SOURCE: World Energy Solutions

World Energy Solutions

November 03, 2011 07:30 ET

World Energy Solutions Reports Record Quarterly Revenue, Fifth Straight Quarter of Net Income

Company Delivers Earnings per Share of $0.08, Makes Strategic Acquisitions

WORCESTER, MA--(Marketwire - Nov 3, 2011) - World Energy Solutions, Inc. (NASDAQ: XWES), a leading energy management services firm, today announced financial results for the three months ended September 30, 2011.

Financial Highlights (All figures are in US dollars and compare the three months ended September 30, 2011 results to the same period in 2010.)

Revenue and Backlog

  • Quarterly revenue increased 21% to a record $5.6 million
  • Annualized backlog reached a record $14.2 million; total backlog was $23.3 million

Operating Results

  • Net income was $0.9 million, or $0.08 per share, also a record
  • Adjusted EBITDA* doubled to $1.3 million
  • Gross margins rose to 83%, up from 80%

Liquidity and Balance Sheet

  • Cash from operations increased from $0.6 million to $1.3 million
  • Cash and cash equivalents were $6.5 million, with no debt

Operating Highlights

  • Record Retail revenue with significant customer wins and renewals
  • Wholesale customers increased 22% to 79; channel partners grew 33% to 172
  • World Energy acquired the energy procurement business of Co-eXprise
  • Subsequent to quarter end, World Energy acquired two additional companies: Northeast Energy Solutions, an energy efficiency firm, and GSE Consulting, a TX-based energy procurement company

"Our outstanding Q3 results provide continuing evidence that our business model -- with its visibility and scalability -- can deliver increasing revenue and profitability, as it has done now for the better part of 2010 and 2011," said Richard Domaleski, CEO of World Energy Solutions.

"Over the last two months, we have applied the funds we raised in Q2 to close three acquisitions that we view as fundamentally game-changing, bringing us new customers, capabilities and revenue streams to advance our leadership in energy management.

"In aggregate, we paid less than 6x EBITDA for these companies. We expect that they will help us accelerate our revenue growth beyond our historical levels of 15-20% to upwards of 40-60% in 2012. Further, because of our predominately fixed cost structure and the operating leverage in our business model, we see EBITDA growing even more rapidly."

Financial Review

Year-to-Date 2011

For the nine months ended September 30, 2011, revenue increased by 16% to $15.2 million. This growth reflects increased auction activity in our Retail product line, including an agreement with one of our energy suppliers for the full payment of all future amounts due us subsequent to August 1, 2011 without recourse. The net result was a $0.7 million increase to revenue during the third quarter. In addition the Retail product line reflected new customer wins, including continued success in the Pennsylvania electricity market and further growth in our channel partner network.

Gross margin percentage for 2011 was 81% compared to 79% in the same period last year as we continued to benefit from the operating leverage in our business model. Total operating expenses for 2011 increased 2% as increases in third-party commission expense directly associated with the 16% increase in revenue were substantially offset by a net reduction in compliance, marketing, and investor relations costs. Net income for 2011 was $1.3 million, or $0.13 per share, compared with a net loss of $0.5 million, or $(0.05) per share, in 2010. This improvement was driven by the increase in revenue and the 2% rise in gross margin percentage.

Q3 2011

Revenue for the three months ended September 30, 2011 rose 21% over the same period last year to $5.6 million due to the supplier payment mentioned above and increased auction activity in our Retail product line.

Gross margin percentage increased 3% to 83% for the three months ended September 30, 2011, compared to 80% in the same period last year. Total operating expenses for the three months ended September 30, 2011 increased 6% as third-party commission expense increased due to the 21% increase in revenue and increased cost due to transaction costs associated with the acquisition of Co-eXprise's energy procurement business. Net income for the quarter was $0.9 million, or $0.08 per share, compared with net income of $0.1 million, or $0.02 per share, in Q3 2010.

At September 30, 2011, we had no bank debt and cash and cash equivalents of $6.5 million, compared with $2.1 million at September 30, 2010 and $3.6 million at December 31, 2010. The increase in cash and cash equivalents was primarily due to $5.3 million of net proceeds from our equity offering during the second quarter and cash generated from adjusted EBITDA* of $2.7 million during the first nine months of 2011 both offset by the Co-eXprise acquisition for $4.0 million.

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 September 30, 2011 included commodity backlog of $22.3 million and $13.2 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, November 3, 2011, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 1-866-352-2112 (domestic) or 1-630-691-2779 (international) and enter passcode 7674892#. A replay will be available two hours after the completion of the call, and for one week following the call, by dialing 1-888-843-7419 for domestic participants or 1-630-652-3042 for international participants, and entering passcode 7674892# 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, net interest and income tax expense.

Management believes it is useful to exclude depreciation, amortization, net interest and income tax expense 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 September 30, Nine Months Ended September 30,
2011 2010 2011 2010
GAAP net income (loss) $ 855,144 $ 147,227 $ 1,296,544 $ (480,866 )
Less: Interest income, net (14,183 ) (2,555 ) (41,646 ) (45 )
Add: Share-based compensation 171,389 186,677 488,897 541,986
Add: Amortization 292,572 300,878 847,633 1,001,302
Add: Depreciation 30,941 34,499 97,965 106,276
Add: Income taxes 7,250 - 21,750 -
Non-GAAP adjusted EBITDA $ 1,343,113 $ 666,726 $ 2,711,143 $ 1,168,653

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 Energy 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 effects of our acquisitions on our growth; 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
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010

Revenue

$ 5,625,070

$ 4,650,992
$ 15,180,140 $ 13,070,078

Cost of revenue

970,846

913,452
2,907,359 2,776,337

Gross profit

4,654,224

3,737,540
12,272,781 10,293,741

Sales and marketing expenses

2,512,191

2,177,921
7,385,241 7,083,757

General and administrative expenses

1,293,822

1,414,947
3,610,892 3,690,895

Operating income (loss)

848,211

144,672
1,276,648 (480,911 )

Interest income, net

14,183

2,555
41,646 45

Income (loss) before income taxes

862,394

147,227
1,318,294 (480,866 )
Income tax expense 7,250 -- 21,750 --

Net income (loss)

$ 855,144

$ 147,227
$ 1,296,544 $ (480,866 )

Net Income (loss) per share:
Net Income (loss) per share - basic and diluted $ 0.08 $ 0.02 $ 0.13 $ (0.05 )

Weighted average shares outstanding - basic

10,762,417

9,083,807
10,187,755 9,054,317

Weighted average shares outstanding - diluted

10,809,144

9,189,776
10,247,294 9,054,317

SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2011
Assets
Cash and cash equivalents $ 6,516,266
Trade accounts receivable, net 3,688,073
Other current assets 410,314
Property and equipment, net 202,557
Goodwill 5,010,092
Other assets 5,564,523
Total assets $ 21,391,825

Liabilities and stockholders' equity
Accrued commissions $ 918,840
Accounts payable and accrued liabilities 1,908,694
Other current liabilities 184,150
Total current liabilities 3,011,684
Total long-term liabilities --
Stockholders' equity 18,380,141
Total liabilities and stockholders' equity $ 21,391,825

Contact Information

  • For additional information, contact:

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

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