dramatically fewer roof attachment points, providing much better long-term reliability for our customers.
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Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Comments from customers indicate that the market adoption for Andalay is exceeding our expectations. Keep in mind that customers routinely pay a 5% to 10% premium for Andalay systems compared to ordinary systems, yet the most common comment we hear from them is simple and cuts right to the heart of Andalay's value proposition. Customers routinely ask, "Why would I buy anything else?"
Also, Andalay has been favorably accepted by building inspectors in three of the largest cities in California -- San Francisco, San Jose, and San Diego. These inspectors love the fact that with Andalay, the safety grounding of the system is integrated with the racking itself. It's virtually impossible to install an Andalay panel with improper grounding.
Recently, we heard from the U.S. Patent Office about our application to patent the Andalay technology, an application which was originally filed in 2004. Importantly, the Patent Office is allowing certain of our technology claims, and we are working with them to finalize this patent award and subsequent patents that we've filed.
As I mentioned before, we've been negotiating a second source of supply for Andalay panels in addition to the guaranteed supply of panels we have through our Suntech OEM agreement. Today, we are very proud to announce a strategic partnership with Kyocera to manufacture Andalay panels. Under the agreement, Kyocera will deliver 1.6 megawatts of panels during 2008.
Based on our forecasts for demand for residential and commercial installations in 2008 and 2009, we believe we have the right balance of projected inventory to achieve our near-term growth plans. And having a second high quality source of supply for Andalay enhances our ability to reduce our costs as panel prices decline next year.
In addition, with the Suntech licensing agreement we signed in January, we're entering markets outside of the United States, including Europe, Japan, and Australia. We're doing this in a low-risk way with licensing and in areas where the customer demand is strong and where Andalay's benefits are important to these customers. We're continuing to explore other distribution opportunities to monetize our Andalay technologies and open up new distribution channels for Akeena.
Before turning to our outlook for 2008, I'd like to touch on policy trends relevant to the solar industry. Ironically, the scheduled expiration of the Federal Tax Credit at the end of 2008 is spurring short-term demand for both residential and small commercial systems. Customers want to get their systems installed before the tax credits potentially expire at the end of 2008.
But for large commercial installations, the uncertainty with the ITC is causing some of these projects to be deferred. Fortunately, and based on our plans, the residential retrofit and small commercial market segments that we have served have been relatively insulated from the expiration of the ITC.
As you probably know, two weeks ago, the U.S. House of Representatives passed the Renewable Energy and Energy Conservation Tax Act of 2008. This renewable energy bill extends tax credits for eight more years, increases the residential credit to $4,000, and provides AMT relief. We're optimistic the bill will pass in the Senate, the third time's a charm.
It's important to note that economic circumstances have changed quite significantly since last year, with oil and gas prices hitting inflation adjusted all-time highs. On last quarter's call, I talked about the potential for oil to reach $100 a barrel. Oil traded at over $110 a barrel yesterday. Gas is at $4.19 down the street, and consumers are really feeling this pain. Every time oil and gas prices hit new highs, policymakers in Washington, D.C. take another look at renewables, and solar is the best option.
We get lots of questions about how a recession might affect our industry. When we put together our 2008 and 2009 plans, we considered the potential impact a recession might have and how we might mitigate this risk. Even though the housing and construction markets continue to weaken, solar stands out as a bright spot. The environmental benefits and economic advantages to customers remain compelling.
Customers face two financial issues when purchasing a system -- net system economics and access to credit. The net economics for solar power are only getting better. Energy prices continue to rise. For example, the price of electricity in the U.S. went up an average of 9.6% in 2007. And the after incentive costs for solar power systems are declining. So, from an ROI perspective, solar power systems are terrific investments and getting better.
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Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
The recession risk is primarily on the customer credit side. Even though access to traditional forms of credit is tightening, there are several new financing techniques that have the potential to make it even easier for our customers to borrow money for their solar power systems.
Distributed generation solar is already at grid parity in many states. Typical installation costs of about $8 per watt result in a retail electric price at the customer's meter of less than $0.19 per kilowatt hour compared to $0.37 per kilowatt hour for many customers in Northern California that they're already paying to their utility.
With Andalay, we're able to bring these costs down to $7.30 a watt, and with the expected price declines we see for solar panels, by 2010, we expect that prices can be as low as $5 a watt with similar margins on the installation side as we have now.
Note that $5 a watt works out to less than $0.12 per kilowatt hour without incentives, at a time when electricity is likely to be much higher than it is now. So, we're making excellent progress both internally getting towards grid parity and externally because electric prices rise, and that's great for our customers.
