SOURCE: World Energy Solutions

World Energy Solutions

February 17, 2011 07:01 ET

World Energy Solutions Achieves Record Quarterly and Full-Year Revenue

Company Posts Second Consecutive Quarter of Net Income, Fifth Straight of Positive Adjusted EBITDA

WORCESTER, MA--(Marketwire - February 17, 2011) - World Energy Solutions, Inc. (NASDAQ: XWES), a leading energy management services firm, today announced financial results for the fourth quarter and fiscal year ended December 31, 2010. In Q4 2010, World Energy delivered its second straight quarter of net income -- doubling earnings per share from Q3 2010 to $0.04 per share -- on record revenue and record backlog.

Financial Highlights (All figures are in US dollars and compare the quarterly and annual 2010 results to the corresponding periods in the prior year.)

Record Revenue and Backlog
--  Quarterly revenue surged 40% to $4.9 million
--  Annual revenue grew 23% to $18.0 million
--  Annualized backlog reached $13.9 million, up 22%
--  Total backlog rose 19% to $26.2 million
Record Operating Results
--  Net income for the quarter was $0.4 million, or $0.04 per share
--  Adjusted EBITDA* grew to $0.8 million for the quarter and $2.0 million
    for the year
--  Gross margins were 81% for the quarter and 79% for the year
--  Net loss for the year was $0.1 million, or $(0.01) per share
Strengthened Balance Sheet
--  Cash and cash equivalents for the year grew to $3.6 million, up 74%
--  Working capital for the year increased to $3.4 million, up 119%

Product Line Highlights

--  Robust Retail bookings and revenue
--  Expanded and solidified Government franchise with new wins and key
    renewals
--  Entered the demand response market with the successful launch of the
    World DR Exchange®
--  Wholesale customers increased 26% to 68; channel partners grew 44% to
    135
--  Continued execution under the renewed RGGI program

"World Energy had an outstanding 2010," said Richard Domaleski, CEO of World Energy Solutions. "We achieved 23 percent revenue growth -- and have now tripled the size of the Company over the last four years; we successfully entered new markets and expanded our product line to include demand response; and we secured several key Government contracts up for renewal in the period, a group that includes our largest customer, the Federal Government, and accounts for approximately 40 percent of our total backlog. The year also served to highlight the scalability in our business model, as two-thirds of our revenue growth dropped directly to the bottom line.

"Our 2010 results were capped by our best quarterly performance ever in the fourth quarter, with revenues just shy of $5 million and gross margins climbing to 81%, resulting in earnings per share growing to $0.04 and our cash balance rising by $1.5 million. And with all our leading indicators at record levels, we've entered 2011 with great momentum and a growing reputation as a trusted brand in energy management."

Financial Review

Full-Year 2010

For the full year ended December 31, 2010, revenue increased by 23% to $18.0 million. This growth reflects increased auction activity in our Retail product line reflecting new customer wins, including continued success in the Ohio electricity market, increased gas transaction activity and further growth in our channel partner network.

Gross margin percentage for 2010 was 79% compared to 75% in the same period last year as we continued to benefit from the operating leverage in our business model. Total operating expenses for 2010 increased 9% due to higher third-party and internal commission expense directly associated with the 23% increase in revenue, as well as increased investor outreach and marketing. These increases were partially offset by a net reduction in compensation and travel costs. Net loss for 2010 was $0.1 million, or $(0.01) per share, compared with a net loss of $2.3 million, or $(0.27) per share, in 2009. This improvement was driven by the increase in revenue and the 4% rise in gross margin percentage.

Q4 2010

Revenue for the three months ended December 31, 2010 rose 40% over the same period last year to $4.9 million due to increased auction activity in our Retail product line.

Gross margin percentage increased 2% to 81% for the three months ended December 31, 2010, compared to 79% in the same period last year. Total operating expenses for the three months ended December 31, 2010 increased 20% primarily due to increased internal and third party commission expense resulting from the 40% increases in revenue, as well as increased marketing and investor outreach. Net income for the quarter was $0.4 million, or $0.04 per share, compared with a net loss of $0.2 million, or $(0.03) per share, in Q4 2009.

