Slowly but surely, the advanced battery business is starting to pick up steam, at least in the fleet market Valence Technology (Nasdaq: VLNC ) serves.
For its second fiscal quarter, Valence reported revenue of $12.7 million, up 278% from the first quarter last year. What's more impressive is the 127% sequential growth from the previous quarter. As the battery business picks up, sequential growth will be more meaningful than year-over-year results going forward.
Valence still reported a loss of $3.6 million, or $0.03 per share, but that is down from a $6.2 million loss last year. Litigation costs of $1.5 million associated with pending patent disputes also hurt the company.
What impressed me most in the quarter were gross margins improving to 22%, up another 5 percentage points from last quarter. Margins have been an issue at battery makers like Ener1 (Nasdaq: HEV ) and A123 Systems (Nasdaq: AONE ) , which have low capacity utilization, so it's nice to see them improving to a comfortable level at Valence.
Throwing cash in the fire
Cash burn at Valence and other battery manufacturers is a major concern as revenue starts to pick up. Valence is walking a tightrope right now with cash on hand only at $4.2 million and accounts receivable and inventory increasing a combined $14.6 million since the March quarter.
I doubt Valence can generate enough cash to maintain operations, so more equity offerings may be made, diluting shareholders further. Over the last year, share count has increased 8.6%, but that's a risk battery investors are used to dealing with.
Overall, Valence had a great quarter and we're getting closer to breakeven, which management anticipates at around $80 million in annual sales. Valence has a ways to go to catch up with Advance Battery Technologies (Nasdaq: ABAT ) , which already has a history of profits, but now we can see the light at the end of the tunnel.
Interested in reading more about Valence Technology? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.
For more Foolishness: