PowerSecure International, Inc. : PowerSecure Reports First Quarter Results
05/03/2012| 04:25pm US/Eastern
Recommend:
0
Revenues Grow 40% Driven by Increases in All Product and Service
Areas
PowerSecure International, Inc. (Nasdaq: POWR) today reported its first
quarter 2012 results, including strong first quarter revenues of $33.2
million which increased 40% compared to $23.7 million of revenues in the
first quarter of 2011. The Company's first quarter 2012 diluted earnings
per share ("E.P.S.") from continuing operations was ($0.03), comparing
favorably to first quarter 2011 diluted E.P.S. from continuing
operations of ($0.04) and first quarter 2011 Non-GAAP E.P.S. from
continuing operations of ($0.09). First quarter 2011 Non-GAAP E.P.S.
from continuing operations excludes the income from the Company's
WaterSecure investment which was sold in June, 2011 (see Non-GAAP
measures discussion and reconciliation, below).
Sidney Hinton, CEO of PowerSecure, said, "We are very pleased with our
first quarter 2012 revenue growth, demonstrating the continued success
we are having across our product and service areas. Of particular note
is the resurgence of growth we are seeing in our Energy Efficiency area
as our portfolio of LED lights is gaining very nice traction in the
marketplace. This is driven by a general and broader increase in market
demand for LED technology, lower LED input prices which enable us to
bring improved solutions to the marketplace, and our unique portfolio of
products designed to deliver a strong combination of light quality,
energy savings, and financial paybacks to customers." Mr. Hinton
continued, "We did realize a negative impact to our gross margins due to
the mild winter this quarter, resulting from efficiency losses in our
Utility Infrastructure area because reduced workloads in certain
utilities we were serving caused us to redeploy crews to other
utilities. We anticipate this impact on our gross margins will begin to
normalize in our second quarter, with the potential to return to
historical levels if the mild weather progresses into a hot summer,
which would likely increase the demand for Utility Infrastructure
services and our gross margins. In addition, we are encouraged by the
way the PowerSecure team has embraced our newly implemented company-wide
cost rationalization initiative, and look forward to reporting progress
on the productivity of our General and Administrative expenses as the
year progresses."
The Company's first quarter 2012 year-over-year revenue growth of 40%,
to $33.2 million, was driven by a 12% increase in Distributed Generation
products and services, a 73% increase in Utility Infrastructure products
and services, and a 53% increase in Energy Efficiency products, as shown
below.
Variance
($ in 000's)
1Q12
1Q11
$
%
Revenue by Product/Service
Distributed Generation
12,505
11,144
1,361
12
%
Utility Infrastructure
13,128
7,578
5,550
73
%
Energy Efficiency
7,552
4,933
2,619
53
%
Total Revenue
33,185
23,655
9,530
40
%
The Company's first quarter 2012 gross margin as a percentage of revenue
was 28.8% compared to 32.7% in the first quarter of 2011 and 31.4% in
the fourth quarter of 2011. On a year-over-year and sequential basis,
gross margins were negatively impacted by the mild winter weather in the
first quarter of 2012, which caused workloads to be reduced at certain
utilities and the redeployment of those crews to other utilities and
projects. Therefore, although Utility Infrastructure revenues were quite
high, inefficiencies in cost of sales related to the demobilization and
redeployment of crews negatively impacted first quarter 2012 gross
margin results. The lower year-over-year gross margins were also due to
the overall growth of Utility Infrastructure revenue in 2012, which is
generally the Company's lowest gross margin product and service
category. As is always the case, variability in quarterly gross margins
is caused by regular on-going differences in the mix of specific
projects completed in each quarter.
Operating expenses for the first quarter of 2012 were $10.8 million
compared to $9.6 million in the first quarter of 2011, and $11.4 million
in the fourth quarter of 2011. During the first quarter of 2012, the
Company initiated a cost productivity initiative across business lines
to identify opportunities to rationalize General and Administrative
expenses. This initiative will be executed over the coming months with a
goal of reducing the Company's cost structure over the course of 2012.
The Company's capital resources continue to be strong, with $24.7
million in cash and zero drawn on its revolving credit facility at the
end of the first quarter of 2012. As planned, the Company's capital
expenditures during the first quarter were significantly reduced
compared to recent quarters, at $0.9 million in total, with $0.4 million
of this capital invested to deploy systems to support PowerSecure-owned
long-term recurring revenue Distributed Generation projects.
The Company announced that its revenue backlog stands at $151 million.