At December 31, 2010, we had no bank debt and cash and cash equivalents of $3.6 million, compared with $2.1 million at September 30, 2010 and $2.0 million at December 31, 2009. The increase in cash and cash equivalents was primarily due to cash generated from adjusted EBITDA* of $0.8 million during the fourth quarter and $2.0 million for the year.

Note: Backlog relates to contracts in force on a given date representing transactions between bidders and listers on our platform related to commodity brokerage assuming listers consume energy at their historical usage levels or deliver credits at expected levels. Total backlog represents the revenue that the Company would derive over the remaining life of those contracts. Annualized backlog represents the revenue that the Company would derive from those contracts within the 12 months following the date on which the backlog is calculated. Total and annualized backlog at December 31, 2010 included commodity backlog of $25.2 million and $12.9 million, respectively. In addition, total and annualized backlog include contracted management fees between World Energy and energy consumers for energy management and auction administration services of $1.0 million that are expected to be received over the following 12 month period. These management fees can be terminated within 30 days per the terms of the contracts.

Conference Call & Webcast

World Energy will hold a conference call today, February 17, 2011, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 1-877-407-9205 (domestic) or 1-201-689-8054 (international). A replay will be available two hours after the completion of the call, and for one month following the call, by dialing 1-877-660-6853 for domestic participants or 1-201-612-7415 for international participants, and entering account #286 and conference ID #366620 when prompted. Participants may also access a live webcast of the conference call through the investor relations section of World Energy's website, www.worldenergy.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 365 days.

* Non-GAAP Financial Measures

World Energy continues to provide all information required in accordance with GAAP and also provides certain non-GAAP financial measures. A "non-GAAP financial measure" refers to a numerical measure of the Company's historical performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable financial measure calculated and presented in accordance with GAAP in the Company's financial statements. World Energy provides adjusted EBITDA as additional information relating to our operating results. This non-GAAP measure excludes expenses related to share-based compensation, depreciation related to our fixed assets, amortization expenses associated with acquisition-related assets and capitalized software and net interest.

Management believes it is useful to exclude depreciation, amortization and net interest as these are essentially fixed amounts that cannot be influenced by management in the short term. In addition, management believes it is useful to exclude share-based compensation as this is not a cash expense.

Management uses this non-GAAP measure for internal reporting and bank reporting purposes. World Energy provides this non-GAAP financial measure in addition to GAAP financial results, because management believes that this non-GAAP financial measure provides useful information to certain investors and financial analysts in helping them to better understand the Company's operating results and underlying operational trends. It also provides a consistent basis for comparison across accounting periods.

This non-GAAP financial measure is not prepared in accordance with GAAP. This measure may differ from the GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare the Company's performance to that of other companies. There are significant limitations associated with the use of non-GAAP financial measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss) prepared in accordance with GAAP.

Whenever World Energy reports non-GAAP financial measures, a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure will be made available. Investors are encouraged to review these reconciliations to ensure they have a thorough understanding of the reported non-GAAP financial measures and their most directly comparable GAAP financial measures. Reconciliation of GAAP net income (loss) to adjusted EBITDA is shown below:

                        Three Months Ended,        Twelve Months Ended,
                    --------------------------  --------------------------
                    December 31,  December 31,  December 31,  December 31,
                        2010          2009          2010          2009
                    ------------  ------------  ------------  ------------
GAAP net income
 (loss)             $    381,779  $   (236,639) $    (99,087) $ (2,333,519)
  Add: Interest
   (income)
   expense, net           (8,637)        1,397        (8,682)        6,051
  Add: Share-based
   compensation          129,337       127,643       671,323       633,285
  Add: Amortization      293,189       357,103     1,294,491     1,509,573
  Add: Depreciation       33,336        35,877       139,612       146,322
                    ------------  ------------  ------------  ------------

Non-GAAP adjusted
 EBITDA             $    829,004  $    285,381  $  1,997,657  $    (38,288)
                    ============  ============  ============  ============

About World Energy Solutions, Inc.

