World Energy Solutions Reports Record Revenue for Q1 2010
Company Delivers Second Straight Quarter of Positive Adjusted EBITDA behind Record Performances in Key Product Lines
TORONTO, May 6 /CNW/ - World Energy Solutions, Inc. (NASDAQ: XWES; TSX: XWE), a leading energy management services firm, today announced financial results for the first quarter ended March 31, 2010.
Q1 Highlights
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(All figures are in U.S. dollars and compare Q1 2010 results to Q1 2009)
Sales Performance Sets New Records, Fuels Future Growth
The Company posted $4.4 million in revenue driven by record performances in its Retail and Wholesale product lines. Revenue growth of 11% was accompanied by increasing gross margins and decreasing sales and marketing expense, demonstrating the operating leverage inherent in the Company's business model. These combined to decrease net loss by 81% to $0.1 million, or $(0.01) per share, and enabled the Company to achieve positive adjusted EBITDA* of $0.4 million.
World Energy's sales performance also laid the groundwork for future success by growing total backlog 18% to $21.2 million and annualized backlog 31% to $11.3 million. The Company also boosted its leading indicators - increasing its total number of Wholesale customers by 33% and its channel partners by 56%.
Dramatic Entry into Demand Response
World Energy successfully introduced the World DR Exchange(TM), the first online marketplace for sourcing demand response. The launch of the new exchange inserts World Energy into the fast-growing demand response market with a differentiated offering that enables customers to increase their share of demand response revenue. The new service also positions the Company to attract new customers and channel partners, while presenting cross-selling opportunities to its growing customer base. World Energy's entry into the demand response market represents a significant strategic development and expansion opportunity for the Company.
Strategic Renewal in Green
Subsequent to quarter end, the Company announced another important development: a two-year contract renewal with RGGI, Inc. to continue to provide auction software and services for the 10 state RGGI programs through July 31, 2012. With this strategic renewal, World Energy remains the only publicly-traded company with hands-on experience implementing and executing auction-based solutions for reducing greenhouse gas emissions. (Please see separate World Energy press release dated May 6, 2010).
"I'm excited to say that World Energy has successfully built on the inflection point we reached last quarter, delivering an outstanding Q1 that saw us post record revenue, narrow net loss significantly, and deliver a second straight quarter of positive adjusted EBITDA," said Richard Domaleski, Chief Executive Officer, World Energy Solutions, Inc. "Our sales teams are executing; our business is scaling; and our leading indicators are continuing to build."
Financial Review
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For the quarter ended March 31, 2010, revenue increased by 11% to $4.4 million, which reflects increased auction activity in all product lines, including record revenue in the Company's Wholesale and Retail product lines and continued execution in the Company's Green product line.
Gross margin percentage for the first quarter of 2010 was 78% compared to 73% in the same period last year as the Company continued to scale its operating model. Total operating expenses for the first quarter of 2010 were relatively flat with the same period in the prior year despite increases in internal and third-party commission expense related to the 11% increase in revenue. As a result, total operating expenses as a percentage of revenue decreased 9% year-over-year. Net loss for the three months ended March 31, 2010 decreased to $0.1 million, or $(0.01) per share, compared with a net loss of $0.7 million, or $(0.08) per share, in 2009. This decrease was driven by the 11% increase in revenue and the 5% improvement in gross margin percentage.
At March 31, 2010, the Company had no bank debt and cash and cash equivalents of $1.4 million, compared with $2.0 million at December 31, 2009 and $1.0 million at March 31, 2009. The $0.6 million decrease in cash and cash equivalents during the three months ended March 31, 2010 was primarily due to an increase in accounts receivable and timing of year-end bonus and commission payments. These decreases were partially offset by cash generated from adjusted EBITDA* of $0.4 million and net proceeds of $0.4 million from the sale of common stock. In March 2010, the Company filed a shelf registration statement to register up to $20 million of Company securities, giving us the opportunity to raise funds when needed or otherwise considered appropriate at prices and on terms to be determined at the time of such offerings.
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 March 31, 2010 included commodity backlog of $20.2 million and $10.3 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, May 6, 2010, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. A live audio webcast of the conference call will be available at www.worldenergy.com and www.newswire.ca. 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 stock-based compensation, depreciation related to our fixed assets, amortization expenses associated with acquisition-related assets and capitalized software and interest expense on our capital leases.
Management believes it is useful to exclude depreciation, amortization and interest 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 stock-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 non-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 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 loss to adjusted EBITDA is shown below:
Three Months Ended,
March 31, December 31, March 31,
2010 2009 2009
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GAAP net loss $ (128,444) $ (236,639) $ (665,074)
ADD: Interest expense, net 1,260 1,397 1,117
ADD: Stock-based compensation 144,638 127,643 274,905
ADD: Depreciation &
amortization 391,244 392,980 439,076
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Non-GAAP adjusted EBITDA $ 408,698 $ 285,381 $ 50,024
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About World Energy Solutions, Inc.
World Energy Solutions, Inc. (NASDAQ: XWES; TSX: XWE) is an energy management services firm that applies an award-winning combination of people, process and technology to help clients manage energy as a strategic asset. To date, the Company has transacted more than $20 billion in energy, demand response and environmental commodities on behalf of its Government, Commercial & Industrial, and Utility customers, creating more than $1 billion in value for them. World Energy is also a leader in the growing global carbon market, where its World Green Exchange(R) 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
March 31,
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2010 2009
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Revenue $ 4,408,106 $ 3,977,779
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Cost of revenue 949,565 1,089,952
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Gross profit 3,458,541 2,887,827
Sales and marketing 2,500,722 2,570,548
General and administrative 1,085,003 981,236
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Operating loss (127,184) (663,957)
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Interest income, net (1,260) (1,117)
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Loss before income taxes (128,444) (665,074)
Income tax expense - -
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Net loss $ (128,444) $ (665,074)
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Net loss per common share - basic & diluted $ ( 0.01) $ (0.08)
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Weighted average shares outstanding - basic
& diluted 9,016,711 8,419,721
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SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET
March 31,
2010
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Assets
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Cash and cash equivalents $ 1,421,681
Trade accounts receivable, net 3,718,864
Other current assets 320,388
Property and equipment, net 358,033
Goodwill 3,178,701
Other assets 4,817,313
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Total assets $ 13,814,980
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Liabilities and stockholders' equity
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Accrued commissions $ 965,208
Accounts payable and accrued liabilities 1,654,768
Other current liabilities 549,504
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Total current liabilities 3,169,480
Total long-term liabilities 11,791
Stockholders' equity 10,633,709
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Total liabilities and stockholders' equity $ 13,814,980
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For further information: Jim Parslow, World Energy Solutions, Inc., (508) 459-8100, [email protected]; or Dan Mees, World Energy Solutions, Inc., (508) 459-8156, [email protected]; Erika Moran, The Investor Relations Group, (212) 825-3210, [email protected]; or Craig Armitage, The Equicom Group, (416) 815-0700 x278, [email protected]
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