In conclusion, we're remaining on the same course because it's working great for us. We will build awareness of the Akeena brand as the best value in the industry, leverage Andalay, our proprietary solar installation technology, and increase our footprint in the most viable U.S. markets.
Now, I'll turn the call over to Gary for a review of the financials.
Gary Effren - Akeena Solar, Inc. - CFO
Thank you, Barry. I will spend the next few minutes reviewing our financial results. For the fourth quarter, revenue was $10.3 million, up 130% compared to $4.56 million for the fourth quarter of 2006, reflecting increased demand for residential and commercial solar systems. Compared with the third quarter, net sales increased 27.6%.
Gross margin for the fourth quarter was 18.2% compared to 17.2% in the same quarter of last year, and 21% in the third quarter. Margin improved year-to-year due to improved efficiency. Gross margin was down on a sequential basis due to a higher proportion of commercial installations. Commercial installations have a lower gross margin, although they contribute nicely to the bottom line since there are low marginal infrastructure costs associated with commercial jobs.
Sales and marketing expenses were $2.1 million compared to $735,000 last year, and $1.8 million in the third quarter. Compared to 2006, the $1.37 million variance was due to $1.1 million of compensation and commissions, of which $415,000 was non-cash stock-based compensation. The balance of the variance was due to marketing programs. The sequential variance for Q3 was due to commissions and stock-based compensation. Stock-based compensation included in the sales and marketing line was $427,000 for Q4, and $531,000 for the year.
Our G&A expense was $4.4 million in the current quarter compared to $1.2 million last year and $3.6 million in the third quarter. Compared to 2006, the $3.2 million variance was due to $2.3 million of compensation, of which $1,244,000 was non-cash stock-based compensation. The balance of the variance was primarily due to developing our proprietary Andalay technology and expanding our sales footprint to support our growth plans. We had nine sales offices at the end of 2007 versus three at the end of 2006. The sequential variance from Q3 of $800,000 was primarily due to compensation, of which $148,000 was non-cash stock-based compensation. Stock-based compensation included in the G&A line was $846,000 for Q4 and $1,780,000 for the year.
So in sum, fourth quarter operating expenses included $1.3 million in stock-based compensation expense, which was $500,000 higher than in Q3. Sales based incentives directly related to the 27.6% sequential increase in revenue accounted for approximately $150,000 of the quarter-to-quarter expense increase. Also in Q4, we had expenses associated with the ramp-up of the six new offices opened in 2007, including the December opening of Palm Springs and pre-opening expenses for the Thousand Oaks office. That one opened in February of 2008.
As Barry mentioned, adjusting for stock-based compensation expense in Q3 and Q4, operating expenses as a percentage of sales declined 700 basis points from 56% in Q3 of 2007 to 49% in Q4 of 2007. So, clearly we're making progress and gaining more operating leverage as we scale the business.
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Throughout 2008, as we move down the path to profitability and execute toward our goal of reaching EBITDA break-even, adjusted for stock-based compensation expense, we expect that cash operating expenses as a percentage of revenue will continue to decline and equal the gross margin percentage by the end of the year, in other words, cash break-even.
Total operating expenses for the year were $17.9 million and included $2.3 million in stock-based compensation. Our net loss for the fourth quarter of 2007 was $4.5 million, or $0.18 per share, compared to a net loss of $1.2 million, or $0.07 per share, in the same quarter of 2006.
And now, a brief review of the balance sheet. Accounts receivable at December 31, 2007, was $9.5 million. We ended the quarter with a cash balance of $22.3 million and a line of credit of $25 million. Common shares outstanding at the end of 2007 were $27,410,684.
Now, after the last conference call, some of you urged us to reconsider our decision to not provide a backlog number. We have since taken a hard look at the data to determine a meaningful definition of backlog that gives reasonable visibility into our expectations of future revenue. We decided to reinstitute our policy of disclosing a backlog metric, and it's going to be defined as all jobs under a signed contract with an expected installation date within six months.
So, excluded from the definition are signed contracts that are contingent on financing, or commercial jobs that will take longer than six months until completion. In other words, we're only going to include those jobs that have the highest probability of producing revenue within six months. Using this definition, we ended 2007 with a backlog of $16 million. Now, it's worth noting that future backlog numbers will be impacted by sales booking levels, improved operational efficiency, specifically, shortening the sale to install timeline, and also by seasonality.
So, thank you very much, and now I'm going to turn the call back to Barry.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
2008 promises to be another year of triple digit revenue growth for Akeena, building on the infrastructure we put in place in 2007. Our plan is to continue to grow in a way that clearly leads to profitability. To that end, we've implemented four concrete initiatives to improve operational efficiencies and margins in 2008.
First, as we transition to Andalay, we'll be reducing our cost of goods because with Andalay, there are no racks to install, no panel grounding, and built-in panel wiring compared to ordinary installations. Second, we've implemented a program to reduce customer acquisition costs as a percent of revenue by leveraging our sales footprint and marketing infrastructure. For example, with nine offices in California, we can more effectively take advantage of large-scale media, such as radio.
Third, with Andalay, we will see a substantial improvement in operational efficiencies. Our crews can complete more jobs in a week with Andalay than with ordinary systems, improving our labor productivity and getting better use out of assets, like tools and trucks. Our back-office efficiencies and logistics are also improved because we're able to streamline our business processes. And fourth, our headcount increases have already started to taper off. The majority of our staffing increases are now directed towards revenue producing business areas, such as sales and installation.
On a percentage basis, operating expenses, adjusted for stock-based compensation, depreciation, and amortization, will continue to decline throughout the year. These expenses already declined from 56% in Q3 to 49% in Q4, so we are well on our way.
In short, more incremental revenue will fall to the bottom line as we leverage our existing infrastructure. We're confident that we will become cash flow positive by the end of the year as we execute these initiatives and continue to build our business according to plan.
Now, we're ready for questions.
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
QUESTION AND ANSWER
Operator
(OPERATOR INSTRUCTIONS)
And your first question comes from the line of Mr. Mehdi Hosseini with FBR.
Mehdi Hosseini - Friedman, Billings, Ramsey & Co. - Analyst
Yes, thanks for taking my question. Can you please help me understand how your base of inventory is going to change going forward? I noticed that it was up by one day sequentially and up significantly on a year-over-year basis. And then, as a follow-up question, when as a part of the -- your strategy with signing licensing agreement in Europe, how should we think about the margin? Especially as you -- I imagine there's going to be some sort of agreement with the licensees in terms of sharing some of the profit, so help us understand how your margin profile is going to change as you go into the international market.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Okay, great. Thank you, Matthew. As far as --
Mehdi Hosseini - Friedman, Billings, Ramsey & Co. - Analyst
It's Mehdi.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
In the fourth quarter of 2007, that was the first quarter in, like, three years that we were actually able to have sufficient inventory to make us really confident we could hit our numbers. It's important to note that at the end of 2007, we had $16 million of backlog, so we wanted to make sure we had the right amount of inventory. And we're being very, very careful to manage that inventory as we make the transition from ordinary panels to Andalay, and we're working with our suppliers on that.
With regards to licensing and margins in Europe, we're very happy that Suntech is taking the lead on selling Andalay in Europe, Japan, and Australia. And, as you know, the licensing revenues almost go completely to the bottom line. I mean, we're getting a certain amount of money per -- for every watt of panels they sell, and we have to do very little other than just train them, support them, and give them a little bit of marketing push.
So, it's something that is going to be relatively small in 2008, I'd say less than $1 million, but it's something that's going to continue to grow. And I think most importantly, one way to think about this licensing revenue is as the Andalay technology becomes adopted widely, other manufacturers are going to say, hey, this is a good way for us to meet the requirements for safe compliance installations.
Mehdi Hosseini - Friedman, Billings, Ramsey & Co. - Analyst
So, in other words, in the long-term, you may give up some gross margin, but you make it up in the operating margin?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Exactly. What -- really, our goal is to maximize the profits for the business, and we're using a combination of licensing, our own installations here in the U.S., and maybe third-party distribution going forward. Thank you.
Mehdi Hosseini - Friedman, Billings, Ramsey & Co. - Analyst
I have a follow. I'll come back to you.
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Operator
Your next question comes from the line of Mr. Mark Manley with Natixis. Please proceed.
Mark Manley - Natixis Bleichroeder - Analyst
Hi, just a couple questions. Could you give me a sense of how much Andalay you might have installed to date? And then, a clarification on your -- you stated that GAAP net income would be profitable in 2000 -- or 2009 -- GAAP profit would be -- you'd have -- be GAAP profitable in 2009. Is that net income profitable? And then finally, just a question on the ITC. If that doesn't get passed until we see a change in the White House, how will that impact your sales?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Okay, thank you, Mark. As you know, we just started to market and sell Andalay customers at the end of the fourth quarter 2007, and we really began to ramp up the sales -- the sales and installations of Andalay in this quarter. So, as you might expect, the percentage of our revenue is still going to be relatively small in the first quarter, but we're ramping towards 100% Andalay installations by the end of the year.
