Press Releases

November 4, 2010

World Energy Solutions Reports Net Income and Record Revenue for Q3 2010 on Strong Growth

Delivers First Quarter of Profits as Publicly-Traded Company, Fourth Straight Quarter of Positive Adjusted EBITDA

Worcester, MA – November 4, 2010 – World Energy Solutions, Inc. (NASDAQ: XWES; TSX: XWE), a leading energy management services firm, today announced financial results for the third quarter ended September 30, 2010. In Q3, World Energy reached a significant financial milestone, recording its first quarter of net income as a publicly-traded company – $0.02 per share – on record revenue and record annual backlog.

Q3 Financial Highlights (All figures are in US dollars and compare Q3 2010 results to Q3 2009)

• Quarterly revenue grew 34% to $4.65 million
• Gross margins rose to 80% from 74%
• Reached net income of $0.1 million, or $0.02 per share, compared to net loss of $0.6 million, or ($0.08) per share
• Adjusted EBITDA* grew to $0.7 million for the quarter and $1.2 million year-to-date
• Annualized backlog reached a record $13.0 million, up 25%
• Total backlog grew 16% to $24.4 million
• Cash and cash equivalents grew to $2.1 million, up over 200% from $0.7 million

Q3 Product Line Highlights

• Strong Retail bookings and revenue spurred by continued successes in the Ohio and Pennsylvania markets
• Renewed our contract with our largest customer – GSA – for 5-years with a 5-year renewal option
• Signed a major new Demand Response partnership with Caterpillar dealer Alban Engine; initiated the expanded roll out of demand response offering
• Wholesale customers increased 27% to 65; channel partners grew 43% to 129
• Continued execution under the renewed RGGI program, with cumulative auction results of close to 300 million allowances for over $729 million

“In Q3, World Energy reached a major milestone, posting our first quarter of net income as a public company,” said Richard Domaleski, CEO of World Energy. “We did so with the best quarterly revenue in our history and record backlog, while notching our fourth consecutive quarter of positive adjusted EBITDA. This all bodes well for the future as we continue to realize the operating leverage of our model and recognize revenue from record bookings and backlog.

“Bigger picture, World Energy continues to execute against our strategic initiatives, solidifying our position as the No. 1 online retail energy broker, expanding our energy management offerings within our target markets, and penetrating new markets to which we can apply our process and technology to drive bottom line impact for our customers. We are a growth company that is steadily gaining market share and generating increased profits.”

Financial Review

For the quarter ended September 30, 2010, revenue increased by 34% over Q3 2009 to $4.65 million. This growth reflects increased auction activity in all the Company’s product lines, including continued success in the Ohio electricity market and further growth in the Company’s channel partner network.

Gross margin percentage for the third quarter of 2010 was 80% compared to 74% in the same period last year as the Company continued to benefit from the operating leverage in its business model. Total operating expenses for the third quarter of 2010 increased 12% due to higher third-party and internal commission expense resulting from the record revenue performance, as well as increased investor outreach and marketing. These increases were partially offset by a net reduction in compensation costs. Net income for the three months ended September 30, 2010 was $0.1 million, or $0.02 per share, compared with a net loss of $0.6 million, or $(0.08) per share, in 2009. This improvement was driven by the 34% increase in revenue and the 6% rise in gross margin percentage.

Revenue for the nine months ended September 30, 2010 rose 18% over the same period last year to $13.1 million due to increased auction activity in the Company’s Retail and Wholesale product lines.

Gross margin percentage increased 6% to 79% for the nine months ended September 30, 2010, compared to 73% in the same period last year. Total operating expenses for the nine months ended September 30, 2010 increased 5% primarily due to increased investor and marketing outreach and increased internal and third-party commissions. These increases were partially offset by a net reduction in compensation and travel costs. Net loss for the year-to-date period was $0.5 million, or $(0.05) per share, compared with a net loss of $2.1 million, or $(0.25) per share, in the first nine months of 2009.

At September 30, 2010, the Company had no bank debt and cash and cash equivalents of $2.1 million, compared with $1.7 million at June 30, 2010. The $0.4 million increase in cash and cash equivalents during the three months ended September 30, 2010 was primarily due to cash generated from adjusted EBITDA* of $0.7 million representing the Company’s fourth straight quarter of positive adjusted EBITDA. During the nine months ended September 30, 2010 the Company generated positive adjusted EBITDA of $1.2 million.

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 September 30, 2010 included commodity backlog of $23.5 million and $12.1 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 $0.9 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, November 4, 2010, at 10:00 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 1-877-407-9205 (domestic) or 1-201-689-8054 (international). A replay will be available two hours after the completion of the call, and for one month following the call, by dialing 1-877-660-6853 for domestic participants or 1-201-612-7415 for international participants, and entering account #286 and conference ID #359382 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 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 share-based compensation, depreciation related to our fixed assets, amortization expenses associated with acquisition-related assets and capitalized software and net interest.

Management believes it is useful to exclude depreciation, amortization and net interest 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 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 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 adjusted EBITDA is shown below:

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 global carbon market, where its World Green Exchange® 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. 


 

SOURCE:  World Energy Solutions, Inc.

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