World Energy Solutions, Inc. (NASDAQ: XWES) is an energy management services firm that brings together the passion, processes and technologies to take the complexity out of energy management and turn it into bottom-line impact for the businesses, institutions and governments we serve. To date, the Company has transacted more than $20 billion in energy, demand response and environmental commodities on behalf of its customers, creating more than $1 billion in value for them. World Energy is also a leader in the global carbon market, where its World Green Exchange® supports the ground-breaking Regional Greenhouse Gas Initiative's (RGGI) cap and trade program for CO2 emissions. For more information, please visit www.worldenergy.com.

This press release contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to the following: our revenue and backlog are dependent on actual future energy purchases pursuant to completed procurements; the demand for our services is affected by changes in regulated prices or cyclicality or volatility in competitive market prices for energy; and there are factors outside our control that affect transaction volume in the electricity market. Additional risk factors are identified in our Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission.

                          WORLD ENERGY SOLUTIONS, INC.

          SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                         Three Months Ended        Twelve Months Ended
                            December 31,               December 31,
                    --------------------------  --------------------------
                        2010          2009          2010          2009
                    ------------- ------------  ------------  ------------

Revenue             $   4,914,584 $  3,499,758  $ 17,984,662  $ 14,618,275

Cost of revenue           939,532      741,441     3,715,869     3,709,957
                    ------------- ------------  ------------  ------------

Gross profit            3,975,052    2,758,317    14,268,793    10,908,318

Sales and
 marketing              2,399,593    2,166,469     9,483,350     9,714,900

General and
 administrative         1,202,317      827,090     4,893,212     3,520,886
                    ------------- ------------  ------------  ------------

Operating income
 (loss)                   373,142     (235,242)     (107,769)   (2,327,468)

Interest income
 (expense), net             8,637       (1,397)        8,682        (6,051)
                    ------------- ------------  ------------  ------------

Income (loss)
 before income
 taxes                    381,779     (236,639)      (99,087)   (2,333,519)
Income tax expense
 (benefit)                     --           --            --            --
                    ------------- ------------  ------------  ------------

Net income (loss)   $     381,779 $   (236,639) $    (99,087) $ (2,333,519)
                    ============= ============  ============  ============

Earnings (loss)
 per share:
  Earnings (loss)
   per share -
   basic and
   diluted          $        0.04 $      (0.03) $      (0.01) $      (0.27)
                    ============= ============  ============  ============

Weighted average
 shares outstanding
 - basic                9,107,943    8,710,305     9,067,834     8,512,060
                    ============= ============  ============  ============

Weighted average
 shares outstanding
 - diluted              9,198,720    8,710,305     9,067,834     8,512,060
                    ============= ============  ============  ============




              SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET

                                                               December 31,
                                                                   2010
                                                               ------------
Assets
  Cash and cash equivalents                                    $  3,559,288
  Trade accounts receivable, net                                  3,124,328
  Other current assets                                              229,108
  Property and equipment, net                                       287,191
  Goodwill                                                        3,178,701
  Other assets                                                    4,348,178
                                                               ------------
    Total assets                                               $ 14,726,794
                                                               ============

Liabilities and stockholders' equity
  Accrued commissions                                          $    847,758
  Accounts payable and accrued liabilities                        2,421,482
  Other current liabilities                                         244,337
                                                               ------------
    Total current liabilities                                     3,513,577
  Total long-term liabilities                                         1,205
  Stockholders' equity                                           11,212,012
                                                               ------------
    Total liabilities and stockholders' equity                 $ 14,726,794
                                                               ============

Contact Information

  • For additional information, contact:

    Jim Parslow
    World Energy Solutions, Inc.
    (508) 459-8100
    Email Contact

    or

    Dan Mees
    World Energy Solutions, Inc.
    (508) 459-8156
    Email Contact

    Erika Moran
    The Investor Relations Group
    (212) 825-3210
    Email Contact

    or

    Craig Armitage
    The Equicom Group
    (416) 815-0700 x278
    Email Contact