A123 Systems, the Watertown, Mass.-based battery maker that jump-started a slew of greentech IPO filings with its $371 million public offering last fall, has entered the thick of the long slog to transform an innovative, government-backed startup into a sustainable business that can compete with industry giants. The company reported its earnings for the first three months of 2010 today, showing increased revenue and new battery deals — just today, A123 announced that it will supply battery systems for Eaton Corp. in a plug-in hybrid truck project – but also rising costs.
Eaton, using funds from a $45 million stimulus grant awarded through the Department of Energy, plans to produce a hybrid power system for installation in a plug-in hybrid truck based on Ford’s F550 model and used by utilities for work on transmission and distribution lines. According to a release from A123 this afternoon, the battery maker has been developing this system “for much of 2010″ with Eaton. It expects the battery pack to recharge within six hours and deliver a 10 mile electric range, or 5-6 hours of operation at a work site when the engine is off.
The battery maker reported $24.5 million in revenues for the quarter, up slightly from $23.2 million in revenue from the same period a year earlier. Amid rising costs associated with its efforts to expand and buildout manufacturing capacity, A123 reported a net loss of approximately $29 million or 28 cents per share for the first quarter of this year, compared to a net loss of $18.7 million or $2.02 per share during this period in 2009. A123′s stock price climbed upwards of $20 in its first day of trading, but it has consistently traded lower than that in the months since. During after hours trading on Tuesday, A123′s stock was trading as low as $9.60.
Overall, A123′s revenue mix in the first quarter of this year reflects its shift away from the consumer market (mainly energy storage for power tools) and an increasing focus on the nascent electric vehicle and grid storage markets. Transportation — which accounted for just 7 percent of the company’s revenue back in 2007 — contributed $10.3 million or about 42 percent of total revenue between January and March 2010. Meanwhile, A123′s electric grid unit contributed $5.2 million and sales in the consumer market brought in $4.3 million.
A123 said today that it’s currently “engaged in development and design activities” with twice as many transportation customers as the number it had engaged before closing its IPO. Half of that increase is connected to passenger vehicle programs, according to the company.
A123 CEO David Vieau said in a call with analysts and shareholders this afternoon that a “majority” of deals now under discussion in this segment “go beyond demos,” and A123′s batteries are being “considered for a little bit bigger scale.”
Despite many automakers’ public statements that they aim to source battery cells from outside suppliers while bringing battery pack technology in-house, A123 executives said today that some of these same car companies have asked for quotes on full battery systems. They expect car companies may purchase a “blend of cells, modules and systems” down the road. “We look at our mix of projects going forward, this is very heavily systems oriented,” they said. “We don’t see that tendency toward cells right now.”
Electric grid services have made up a growing portion of A123′s revenue during the last few years, and over the long term they could hold increasing importance for a battery maker that has generated much of its revenue to date from deals with consumer product makers — chiefly power tools — but never turned a profit.
For more on batteries and electric vehicles check out GigaOM Pro (subscription required):