WORCESTER, Mass., Aug. 8, 2014 (GLOBE NEWSWIRE) -- World Energy Solutions, Inc. (Nasdaq:XWES), a leading energy technology and services firm, today announced financial results for the three and six months ended June 30, 2014.
Financial Highlights (All figures are in US dollars; comparisons of performance are made between Q2 2014 results and Q2 2013 results, unless otherwise noted.)
Revenue and Backlog
- Quarterly revenue grew 18% to $9.4 million
- Revenue for the six-month period increased 14% to $18.9 million
- Annualized backlog grew 1% to $24.3 million
- Total backlog increased 2% to $45.0 million
- EBITDA climbed to a record $1.3 million, up from ($0.2) million
- EBITDA margin was 14%, up from (3%)
- Net income improved to $0.3 million, or $0.02 per share, up from a ($1.7) million loss or ($0.14) per share
- Gross margins in the quarter rose to 77%, up from 73%
- Energy procurement gross margins increased to 88% from 82%
- Energy efficiency services gross margins increased to 21% from 9%
Liquidity and Balance Sheet
- Cash and cash equivalents were $2.3 million at quarter end, a 33% increase from December 31, 2013
- The Company retired the last of its seller-note and earnout obligations
"The second quarter marks a return to GAAP net income for World Energy," said Phil Adams, CEO of World Energy Solutions. "Not only did we show double-digit organic revenue growth, but we achieved record EBITDA and reached quarterly profitability more quickly than expected. We also continued to generate cash, growing our cash balance 33% from year end, while retiring the last $500,000 in seller notes from our acquisitions.
"In Q2, our energy procurement team posted strong sales, as energy prices moved down from their winter highs. Our energy efficiency team also had a successful sales quarter, growing revenue by nearly 50% over Q2 2013 and increasing margins. We expect the energy efficiency segment to generate net income for the second half of the year.
"Based on our results through the first half of the year, a strong sales pipeline, and continued improvement in sales and operational performance, we are again raising our view on EBITDA growth. We now forecast we will double last year's EBITDA and reach GAAP profitability for the full year."
Revenue for the three months ended June 30, 2014 increased 18% to $9.4 million as revenue from both segments increased compared to the same period last year. Energy procurement revenue rose 14%, reflecting increased transaction activity from our auction and mid-market customers as well as higher revenue recognized from previously deferred items. Energy efficiency services grew 47% as our rebuilt Massachusetts sales team gained traction in the market and delivered an increase in the number of projects and the average project size in the second quarter of 2014.
Gross margins improved to 77% compared to 73% in the same period last year, reflecting an increase in both segments. Energy procurement gross margins increased to 88%, from 82%, reflecting a decrease in payroll due to our continued integration, automation, and reorganization efforts to improve processes and drive scalability. Energy efficiency services gross margins increased to 21%, from 9% in the same period last year, due to improved contribution margins on projects completed during the quarter. Operating expenses as a percentage of sales decreased to 73%, from 89% in the same period last year, primarily resulting from the growth in revenue while costs decreased slightly. The decrease in costs reflects a reduction in internal commissions resulting primarily from the change in commission structure for our mid-market group at the beginning of the second quarter of 2013. Our operating margin improved to 4% as compared to (16%) in the same period last year, and EBITDA* margin was 14% compared to a deficit of (3%) in the prior year quarter. We recorded a $0.1 million income tax benefit for the three months ended June 30, 2014 compared to a $0.1 million income tax expense in the same period last year as we utilized an actual effective tax rate in 2014 due to changes in our financial projections for the full year. Net income was $0.3 million, or $0.02 per share, for the three months ended June 30, 2014 compared to a net loss of ($1.7) million, or ($0.14) per share in 2013.