I'll -- as far as the ITC and the nix on that, I think it's safe to say that every choice we, in the United States, have for a new president will improve the policy outlook for solar. So--
Mark Manley - Natixis Bleichroeder - Analyst
That's what I figured.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
--a couple industries saying, hey, it's only going to get better, and that's really, really good. Now, if the ITC is extended sooner rather than later in 2008, it may favorably impact more commercial installations for us.
I'm going to have Gary address the specifics of the GAAP net income question you had in 2009.
Mark Manley - Natixis Bleichroeder - Analyst
Okay.
Gary Effren - Akeena Solar, Inc. - CFO
And, Mark, what we said is we are committed to achieving EBITDA break-even that's adjusted for stock comp by the end of this year--
Mark Manley - Natixis Bleichroeder - Analyst
Right.
Gary Effren - Akeena Solar, Inc. - CFO
--and that we're going to make substantial progress to GAAP profitability by the end of 2009. So, substantial progress toward GAAP profitability, and that's net income, in 2009.
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Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Mark Manley - Natixis Bleichroeder - Analyst
That is net income? Okay, great. Just to clarify, though, I mean, if we don't see an ITC until somebody comes in the White House in the new year, I mean, how -- when -- would there be a drop-off in sales in the fourth quarter? When are customers going to just hold off until the new year? At what point would that impact the residential and small commercial?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Well, our plan for 2008 does not count on the ITC being extended this year.
Mark Manley - Natixis Bleichroeder - Analyst
Okay.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
What's happening, ironically, is when there's a cliff of an incentive, which the residential and small commercial customers very clearly see as affecting their installations, it has a tendency to accelerate their purchases.
Mark Manley - Natixis Bleichroeder - Analyst
Sure.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
And we've kind of baked that in. Now, if the extension -- if it's extended, then it's likely that there's going to be even more of a residential incentive. That's going to be great. And if it's extended this year, it's likely that the medium commercial segment is going to pick up again, and that's also going to be great for us. But just to reiterate, we put plans together that assume status quo.
Mark Manley - Natixis Bleichroeder - Analyst
Okay, that's helpful. Thank you.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks, Mark.
Operator
Your next question comes from the line of Colin Rusch with Broadpoint Capital. Please proceed.
Colin Rusch - Broadpoint Capital - Analyst
Good afternoon. My first question is about growing the infrastructure necessary for $100 million in revenue prior to those run rates. What was the motivation for that and how long do you expect it to take to grow into that infrastructure?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks, Colin. The motivation to put the infrastructure in place was so that we could get to that destination as quickly as we can. And these were all planned investments that we had made in 2007, and for a very large reason, that's why we went public and that's why we've got this management team here. As far as when we're going to get there, it's -- we're going to be there on a run rate at the end of 2008, early 2009.
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks, Colin.
Operator
Your next question comes from the line of Adam Krop with Ardour Capital. Please proceed.
Adam Krop - Ardour Capital Investments - Analyst
Good afternoon. My question today is on the Kyocera agreement. I was hoping you could comment on what your costs would be on a per watt basis for the modules manufactured by Kyocera.
Jim Curran - Akeena Solar, Inc. - COO
As you can imagine -- this is Jim Curran -- as you can imagine, we don't disclose those specifics, both on our own policy as well as those on our partners. However, we're very, very happy with the alignment that we've got, and the important part here is that going forward, we're very happy about the supply we've got to get to our business profitability.
Adam Krop - Ardour Capital Investments - Analyst
Okay. And then, can you also comment on when you expect to see Suntech starting to sell the Andalay panels through their distribution channels?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
We've been doing a little bit of training for Suntech sales and marketing people, both in China and in here, so we expect to see them to really successfully begin to sell those products in the third and fourth quarter.
It's important to note that there's really two types of benefits that customers get from Andalay. The end-user customers get the aesthetics, the performance benefits, the long-term reliability, and that's really important. But what's really important for installers like Akeena and installers in Europe, Japan, and Australia, is that their costs are lower and they can get more profits. So, we've done a very good job, in our view, of communicating these benefits to our partners and to the installation partners that Suntech's going to have in Europe.
Jim Curran - Akeena Solar, Inc. - COO
We should also let you know that on a quarterly basis, we're meeting with Suntech and their partners in non-U.S. to manage and modify and make any appropriate business changes to their business models to help them sell.
Adam Krop - Ardour Capital Investments - Analyst
Okay, thanks. One other question, on your geographic expansion in the U.S., you -- I know you've talked about Colorado and Hawaii as possible target states, could you just comment on how you expect to get -- or what type of strategy you're taking to get into those states and when we can maybe expect some sales coming out of those areas?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks. Our plans are to continue to grow organically. We are looking at possibly acquiring other companies if we can do it in a way that's going to be good for the shareholders. In the meantime, what we're doing is continuing to expand by, as you can see, in California and perhaps in other states, opening up our own small modest offices and leveraging those towards profitability as quickly as possible. So, all I can say is stay tuned. It'll be one of the those two options, either an acquisition or organically opening up new offices.
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
Adam Krop - Ardour Capital Investments - Analyst
Okay. And then, just one final question on the balance sheet. Can you just comment a little bit on your cash burn in the quarter and how should we be looking at that for 2008?
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Sure. Cash burn in the fourth quarter was $3.1 million, and we ended the quarter with over $22 million in cash, plus we have available cash under our borrowing arrangement. So, the way we should look at that throughout 2008 is as we get closer to that cash break-even, the number's going to go down to zero by the end of the year.
And I have to say that we were fortunate to make sure that we were adequately capitalized as a business in the last pipe that we did, and that gives us a very big advantage compared to a lot of other installers and some manufacturers because now is not a great time to be raising capital.
Adam Krop - Ardour Capital Investments - Analyst
Fair enough, thank you. Thanks very much.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks, Adam.
Operator
Your next question comes from the line of Mr. Brian Yerger with Jesup & Lamont. Please proceed.
Brian Yerger - Jesup & Lamont Securities Corp. - Analyst
Thank you. Good morning, gentlemen. Congratulations on the Kyocera deal.
Barry Cinnamon - Akeena Solar, Inc. - President, CEO
Thanks.
Brian Yerger - Jesup & Lamont Securities Corp. - Analyst
I guess we could start off with the Kyocera agreement. This is for manufacturing only, no licensing attached to that?
Jim Curran - Akeena Solar, Inc. - COO
Correct, at this point.
Brian Yerger - Jesup & Lamont Securities Corp. - Analyst
Okay. Shipment dates on this manufacturing, are we looking at this towards the end of '08 and does that imply sales being booked in '09 or do you think you're going to get this supply in time enough to book those sales for '08?
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Final Transcript
Mar. 13. 2008 / 2:00PM ET, AKNS - Q4 2007 Akeena Solar Earnings Conference Call |
And your next question comes from the line of Mr. George Santana with Global Hunter Securities. Please proceed.
Hi, gentlemen. Thanks so much for the detail and the prepared remarks, very helpful. A couple of questions. Did you touch on the revenue mix, commercial versus residential?
Sure. In Q4, we did about 35% commercial installations and 65% residential. For the year, it was more like 22% commercial and 78% residential. The revenues that we get for commercial are kind of hard to plan because it's when we get completion done, so it's a little lumpier. We're very, very comfortable that we've got this baseline growing from residential. So, we expect to see about the same mix in 2008. If there's favorable outcomes on the ITC, we may do a little bit more commercial in '08.
Now, when you say commercial, are you going a little bit larger commercial and starting to compete with more of the big buck stores versus the smaller projects you've been doing?
No. It's been our philosophy since 2001 that we like to leverage what we get from the residential sales and marketing activities. So, our commercial installations typically top out at 100 or 200 kilowatts, and we're not looking at doing jobs that are up in the megawatt level. And it's also important because there's a few companies in the industry that really focus on those segments, and they're just absolutely not competitors with us at all.
So, when you say that you're going to continue and look for the same mix in 2008, does that imply -- is that carrying forward the Q4 number or the 2007 number?
It's carrying forward the 2007 number. So, you could figure 25% commercial, maybe getting to 30% if we get good results on the ITC, but mostly residential. It's just a great business for us. We've got good margins, and, as you can see, it's giving us a nice steady growth path.
On that point, then, what we saw in the gross margin and the progression through 2007, should we assume the fourth quarter going forward or more of an average of the 2007 going forward?
Well, George, if the mix didn't change during 2008, you would expect the gross margin to improve as we transition from ordinary residential installations to Andalay installations.
