WORCESTER, Mass., May 14, 2013 (GLOBE NEWSWIRE) -- World Energy Solutions, Inc. (Nasdaq:XWES), a leading energy management services firm, today announced financial results for the first quarter ended March 31, 2013.
Financial Highlights (All figures are in US dollars; comparisons of performance are made between Q1 2013 results and Q1 2012 results, unless otherwise noted.)
Record Q1 Revenue and Backlog
- Quarterly revenue increased 27% to $8.7 million
- Annualized backlog increased 23% to $23.8 million
- Total backlog plus deferred revenue rose 27% to $50.2 million
Operating Results
- EBITDA grew 161% to $0.4 million
- Net loss was ($1.0 million), or ($0.08) per share
- Gross margins were 74%
Liquidity and Balance Sheet
- Cash flow from operations was $0.7 million, up $1.2 million
- Free cash flow was $4.6 million for the 12-months ended March 31, 2013
- Cash and cash equivalents were $2.1 million
Business Highlights
- Energy Procurement:
- The large commercial & industrial (LCI) team ran a successful multi-state aggregation for a Fortune 100 company; notched new hospital wins with channel partner GNYHA; and made inroads in Texas with a successful auction for Abilene Independent School District
- Wholesale posted its second best quarter ever, executing major electricity and natural gas buys for utilities in the Northeast, Midwest and Mid-Atlantic
- Government supported the 19th RGGI auction and continued to grow the Federal Government's Natural Gas Acquisition Program (NGAP)
- Mid-market experienced strong sales in the Southwest, key renewals in the Northeast
- Energy Efficiency Services:
- Grew revenue 57% over Q1 2012
- Drove cross-sell leads in CT and MA
"We delivered strong results in the first quarter, despite the challenges of rising commodity prices and the previously announced changes to our mid-market business," said Phil Adams, CEO of World Energy Solutions. "Revenue grew 27%, reflecting the addition of NEP, strong growth in our Energy Efficiency Services segment, increased traction in our cross-sell efforts, near record performance from our Wholesale team, and new customer wins across our Retail Energy Procurement business. World Energy's fundamentals and long-term outlook remain strong, and our results continue to validate our transition from an auction-based, procurement-only company to one offering a broader range of energy management services.
"For 2013, our plan calls for top-line growth of 20%, EBITDA increasing by over 50%, and cash generation sufficient to meet our working capital requirements and to retire the obligations incurred from our acquisitions. We expect net loss to remain on par with 2012's results, reflecting the impact of the revenue recognition policy change we announced last quarter that defers certain revenue to the future while expensing channel and sales commission as cash is received or contracts are booked."
Financial Review
Revenue for the three months ended March 31, 2013 rose 27% over the same period last year to $8.7 million, reflecting significant increases in both Energy Procurement and Energy Efficiency Services. Energy Procurement grew 24%, reflecting the acquisition of NEP in Q4 2012 and continued execution in the Company's base business. Energy Efficiency Services grew 57%, as the Company continued to execute under the four utility efficiency program designations it was awarded in 2012 and capitalized on cross-sell opportunities.
Gross margins were 74% for the quarter compared to 73% for the same period last year, reflecting an increase in Energy Procurement gross margins. Energy Procurement gross margins increased 4% to 83% as a result of increased revenue with costs only slightly increasing over Q1 2012. Energy Efficiency Services gross margins were 20% compared to 27% in Q1 2012, reflecting increased payroll costs associated with additional project managers in Q1 2013 and, to a lesser extent, slightly lower margins on projects completed in Q1 2013 versus Q1 2012. Operating expenses as a percentage of sales decreased 3% to 81% as the growth in revenue exceeded the increase in costs. The increase in operating expenses was primarily due to higher payroll, commissions and intangible assets related to the NEP acquisition and general headcount increases in the Company's sales, marketing and back office operations. As a result, the Company's operating margin improved 4% to (7)% and EBITDA* margin was 5% compared to 2% in the prior year quarter.
At March 31, 2013, the Company had cash and cash equivalents of $2.1 million, compared with $3.3 million at December 31, 2012 and $2.4 million at March 31, 2012. The decrease in cash and cash equivalents during the quarter was primarily due to $1.4 million of contingent consideration payments and $0.5 million of principal payments on long-term debt offset by cash flow from operations of $0.7 million. Cash flow from operations increased $1.2 million compared to Q1 2012. Free cash flow* was $4.6 million for the 12-months ended March 31, 2013, a 22% increase over the same period in the prior year. The Company continues to maintain its $2.5 million line-of-credit and has not borrowed against that facility to date.
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 commission that the Company would derive over the remaining life of those contracts. Annualized backlog represents the commission 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 March 31, 2013 included commodity backlog of $43.1 million and $23.0 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 $0.8 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, May 14, 2013, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 1 (888) 517-2458 (domestic) or 1 (847) 413-3538 (international) and enter passcode 6462953#. A replay will be available two hours after the completion of the call, and for one month following the call, by dialing 1 (888) 843-7419 for domestic participants or 1 (630) 652-3042 for international participants, and entering passcode 6462953# 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 30 days.
* Non-GAAP Financial Measures
World Energy provides all information required in accordance with GAAP and also provides certain "non-GAAP financial measures." A non-GAAP financial measure refers to a numerical financial measure that is 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 EBITDA, adjusted EBITDA and free cash flow as additional information relating to our operating results. These non-GAAP measures exclude expenses related to share-based compensation, depreciation related to our fixed assets, amortization expense related to acquisition-related assets and other assets, interest expense on bank borrowings, notes payable to sellers and contingent consideration, interest income on invested funds and notes receivable, and income taxes.
