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August 7, 2008
August 7, 2008 – Worcester, MA. World Energy Solutions, Inc. (TSX: XWE), a leading operator of online exchanges for energy and environmental commodities, today announced its financial results for the three and six months ended June 30, 2008. All figures below are in U.S. dollars, unless stated otherwise.
Q2 2008 Highlights (compared with Q2 2007)
- Revenue increased by 43% to $2.8 million
- Annualized retail backlog* grew to $8.5 million from $6.0 million
- Wholesale client base rose sixfold to 30 from 5, although revenue affected by high-priced commodity environment
- Channel partner network increased to 53 from 34
- Continued to solidify retail business through new transactions with many commercial and industrial (C&I) customers, government customers and with key renewals
- Subsequent to quarter end, finalized contract with Regional Greenhouse Gas Initiative, Inc. (RGGI) under which World Energy will provide auction services related to the design and implementation of the United States' only cap-and-trade carbon market
"The second quarter was highlighted by strong performance from our base retail product line, resulting in a record $8.5 million in annualized retail backlog. Key drivers during the quarter included the continued growth of our government franchise with the expansion of our State of Connecticut relationship and a successful five-year auction for the City of Springfield," said Richard Domaleski, Chief Executive Officer, World Energy Solutions. "The success of our dedicated wholesale sales team was reflected in accelerating traction with new wholesale customers, which is an important indicator of future growth. However, the high-priced energy environment continued throughout the second quarter, which we believe caused many customers to delay their purchasing decisions. Despite the market conditions, we executed successful auctions for four new wholesale customers, and believe we have positioned the company to capitalize on this significant opportunity once customers return to the market. We have already seen increased activity in July as natural gas has moved below $10 per decatherm."
Mr. Domaleski added: "During the quarter, we passed a significant milestone with RGGI, developing materials that supported RGGI's release of the auction notice and bidder application for their first auction, which is scheduled for September 25, 2008. This promises to be an exciting event for our Company and for the shaping of a U.S. cap-and-trade system to curb carbon emissions."
Financial Review
For the quarter ended June 30, 2008, revenue increased by 43% over the same period in the prior year to $2.8 million as a result of increased auction activity in the Company's retail product line, new customer wins and the acquisition of the assets of EnergyGateway. The year-over-year growth in revenue also reflects the addition of 19 new channel partners during Q2 2008 compared with the same period in the prior year. During Q2 2008, the Company added 10 new wholesale customers, bringing its wholesale customer base to 30. However, the Company believes that some of these customers delayed procurement decisions during the period because of the high-priced energy environment. As a result, revenue from the Company's wholesale product line represented 4% of total revenue in Q2 2008, compared with an average of 17% in the previous two quarters. For the third quarter to date, wholesale auction revenue has already exceeded second quarter levels as electricity and natural gas prices have declined.
Total operating expenses for Q2 2008 were $3.9 million, compared with $3.3 million in Q2 2007 and $4.1 million in Q1 2008. The year-over-year increase primarily reflects the planned investment in the Company's direct sales force and account management teams as well as the addition of the EnergyGateway operations. At June 30, 2008, the Company had 62 employees, compared with 54 at the same point last year and 62 at March 31, 2008. Management expects its fixed cost structure to remain stable at current levels. The Company's major infrastructure investment was completed during 2007 and its fixed operating costs have remained flat over the past three quarters.
Net loss for the second quarter of 2008 was $2.4 million, or $(0.03) per share, compared with a net loss of $1.2 million, or $(0.02) per share, in the second quarter of 2007. The year-over-year change is primarily due to higher operating expenses and decreases in interest income and income tax benefit, partially offset by an increase in revenue.
Revenue for the six months ended June 30, 2008 rose 71% over the same period last year to $5.9 million due to organic growth from increased auction activity and energy consumption and the addition of EnergyGateway. This growth reflects increases in all of the Company's base energy procurement markets, including wholesale, government and C&I.
Total operating expenses for the six months ended June 30, 2008 increased to $7.9 million from $5.3 million in the same period last year primarily due to increases in salary, benefit and recruiting costs reflecting the Company's increased employee base. Net loss for the year-to-date period was $4.5 million, or $(0.05) per share, compared with $1.6 million, or $(0.02) per share, in the first six months of 2007.