This includes new business awards announced on April 24, 2012, as well
as new orders received in late-April and early-May. The Company's
revenue backlog represents revenue expected to be recognized after March
31, 2012, for periods including the second quarter of 2012 onward. This
backlog figure compares to the revenue backlog of $158 million announced
in the Company's fourth quarter earnings release issued on March 8,
2012, which represented revenue expected to be recognized after December
31, 2011. The Company's $151 million revenue backlog and the estimated
timing of revenue recognition are outlined below, including
"project-based revenues" expected to be recognized as projects are
completed, and "recurring revenues" expected to be recognized over the
life of the underlying contracts:
Revenue Backlog expected to be recognized after March 31, 2012
Anticipated
Estimated Primary
Description
Revenue
Recognition Period
Project-based Revenue -- Near term
$63 Million
2Q12 through 4Q12
Project-based Revenue -- Long term
$18 Million
1Q13 through 2014
Recurring Revenue
$70 Million
2Q12 through 2020
Revenue Backlog expected to be recognized after March 31, 2012
$151 Million
Note: Anticipated revenue and estimated primary recognition
periods are subject to risks and uncertanities
as indicated in the Company's safe harbor statement, below.
Consistent with past practice, these figures
are not intended to constitute the Company's total revenue over
the indicated time periods, as the Company
has additional, regular on-going revenues. Examples of
additional, regular recurring revenues include
revenues from the engineering fees, and service revenue, among
others. Numbers may not add due to rounding.
Orders in the Company's revenue backlog are subject to delay, deferral,
acceleration, resizing, or cancellation from time to time, and estimates
are utilized in the determination of the backlog amounts. Given the
irregular sales cycle of customer orders, and especially of large
orders, the revenue backlog at any given time is not necessarily an
accurate indication of our future revenues.
The Company's reported results also include discontinued operations
comprised of the Company's former Southern Flow unit, which was sold
during the first quarter of 2011 and for which a $5.6 million gain on
sale was recorded in that period, and the Company's discontinued
PowerPackages unit, which was exited during the second half of 2011. The
results of these discontinued operations were negligible during the
first quarter of 2012, as E.P.S. including these results was ($0.03),
the same as E.P.S. from continuing operations of ($0.03). However, the
discontinued operations had a meaningful impact on the results of the
first quarter of 2011, driven by the gain on sale recorded in that
period, as E.P.S. including discontinued operations was $0.25 compared
to E.P.S. from continuing operations of ($0.04).
The Company will host a conference call commencing today at 5:30 p.m.
eastern time to discuss its first quarter 2012 results, business
operations, strategic initiatives and prospects for the future. The
conference call will be webcast live and can be accessed from the
Investor Relations section of the Company's website at www.powersecure.com.
Participants can also access the call by dialing 888-679-8034 (or
617-213-4847 if dialing internationally), and providing pass code
92608959. If you are unable to participate during the live webcast, a
replay of the conference call will be available beginning today at 7:30
p.m. eastern time through midnight on May 31, 2012. To listen to the
replay, dial toll-free 888-286-8010 (or 617-801-6888 if dialing
internationally), and enter pass code 65632570. In addition, the webcast
will be archived on the Company's website at www.powersecure.com.
About PowerSecure
PowerSecure International, Inc. is a leading provider of Utility and
Energy Technologies to electric utilities, and their commercial,
institutional, and industrial customers. PowerSecure provides products
and services in the areas of Energy Efficiency, Interactive Distributed
Generation, and Utility Infrastructure. The Company is a pioneer in
developing Interactive Distributed Generation® systems with
sophisticated, proactive smart grid capabilities, including the ability
to 1) forecast electricity demand and electronically deploy the systems
to deliver more efficient, and environmentally friendly power at peak
power times, 2) provide utilities with dedicated electric power
generation capacity to utilize for demand response purposes, and 3)
provide customers with the most dependable standby power in the
industry. PowerSecure also provides utilities with transmission and
distribution infrastructure construction and maintenance services, and
engineering and regulatory consulting services. The Company's Energy
Efficiency business provides customers with energy efficient lighting
technologies that deliver improved quality of light, including its
proprietary EfficientLights LED lighting products for grocery, drug, and
convenience stores, and its SecureLiteTM and PowerLiteTM
street lights for utilities and municipalities. Additional information
is available at www.powersecure.com.
