PowerSecure Reports Second Quarter 2013 Results
PowerSecure Reports Second Quarter 2013 Results
—Record revenues of $70.2 million reflect 85 percent growth y-o-y—
—Record backlog grows to $245 million—
—133 percent y-o-y growth in utility infrastructure revenues—
—87 percent y-o-y growth in energy efficiency revenues—
—46 percent y-o-y growth in distributed generation revenues—
- Revenues increase 85.4 percent y-o-y to $70.2 million
- Operating margin expands 3.3 percentage points y-o-y to 4.9 percent
- GAAP EPS increases by $0.02 y-o-y from $0.09 to $0.11
- Non-GAAP EPS increases by $0.08 y-o-y from $0.04 to $0.12 (see non-GAAP discussion and reconciliation, below)
- EBITDA increases nearly 150 percent to $5.9 million (see non-GAAP discussion and reconciliation, below)
"Our record second quarter results and all time high backlog illustrate the continued momentum we are seeing across our business as we deliver differentiated, best-in-class solutions to our customers. In addition, we are very pleased with the strong performance of our two most recent acquisitions out of the gate, as our new ESCO and Solais businesses delivered second quarter revenues of $12.3 million and $1.6 million, respectively," said Sidney Hinton, chief executive officer of PowerSecure.
"With increasing revenues and EPS, a strong balance sheet, growing EBITDA from operations, a backlog that has grown even faster than our revenues, and added strength from our recent strategic acquisitions, PowerSecure has never been in a stronger position for long term success," Hinton added.
Second Quarter 2013:
PowerSecure's second quarter 2013 (2Q 2013) revenues of $70.2 million, an increase of $32.3 million, or 85.4 percent, from the second quarter of 2012 (2Q 2012), were driven by a 46.1 percent year-over-year (y-o-y) increase in revenues from distributed generation products, a 133.2 percent y-o-y increase in revenues from utility infrastructure products and services, and an 87.1 percent y-o-y increase in revenues from energy efficiency products and services.
|($ in 000's)||2Q13||2Q12||$||%|
|Revenue by Product/Service|
Gross margin as a percentage of revenue was 28.3 percent in 2Q 2013 compared to 32.2 percent in 2Q 2012. The y-o-y gross margin decrease was driven by a higher mix of revenues from solar and ESCO projects, and the increased contribution of our utility infrastructure products and services, which generally carry lower gross margins. Solar and ESCO revenues were $3.9 million and $12.3 million, respectively (solar is included in the distributed generation product category and ESCO is included in the energy efficiency category).
Operating expenses for 2Q 2013 as a percentage of our revenues decreased by 7.2 percentage points compared to 2Q 2012, as the company leveraged operating expenses against a greater level of revenues, quarter-over-quarter.
Operating expenses for 2Q 2013 were $16.4 million, compared to $11.6 million in 2Q 2012. The $4.8 million y-o-y increase in operating expenses consists primarily of $2.7 million of incremental operating expenses in 2Q 2013 related to our recent solar, Solais and ESCO acquisitions. In addition, we incurred $0.5 million in incremental acquisition costs related to our acquisitions in Q2 2013, compared to $0.1 million in incremental acquisition costs in Q2 2012. The remaining y-o-y increase in our operating expenses is primarily due to an increase in selling expenses related to our significantly higher revenue and backlog, depreciation from our investments in company-owned distributed generation systems, utility infrastructure equipment, and increases in personnel and equipment to drive and support our growth. The increases in personnel and equipment include expenses to continue to strengthen the company's safety resources and programs.
Operating margin as a percentage of revenue increased 3.3 percentage points to 4.9 percent in 2Q 2013 from 1.6 percent in 2Q 2012. The increase in operating margin was driven by the reduction in operating expenses as a percentage of revenue. This increase was enhanced by the cost reduction actions the company took during the second half of 2012 to streamline its operations.
The company's recent acquisitions have provided opportunities to further leverage the profitability of our operations, including significant near and mid-term opportunities to increase the operating margins in our energy efficiency product and service lines. This includes manufacturing and sourcing synergies our Solais acquisition brings to our existing LED lighting operations, and other cost reduction opportunities. The company is executing on these opportunities and initiatives to accelerate the realization of their expected benefits, and we expect these actions to result in a charge of between $2 million and $4 million during the second half of 2013.
Diluted GAAP earnings per share (EPS) from continuing operations increased to $0.11 in 2Q 2013, compared to $0.09 in 2Q 2012. Non-GAAP EPS from continuing operations increased to $0.12 in 2Q 2013, compared to $0.04 in 2Q 2012.
Results from 2Q 2012 included a one-time gain of $1.4 million from the sale of our WaterSecure business, and $0.1 million of acquisition expenses related to our acquisition of PowerSecure Solar. These items are adjusted in our non-GAAP calculation of 2Q 2012 non-GAAP EPS. Results from Q2 2013 include $0.5 million of acquisition costs primarily related to the acquisition of Solais, and are adjusted in the Q2 2013 non-GAAP EPS calculation (see non-GAAP discussion and reconciliation, below).
The company completed the second quarter of 2013 with $26.7 million in cash, zero drawn on its $20 million revolving credit facility and $27.2 million in term debt outstanding.