At June 30, 2008, the Company had no long-term bank debt and cash and cash equivalents of $2.3 million, compared with $4.1 million at March 31, 2008. Net cash used in operations during the first six months of 2008 was $4.4 million, which included $1.2 million of working capital increases primarily attributable to forecasted decreases in accrued compensation and accounts payable. The Company believes that it has the resources necessary to fund its ongoing operations and pursue its growth initiatives.
*Annualized retail backlog represents the revenue that the Company would derive within the 12 months following the date on which the backlog is calculated from contracts between consumer, industrial and government (CIG) energy consumers and energy suppliers that are in force on such date, assuming such CIG energy consumers use energy at their historical usage levels. In addition, contracted backlog includes annualized expected management fees, which represent contracts for risk management services between World Energy and energy consumers that are recognized on a monthly basis and are expected to be received over the following 12 months. Management fees can be terminated within 30 days per the terms of the contracts. The annualized backlog at June 30, 2008 included contracted backlog of $7.2 million and expected management fees of $1.3 million.
Conference Call & Webcast
World Energy will hold a conference call today, August 7, 2008, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 416-915-5762 or 1-800-814-4862. A live audio webcast of the conference call will be available through the Investor Relations/News & Events section of the Company's website at www.worldenergy.com and at www.newswire.ca.An archived replay of the webcast will be available for 360 days.
About World Energy
World Energy operates leading online exchanges for energy and environmental commodities. Our proven approach provides market intelligence, promotes liquidity, and creates price transparency for all market participants, enabling our customers to transact with confidence and to seek the best possible price. To date, the company has transacted more than 45 billion kwh of electricity, nearly 1bb kwh of green power and Renewable Energy Certificates (RECs) and over one trillion cubic feet of natural gas. 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: our revenue is 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; we depend on a small number of key energy consumers, suppliers and channel partners; there are factors outside our control that affect transaction volume in the electricity market; and there are other factors identified in our Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission.
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WORLD ENERGY SOLUTIONS, INC.
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
Revenue $ 2,760,695 $ 1,927,192 $ 5,875,212 $ 3,428,329
Cost of revenue 1,276,859 669,782 2,512,912 1,066,143
------------- ------------- ------------- -------------
Gross profit 1,483,836 1,257,410 3,362,300 2,362,186
Sales and
marketing 2,770,924 1,834,314 5,414,660 2,936,349
General and
administrative 1,100,642 1,484,804 2,521,625 2,397,797
------------- ------------- ------------- -------------
Operating loss (2,387,730) (2,061,708) (4,573,985) (2,971,960)
Interest income,
net 7,413 170,219 33,726 374,243
------------- ------------- ------------- -------------
Loss before
income taxes (2,380,317) (1,891,489) (4,540,259) (2,597,717)
Income tax benefit - 713,919 - 980,711
------------- ------------- ------------- -------------
Net loss $ (2,380,317) $ (1,177,570) $ (4,540,259) $ (1,617,006)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Loss per share:
Net loss per
common share
- basic $ (0.03) $ (0.02) $ (0.05) $ (0.02)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net loss per
common share
- diluted $ (0.03) $ (0.02) (0.05) $ (0.02)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average
shares
outstanding -
basic 82,886,727 78,283,719 82,703,102 77,402,625
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average
shares
outstanding -
diluted 82,886,727 78,283,719 82,703,102 77,402,625
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2008
----------------
Assets
------
Current assets $ 4,944,015
Property and equipment, net 561,242
Goodwill 3,178,701
Other assets 7,217,808
----------------
Total assets $ 15,901,766
----------------
----------------
Liabilities and stockholders' equity
------------------------------------
Accrued commissions $ 623,850
Accounts payable and accrued liabilities 2,082,964
Other current liabilities 396,525
----------------
Total current liabilities 3,103,339
Total long-term liabilities 25,411
Stockholders' equity 12,773,016
----------------
Total liabilities and stockholders'
equity $ 15,901,766
----------------
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SOURCE: World Energy Solutions, Inc.
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