At June 30, 2014, we had cash and cash equivalents of $2.3 million compared to $1.7 million at December 31, 2013 and $2.6 million at March 31, 2014. The decrease in cash and cash equivalents during the quarter was primarily due to the final $0.5 million Seller note payment to Northeast Energy Partners, LLC ("NEP"), a CT-based mid-market energy procurement firm we acquired in 2012. Free cash flow was $0.2 million for the quarter, or $0.02 per share. Free cash flow decreased from the same period last year due to our strengthening working capital position. Excluding this increase in working capital, our cash flow from operations, adjusted for non-cash expense items, was $1.3 million for the quarter compared to ($0.3) million in Q2 2013. In addition, on April 4, 2014, we settled all outstanding earnout claims with the former owners of GSE Consulting, LP ("GSE"), a TX-based mid-market energy procurement firm we acquired in 2011, by issuing 200,000 shares of common stock. We have now settled all of our seller-note and earnout obligations. The Company continues to maintain a $2.5 million line-of-credit with Commerce Bank and has not borrowed against this facility.
Revenue for the six months ended June 30, 2014 rose 14% over the same period last year to $18.9 million as revenue from both segments increased over the same period last year. Energy procurement increased 11%, reflecting increased transaction activity from our auction and mid-market customers, as well as increased revenue recognized from previously deferred items. These increases were partially offset by decreases in wholesale and gas transaction activity as increased commodity prices during the first quarter delayed contracting decisions by listers. Energy efficiency services increased 35% as our rebuilt Massachusetts sales team gained traction in the market and delivered increased revenue in the NSTAR territory in Massachusetts during 2014. Gross margins were 77% for the six months ended June 30, 2014 compared to 74% for the same period last year, reflecting an increase in both segments. Energy procurement gross margins increased to 87%, from 83%, primarily resulting from a decrease in payroll resulting from our continued integration, automation, and reorganization efforts to improve processes and drive scalability. Energy efficiency services gross margins increased to 19%, from 15% in the same period last year, due to improved contribution margins on projects completed during the first half of 2014. Operating expenses as a percentage of sales decreased to 76%, from 85% in the same period last year, as the increase in costs was exceeded by the growth in revenue. The increase in operating expenses was primarily due to increased legal and consulting costs related to a shareholder action in the first quarter of 2014. Overall, the Company's operating margin improved to 1% and EBITDA* margin was 11% as compared to 1% for the same period last 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 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 June 30, 2014 included commodity backlog of $44.3 million and $23.6 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 $0.7 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, August 8, 2014, 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 9074853#. A replay will be available two hours after the completion of the call, and for three months following the call, by dialing 1 (888) 843-7419 for domestic participants or 1 (630) 652-3042 for international participants, and entering passcode 9895528# 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 90 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, net income / (loss) adjusted for non-cash items 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 (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 EBITDA and adjusted EBITDA is shown below:
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|GAAP net income (loss)||$ 305,602||$ (1,654,155)||$ (192,175)||$ (2,611,040)|
|Add: Interest expense||197,899||277,397||398,296||480,134|
|Add: Income taxes (benefit) expense||(88,000)||131,305||(25,000)||262,610|
|Add: Amortization of intangibles||844,700||974,758||1,771,345||1,949,516|
|Add: Amortization of other assets||12,447||8,506||26,012||17,013|
|Non-GAAP EBITDA (deficit)||$ 1,324,733||$ (207,119)||$ 2,083,474||$ 208,972|
|Non-GAAP EBITDA per share||$ 0.11||$ (0.02)||$ 0.17||$ 0.02|
|Add: Share-based compensation||190,761||146,323||352,664||292,309|
|Non-GAAP adjusted EBITDA (deficit)||$ 1,515,494||$ (60,796)||$ 2,436,138||$ 501,281|
|Non-GAAP adjusted EBITDA per share||0.12||(0.01)||0.20||0.04|
|Weighted average diluted shares||12,518,390||11,982,656||12,406,834||12,050,866|
| Reconciliation of Free Cash |
Flow for Three Months Ended
| Reconciliation of Free Cash |
Flow for Six Months Ended
|Net income (loss)||$ 305,602||$ (1,654,155)||$ (192,175)||$ (2,611,040)|
|Net income (loss) adjusted for non-cash items||1,312,020||(336,951)||2,030,540||30,097|
|Changes in operating assets and liabilities||(1,036,099)||918,679||(862,748)||1,217,028|
|Net cash provided by operating activities||$ 275,921||$ 581,728||$ 1,167,792||$ 1,247,125|
|Net cash provided by operating activities per share||$ 0.02||$ 0.05||$ 0.10||$ 0.10|
|Less: Purchases of property and equipment||(10,751)||(65,023)||(59,710)||(74,239)|
|Less: Capitalization of internal-use software development costs||(72,644)||--||(83,722)||--|
|Free cash flow||$ 192,526||$ 516,705||$ 1,024,360||$ 1,172,886|
|Free cash flow per share||$ 0.02||$ 0.04||$ 0.08||$ 0.10|
About World Energy Solutions, Inc.