This press release contains forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are all statements other than statements of historical facts,
including but not limited to statements concerning the outlook for the
Company's future revenues, earnings, margins, cash resources and cash
flow and other financial and operating information and data; the
Company's future business operations, strategies and prospects; and all
other statements concerning the plans, intentions, expectations,
projections, hopes, beliefs, objectives, goals and strategies of
management, including statements about other future financial and
non-financial items, performance or events and about present and future
products, services, technologies and businesses; and statements of
assumptions underlying the foregoing. Forward-looking statements are not
guarantees of future performance or events and are subject to a number
of known and unknown risks, uncertainties and other factors that could
cause actual results to differ materially from those expressed,
projected or implied by such forward-looking statements. Important
risks, uncertainties and other factors include, but are not limited to,
the on-going downturn, disruption and volatility in the economy,
financial markets and business markets and the effects thereof on the
Company's markets and customers, the demand for its products and
services, and the Company's access to capital; the size, timing and
terms of sales and orders, including the Company's revenue backlog
discussed in this press release, and the risk of customers delaying,
deferring or canceling purchase orders or making smaller purchases than
expected; the effects of the sale of Southern Flow business and
WaterSecure investment and the Company's strategy of monetizing its
non-core businesses on the Company's financial condition and results of
operations; the potential adverse financial and reputational
consequences that can result from safety risks and hazards such as
accidents inherent in our operations; the effects of exiting the
Company's PowerPackages business, including any future charges we may
incur; the timely and successful development, production and market
acceptance of new and enhanced products, services and technologies of
the Company; the ability of the Company to obtain adequate supplies of
key components and materials of sufficient reliability and quality for
its products and technologies on a timely and cost-effective basis and
the effects of related warranty claims and disputes; the ability of the
Company to successfully expand its core distributed generation products
and services, to successfully develop and achieve market acceptance of
its new energy-related businesses, to successfully expand its recurring
revenue projects, to manage its growth and to address the effects of any
future changes in utility tariff structures and environmental
requirements on its business solutions; the effects of competition;
changes in customer and industry demand and preferences; the ability of
the Company to continue the growth and diversification of its customer
base; the ability of the Company to attract, retain, and motivate its
executives and key personnel; changes in the energy industry in general
and the electricity, oil, and natural gas markets in particular,
including price levels; the effects of competition; the ability of the
Company to secure and maintain key contracts and relationships; the
effects of pending and future litigation, claims and disputes; and other
risks, uncertainties and other factors identified from time to time in
its reports filed with or furnished to the Securities and Exchange
Commission, including the Company's most recent Annual Report on Form
10-K, as well as subsequently filed reports on Form 10-Q and Form 8-K.
Accordingly, there can be no assurance that the results expressed,
projected or implied by any forward-looking statements will be achieved,
and readers are cautioned not to place undue reliance on any
forward-looking statements. The forward-looking statements in this press
release speak only as of the date hereof and are based on the current
plans, goals, objectives, strategies, intentions, expectations and
assumptions of, and the information currently available to, management.
The Company assumes no duty or obligation to update or revise any
forward-looking statements for any reason, whether as the result of
changes in expectations, new information, future events, conditions or
circumstances or otherwise.
PowerSecure International, Inc.
Consolidated Statements of Operations (unaudited)
($000's except per share data)
Three Months Ended
March 31,
March 31,
2012
2011
Revenue
33,185
23,655
Cost of sales
23,630
15,926
Gross Profit
9,555
7,729
Operating expenses
General and administrative
8,645
7,681
Selling, marketing, and service
1,058
1,154
Depreciation and amortization
1,085
773
Total operating expenses
10,788
9,608
Operating income (loss)
(1,233
)
(1,879
)
Other income (expense)
Gain on sale of unconsolidated affiliate
0
0
Equity income from unconsolidated affiliate
0
1,011
Management fees from unconsolidated affiliate
0
168
Interest income and other income
22
20
Interest expense
(108
)
(142
)
Income (loss) before income taxes
(1,319
)
(822
)
Income tax benefit (provision)
393
(47
)
Net income (loss) from continuing operations
(926
)
(869
)
Discontinued operations - income (loss) from operations (net of tax)
35
(215
)
Discontinued operations - gain on sale (net of tax)
0
5,636
Net income (loss)
(891
)
4,552
Net loss attributable to noncontrolling interest
288
184
Net income (loss) attributable to PowerSecure International, Inc.
(603
)
4,736
Summary of Amounts Attributable to PowerSecure International, Inc.
shareholders
Income (loss) from continuing operations (net of tax)
(638
)
(685
)
Income (loss) from discontinued operations (net of tax)
35
5,421
Net income (loss) attributable to PowerSecure International, Inc.