The company's capital expenditures during Q2 2013 were $2.5 million, with $1.2 million of this capital invested to deploy systems to support PowerSecure-owned long-term recurring revenue distributed generation projects, and the remaining $1.3 million primarily invested in the purchase of equipment for its growing utility infrastructure business.
The company's revenue backlog stands at a record $245 million, as of the date of this release. This includes new business from awards announced on June 6, 2013 and July 31, 2013. The company's revenue backlog represents revenue expected to be recognized after June 30, 2013, for periods including the third quarter of 2013 onward.
This backlog figure compares to the revenue backlog of $206 million announced in the company's first quarter 2013 earnings release issued on May 8, 2013, which represented revenue expected to be recognized after March 31, 2013, and $166 in revenue backlog announced in the company's 2Q 2012 earnings release issued on August 6, 2012.
The company's $245 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 June 30, 2013|
|Project-based Revenue -- Near term||$131 Million||3Q13 through 1Q14|
|Project-based Revenue -- Long term||$45 Million||2Q14 through 2015|
|Recurring Revenue||$69 Million||3Q13 through 2020|
|Revenue Backlog expected to be recognized after June 30, 2013||$245 Million|
Note: Anticipated revenue and estimated primary recognition periods are subject to risks and uncertainties
|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 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.
Conference Call Information
The company will host a conference call commencing today at 5:30 p.m. eastern time. 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. The call can also be accessed by dialing 888-713-4211 (or 617-213-4864 if dialing internationally) and providing pass code 53645986. If you are unable to participate during the live webcast, a replay of the conference call will be available approximately two hours after the completion of the call through midnight on August 21, 2013. To listen to the replay, dial 888-286-8010 (or 617-801-6888 if dialing internationally), and enter passcode 84522182. In addition, the webcast will be archived on the company's website at www.powersecure.com.
PowerSecure International, Inc. is a leading provider of utility and energy technologies to electric utilities, and their industrial, institutional and commercial customers. PowerSecure provides products and services in the areas of Interactive Distributed Generation ® (IDG®), energy efficiency and utility infrastructure. The company is a pioneer in developing IDG® power systems with sophisticated 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. Its proprietary distributed generation system designs utilize a range of technologies to deliver power, including renewables. The company's energy efficiency business develops energy efficient lighting technologies that improve the quality of light, including its proprietary EfficientLights® LED lighting products for grocery, drug and convenience stores, and its SecureLite area light and PowerLite street lights for utilities and municipalities. PowerSecure also provides electric utilities with transmission and distribution infrastructure maintenance and construction services, and engineering and regulatory consulting services. 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; the company's cost reduction plan; 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 are difficult to predict and 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 potential adverse financial and reputational consequences that can result from safety risks and hazards such as accidents inherent in the company's operations; the impact of the company's recent acquisitions of the ESCO business, the Solais business, and the commercial and industrial solar business; the company's ability to reduce and control its costs and expenses; 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, copies of which may be obtained by visiting the investor relations page of the company's website atwww.powersecure.comor the SEC's website atwww.sec.gov.
Accordingly, there is 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 Income (unaudited)|
|($000's except per share data)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,||June 30,||June 30,|
|Cost of sales||50,304||25,663||81,521||49,293|
|General and administrative||12,511||9,093||22,343||17,738|
|Selling, marketing, and service||2,105||1,366||3,490||2,424|
|Depreciation and amortization||1,809||1,136||3,265||2,221|
|Total operating expenses||16,425||11,595||29,098||22,383|
|Operating income (loss)||3,458||609||4,525||(624||)|
|Other income (expense)|
|Gain on sale of unconsolidated affiliate||0||1,439||0||1,439|
|Interest income and other income||19||23||40||45|
|Income (loss) before income taxes||3,347||1,955||4,330||636|
|Income tax expense (benefit)||1,305||621||1,679||228|
|Net income (loss) from continuing operations||2,042||1,334||2,651||408|
Discontinued operations - income (loss) from operations (net of
|Discontinued operations - gain on sale (net of tax)||0||0||0||0|
|Net income (loss)||2,042||1,366||2,651||475|
|Net loss attributable to noncontrolling interest||57||277||181||565|
|Net income (loss) attributable to PowerSecure International, Inc.||2,099||1,643||2,832||1,040|
|Summary of Amounts Attributable to PowerSecure International, Inc. shareholders|
|Income (loss) from continuing operations (net of tax)||2,099||1,611||2,832||973|
|Income (loss) from discontinued operations (net of tax)||0||32||0||67|
|Net income (loss) attributable to PowerSecure International, Inc.||2,099||1,643||2,832||1,040|
|EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO|
|POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:|
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING|
|PowerSecure International, Inc.|
|Condensed Consolidated Balance Sheets (unaudited)|
|June 30,||December 31,|
|Cash and cash equivalents||26,653||19,122|
|Trade receivables, net of allowance for doubtful accounts||74,526||57,147|
|Income taxes receivable||0||592|
|Deferred tax asset, net||803||803|
|Prepaid expenses and other current assets||1,440||1,285|
|Total current assets||131,998||99,276|
|PROPERTY, PLANT, AND EQUIPMENT:|
|Furniture and fixtures||460||375|
|Land, building, and improvements||5,996||5,907|
|Total property, plant, and equipment at cost||59,169||54,729|
|Less accumulated depreciation and amortization||15,008||12,152|
|Property, plant, and equipment, net||44,161||
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