World Energy Solutions, Inc. (Nasdaq:XWES) is an energy technology and services firm transforming energy procurement and energy efficiency for commercial, industrial, institutional, government and utility customers. The Company's award-winning, cloud-based auction platform, the World Energy Exchange®, its team of energy experts, and a network of more than 500 suppliers and 300 channel partners form an ecosystem that enables customers to minimize their total cost of energy. To date, World Energy has transacted over $45 billion in energy, demand response and environmental commodities, creating more than $3 billion in value for its customers. For more information, please visit www.worldenergy.com.
This press release contains forward-looking statements which involve risk and uncertainties. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "forecasts," "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, and its expectations in growth in revenue, operating results, operating margins, and free cash flow. 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, 2013 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. Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the forward-looking statements expressed in this press release. Forward-looking statements are provided for the purpose of presenting information about management's current expectations relating to the future, and readers are cautioned that such statements may not be appropriate for other purposes. 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||Six Months Ended|
|June 30,||June 30,|
|Revenue||$ 9,393,036||$ 7,935,657||$ 18,913,390||$ 16,593,139|
|Cost of revenue||2,119,806||2,144,455||4,432,119||4,377,606|
|Sales and marketing expenses||4,633,760||4,890,347||9,395,751||9,868,428|
|General and administrative expenses||2,228,641||2,167,021||4,913,114||4,228,694|
|Operating income (loss)||410,829||(1,266,166)||172,406||(1,881,589)|
|Interest expense, net||(197,899)||(277,397)||(398,296)||(480,134)|
|Income (loss) before income taxes||217,602||(1,522,850)||(217,175)||(2,348,430)|
|Income tax benefit (expense)||88,000||(131,305)||25,000||(262,610)|
|Net income (loss)||$ 305,602||$ (1,654,155)||$ (192,175)||$ (2,611,040)|
|Net income (loss) per common share – basic||$ 0.02||$ (0.14)||$ (0.02)||$ (0.22)|
|Net income (loss) per common share – diluted||$ 0.02||$ (0.14)||$ (0.02)||$ (0.22)|
|Weighted average shares outstanding – basic||12,369,034||11,982,656||12,252,044||11,974,428|
|Weighted average shares outstanding – diluted||12,518,390||11,982,656||12,252,044||11,974,428|
|SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET|
|June 30, 2014|
|Cash and cash equivalents||$ 2,290,370|
|Trade accounts receivable, net||7,205,500|
|Other current assets||2,209,145|
|Property and equipment, net||516,094|
|Intangible and other assets, net||14,264,975|
|Long-term portion of deferred tax asset||7,230,984|
|Total assets||$ 49,884,902|
|Liabilities and stockholders' equity|
|Accrued commissions||$ 1,673,685|
|Accounts payable and accrued liabilities||3,920,742|
|Deferred revenue and customer advances||3,997,901|
|Current portion of long-term debt||1,035,939|
|Total current liabilities||10,628,267|
|Deferred revenue and customer advances, and other liabilities||3,534,072|
|Total liabilities and stockholders' equity||$ 49,884,902|
CONTACT: Jim Parslow World Energy Solutions, Inc. (508) 459-8100 firstname.lastname@example.org or Dan Mees World Energy Solutions, Inc. (508) 459-8156 email@example.com or In Canada: Craig Armitage The Equicom Group (416) 815-0700 x278 firstname.lastname@example.org
Source:World Energy Solutions, Inc.