(603
)
4,736
EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:
Continuing Operations
Basic
(0.03
)
(0.04
)
Diluted
(0.03
)
(0.04
)
Discontinued Operations
Basic
0.00
0.29
Diluted
0.00
0.29
Net Income
Basic
(0.03
)
0.25
Diluted
(0.03
)
0.25
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic
18,902
18,719
Diluted
18,902
18,719
PowerSecure International, Inc.
Condensed Consolidated Balance Sheets (unaudited)
($000's)
March 31,
December 31,
ASSETS
2012
2011
CURRENT ASSETS:
Cash and cash equivalents
24,654
24,606
Trade receivables, net of allowance for doubtful accounts
41,840
46,163
Assets of discontinued operations held for sale
240
380
Inventories
20,790
20,290
Income taxes receivable
869
439
Current deferred income taxes
650
650
Prepaid expenses and other current assets
858
1,128
Total Current Assets
89,901
93,656
PROPERTY, PLANT, AND EQUIPMENT:
Equipment
39,190
38,441
Furniture and fixtures
307
283
Land, building, and improvements
5,899
5,885
Total property, plant, and equipment at cost
45,396
44,609
Less accumulated depreciation and amortization
9,108
8,281
Property, plant, and equipment, net
36,288
36,328
OTHER ASSETS:
Goodwill
7,970
7,970
Deferred income taxes, net of current portion
266
266
Restricted annuity contract
2,394
2,376
Intangible rights and capitalized software, net of accum amort
1,647
1,642
Investment in unconsolidated affiliate
6
6
Other assets
331
331
Total other assets
12,614
12,591
TOTAL ASSETS
138,803
142,575
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
5,438
6,894
Accrued and other liabilities
12,712
16,129
Liabilities of discontinued operations held for sale
0
125
Current unrecognized tax benefit
287
287
Current portion of term loan
160
0
Current portion of capital lease obligations
851
840
Total current liabilities
19,448
24,275
LONG-TERM LIABILITIES
Revolving Line of Credit
0
0
Term loan, net of current portion
2,200
0
Capital lease obligations, net of current portion
2,590
2,807
Unrecognized tax benefit
731
731
Other long-term liabilities
2,355
2,300
Total long-term liabilities
7,876
5,838
STOCKHOLDERS' EQUITY
Preferred stock - undesignated
0
0
Preferred stock - Series C
0
0
Common stock
189
189
Additional paid-in-capital
116,711
116,803
Accumulated deficit
(6,042
)
(5,439
)
Total PowerSecure International, Inc. stockholders' equity
110,858
111,553
Noncontrolling Interest
621
909
Total stockholders' equity
111,479
112,462
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
138,803
142,575
PowerSecure International, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
($000's)
Three Months Ended
March 31,
March 31,
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
(891
)
4,552
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Income from discontinued operations
(35
)
(5,421
)
Depreciation and amortization
1,085
773
Stock compensation expense
295
480
Loss on disposal of miscellaneous assets
3
0
Equity in income of unconsolidated affiliate
0
(1,011
)
Distributions from unconsolidated affiliate
0
607
Changes in operating assets and liabilities, net of
effect of acquisitions:
Trade receivables, net
4,323
(3,382
)
Inventories
(500
)
(4,852
)
Other current assets and liabilities
(160
)
(106
)
Other noncurrent assets and liabilities
37
90
Accounts payable
(1,456
)
954
Accrued and other liabilities
(3,417
)
2,166
Net cash provided by (used in) continuing operations
(716
)
(5,150
)
Net cash provided by (used in) discontinued operations
50
(182
)
Net cash provided by (used in) operating activities
(666
)
(5,332
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(878
)
(4,177
)
Additions to intangible rights and software development
(185
)
(192
)
Proceeds from sale of property, plant and equipment
10
0
Proceeds from sale of discontinued operations
0
16,515
Discontinued operations investing activities
0
(3
)
Net cash provided by (used in) investing activities
(1,053
)
12,143
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on revolving line of credit
0
0
Proceeds from term loan borrowings
2,400
0
Payments on term loan
(40
)
0
Payments on capital lease obligations
(206
)
(195
)
Repurchases of common stock
(398
)
(158
)
Proceeds from stock option exercises
11
230
Net cash provided by (used in) financing activities
1,767
(123
)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
48
6,688
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
24,606
8,202
CASH AND CASH EQUIVALENTS AT END OF PERIOD
24,654
14,890
Non-GAAP Pro forma Financial Measures:
Our references to our first quarter 2011 "Non-GAAP Pro forma" financial
measures of net income from continuing operations, net income, net
income attributable to PowerSecure International, Inc., diluted E.P.S.