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 defines free cash flow as net cash provided by operating activities less capital expenditures. Management defines capital expenditures as purchases of property and equipment, which includes capitalization of internal-use software development costs.
Management uses these non-GAAP measures for internal reporting and bank reporting purposes. World Energy provides these non-GAAP financial measures in addition to GAAP financial results, because management believes that these non-GAAP financial measures provide useful information to certain investors and financial analysts in helping them to better understand the Company's operating results and underlying operational trends. They also provide a consistent basis for comparison across accounting periods.
These non-GAAP financial measures are not prepared in accordance with GAAP. These measures 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 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 to EBITDA and adjusted EBITDA is shown below:
| Three Months Ended March 31, | ||
| 2013 | 2012 | |
| GAAP net loss | $(956,885) | $(783,064) |
| Add: Interest expense | 202,737 | 89,444 |
| Add: Income taxes | 131,305 | 27,500 |
| Add: Amortization of intangibles | 974,758 | 759,247 |
| Add: Amortization of other assets | 8,507 | 12,937 |
| Add: Depreciation | 55,669 | 53,550 |
| Non-GAAP EBITDA | $416,091 | $159,614 |
| Non-GAAP EBITDA per share | $0.03 | $0.01 |
| Add: Share-based compensation | 145,986 | 119,541 |
| Non-GAAP adjusted EBITDA | $562,077 | $279,155 |
| Non-GAAP adjusted EBITDA per share | $0.05 | $0.02 |
| Weighted average diluted shares | 12,077,901 | 11,983,573 |
|
Reconciliation of Free Cash Flow for Three Months Ended March 31, |
Reconciliation of Free Cash Flow for Twelve Months Ended March 31, |
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| 2013 | 2012 | 2013 | 2012 | |
| Net cash provided by (used in) | ||||
| operating activities | $665,397 | $(492,266) | $4,944,211 | $3,787,237 |
| Less: Purchases of property and | ||||
| equipment | (9,216) | (31,615) | (381,507) | (44,235) |
| Free cash flow | $656,181 | $ (523,881) | $4,562,704 | $3,743,002 |
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 $40 billion in energy, demand response and environmental commodities on behalf of its customers, creating more than $2 billion in value for them. World Energy is also a leader in the global carbon market, where its World Energy Exchange® supports the Regional Greenhouse Gas Initiative (RGGI), the first mandatory market-based regulatory program in the U.S. to reduce greenhouse gas emissions. For more information, please visit www.worldenergy.com.
This press release contains forward-looking statements. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The Company has based these forward-looking statements on its current expectations and projections about future events, including without limitation, its expectations of backlog and energy prices. Although the Company believes that the expectations underlying any of its forward-looking statements are reasonable, these expectations may prove to be incorrect and all of these statements are subject to risks and uncertainties. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections or expectations prove incorrect, actual results, performance or financial condition may vary materially and adversely from those anticipated, estimated or expected. Such risks and uncertainties include, but are not limited to the following: the Company's revenue and backlog are dependent on actual future energy purchases pursuant to completed procurements; the demand for the Company's services is affected by changes in regulated prices or cyclicality or volatility in competitive market prices for energy; the potential impact on the Company's historical and prospective financial results of a change in accounting policy may negatively impact its stock price; and other factors outside the Company's control that affect transaction volume in the electricity market. Additional risk factors are identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent reports filed with the Securities and Exchange Commission. The forward-looking statements made in this press release are made as at the date hereof. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, other than as required by securities laws.
| WORLD ENERGY SOLUTIONS, INC. | ||
| SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
|
Three Months Ended March 31, |
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| 2013 | 2012 | |
| Revenue | $8,657,482 | $6,793,407 |
| Cost of revenue | 2,233,151 | 1,823,413 |
| Gross profit | 6,424,331 | 4,969,994 |
| Sales and marketing | 4,978,081 | 3,814,183 |
| General and administrative | 2,061,673 | 1,875,037 |
| Operating loss | (615,423) | (719,226) |
| Interest expense, net | (202,737) | (89,444) |
| Other income (expense) | (7,420) | 53,106 |
| Loss before income taxes | (825,580) | (755,564) |
| Income tax expense | 131,305 | 27,500 |
| Net loss | $(956,885) | $ (783,064) |
| Net loss per common share – basic and diluted | $ (0.08) | $ (0.07) |
| Weighted average shares outstanding – basic and diluted | 11,966,108 | 11,869,648 |
SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET March 31, 2013 Assets Cash and cash equivalents $2,103,246 Trade accounts receivable, net 7,246,357 Other current assets 2,464,042 Property and equipment, net 604,425 Goodwill 16,167,834 Intangible and other assets, net 18,782,525 Long-term portion of deferred tax asset 5,769,175 Total assets $53,137,604 Liabilities and stockholders' equity Accrued commissions $1,354,544 Accounts payable and accrued liabilities 7,608,456 Deferred revenue and customer advances 2,167,799 Notes payable and current portion of long-term debt 3,460,127 Total current liabilities 14,590,926 Deferred revenue and customer advances 4,142,703 Long-term debt 8,437,888 Stockholders' equity 25,966,087 Total liabilities and stockholders' equity $53,137,604