from continuing operations, diluted E.P.S. from discontinued operations,
and diluted E.P.S. discussed and shown above constitute non-GAAP
financial measures. They refer to our GAAP results, adjusted to show the
results 1) without the after-tax income from our WaterSecure investment
(identified in our financial statements as our unconsolidated
affiliate), 2) without the after-tax gain on the sale of our
discontinued Southern Flow business, and 4) without the after-tax
results of our discontinued PowerPackages business.
We believe providing non-GAAP measures which show our pro forma results
with these items adjusted is valuable and useful as it allows our
management and our board of directors to measure, monitor and evaluate
our operating performance with the same consistent financial context as
the business was managed and evaluated from the 2011 fiscal year
forward. Additionally, because our Southern Flow business was sold in
January, 2011, our WaterSecure business was sold in June, 2011, and our
PowerPackages business was discontinued in 2011, these pro forma
measures provide baseline comparatives which are more comparable to our
current and future results.
We believe these Non-GAAP Pro forma measures also provide meaningful
information to investors in terms of enhancing their understanding of
our first quarter operating performance and results, as they allow
investors to more easily compare our financial performance on a
consistent basis compared to 2011. These Non-GAAP Pro forma measures
also correspond with the way we expect Wall Street Analysts to compare
our results. Our Non-GAAP Pro forma measures should be considered only
as supplements to, and not as substitutes for or in isolation from, our
other measures of financial information prepared in accordance with
GAAP, such as GAAP revenue, operating income, net income from continuing
operations, net income, net income attributable to PowerSecure
International, Inc., diluted E.P.S. from continuing operations, diluted
E.P.S. from discontinued operations, and diluted E.P.S.
PowerSecure International, Inc.
Non-GAAP Pro forma Measures Excluding WaterSecure, PowerPackages,
and Southern Flow Results
($000's except per share data, some rounding throughout)
Three Months Ended March 31, 2011
As Reported
1Q11
WaterSecure,
PowerPackages, and
Southern Flow
Pro forma
1Q11
Revenue
23,655
23,655
Cost of sales
15,926
15,926
Gross Profit
7,729
0
7,729
Operating expenses
General and administrative
7,681
7,681
Selling, marketing, and service
1,154
1,154
Depreciation and amortization
773
773
Total operating expenses
9,608
0
9,608
Operating income (loss)
(1,879
)
0
(1,879
)
Other income (expense)
Gain on sale of unconsolidated affiliate
0
0
Equity income from unconsolidated affiliate
1,011
(1,011
)
0
Management fees from unconsolidated affiliate
168
(168
)
0
Interest income and other income
20
20
Interest expense
(142
)
(142
)
Income (loss) before income taxes
(822
)
(1,179
)
(2,001
)
Income tax benefit (provision)
(47
)
166
119
Net income (loss) from continuing operations
(869
)
(1,013
)
(1,882
)
Discontinued operations - income (loss) from operations (net of tax)
(215
)
215
0
Discontinued operations - gain on sale (net of tax)
5,636
(5,636
)
0
Net income (loss)
4,552
(6,434
)
(1,882
)
Net income (loss) attributable to noncontrolling interest
184
184
Net income (loss) attributable to PowerSecure International, Inc.
4,736
(6,434
)
(1,698
)
Summary of Amounts Attributable to PowerSecure International, Inc.
shareholders
Income (loss) from continuing operations (net of tax)
(685
)
(1,013
)
(1,698
)
Income (loss) from discontinued operations (net of tax)
5,421
(5,421
)
0
Net income (loss) attributable to PowerSecure International, Inc.
4,736
(6,434
)
(1,698
)
EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:
Continuing Operations
Basic
(0.04
)
(0.05
)
(0.09
)
Diluted
(0.04
)
(0.05
)
(0.09
)
Discontinued Operations
Basic
0.29
(0.29
)
0.00
Diluted
0.29
(0.29
)
0.00
Net Income
Basic
0.25
(0.34
)
(0.09
)
Diluted
0.25
(0.34
)
(0.09
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic
18,719
18,719
18,719
Diluted
18,719
18,719
18,719
PowerSecure International, Inc. Chris Hutter, 919-453-1760 Chief
Financial Officer
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