Comverge Reports Second Quarter 2010 Financial Results
NORCROSS, GA., July 29, 2010 Comverge, Inc. (Nasdaq:COMV), the leading provider of Intelligent Energy Management (IEM) solutions for Residential and Commercial + Industrial customers, today announced second quarter 2010 financial and operating results.
Quarterly revenues of $17 million, a 29% increase over prior year
Secured $74 million in future contracted revenue in PJM's 2013-14 auction
Awarded a major Virtual Peaking Capacity contract expansion at NV Energy
Announced strategic partnership to pursue international opportunities
"Our explosive growth in the commercial and industrial sector in particular, punctuated by the results of the PJM 2013 auction, where we tripled revenue compared to the prior auction and increased our market share to more than 10% of the total awarded Demand Response resources, is proof positive of our position as the proven provider of comprehensive energy management solutions," said Comverge President & CEO, R. Blake Young. "In the second quarter of 2010 we continued our momentum of high growth, securing valuable partnerships that will allow us to enter new markets and winning key strategic contracts in both the residential and commercial and industrial sectors."
Financial Summary
Second quarter revenues for 2010 were $17.0 million compared to $13.3 million in the second quarter of 2009, a 29% increase. Revenues for both periods exclude revenues from our residential Virtual Peaking Capacity (VPC) contracts, which are deferred and recognized in the fourth quarter.
Gross margin for the second quarter of 2010 was 31.4% compared to 44.0% in the second quarter of 2009. Gross margin in the second quarter of 2010 was impacted by 3 percentage points for the one-time limited product recall disclosed in June and lower gross margins on turnkey contracts. Gross margins are most meaningful when comparing on a 12 month basis due to the deferral of VPC contract revenues. Deferred VPC contract revenues at June 30, 2010 were $14.3 million, with a deferred gross margin of 76% compared to deferred VPC gross margin of 66% at June 30, 2009.
Adjusted EBITDA for the second quarter of 2010 was a negative $8.2 million compared to a negative $6.3 million for the second quarter of 2009. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense (see Schedule 5 -- Reconciliation of Non-GAAP Financial Measure to the Most Directly Comparable GAAP Financial Measure).
Net loss for the second quarter of 2010 was $10.3 million, or $0.42 per share basic and diluted, compared to a net loss of $9.1 million, or $0.43 per share basic and diluted for the second quarter of 2009. Included in the second quarter of 2010 result was a one-time charge of $0.03 per share related to the limited product recall.
Business Highlights Comverge second quarter 2010 business highlights include:
Secured more than $74 million in future contracted revenues in the PJM
Interconnection (PJM) market as a result of the 2013/2014 Reliability
Pricing Model Base Residual Auction. The award extends Comverge's recent
growth in the commercial and industrial (C+I) demand response market,
following an increase of more than 275 megawatts (MWs) under management
in the first quarter of 2010,
announced the extension and expansion of our NV Energy residential
Virtual Peaking Capacity contract to manage the 143 MWs built-out by
Comverge over the last three years and to build-out an additional 12 MWs
during 2010, bringing the program total to more than 155 MWs; and
announced a joint venture agreement with Projects International, Inc.,
an international business development firm. Under the three-year
agreement, Projects International will pursue opportunities to leverage
Comverge's IEM solutions in select countries.
Increased total megawatts under management by 456 megawatts or 16%,
during the first half of 2010. Total megawatts under management as of
June 30, 2010 and December 31, 2009 were:
6/30/2010 12/31/09
--------- --------
Megawatts under long-term contracts, with regulatory
approval 910 898
Megawatts under open market programs 1453 1194
Megawatts to be provided under turnkey programs 555 370
Megawatts managed for a fee 437 437
--------- --------
Total megawatts 3355 2899
========= ========
Recent Developments
Announced we were selected by Public Service Company of Oklahoma (PSO)
to deliver a comprehensive energy management pilot program to eligible
residential and commercial customers. The demand response pilot program
will be built on Comverge's Apollo Demand Response Management System
(DRMS) software, the industry's leading energy management software
platform. Under the three-year agreement, Comverge will provide full
turnkey services including hardware, enrollment, installation and call
center services to both PSO's residential and commercial + industrial
customers.
Current Outlook We are reaffirming our revenue outlook for full year 2010 and expect revenues to be in the range of $125 to $137 million. We also expect to grow total megawatts under management by 800 megawatts.
As of the date of this release, we have 910 megawatts under long-term capacity contracts, which represents approximately $614 million in total contracted future revenues. Furthermore, we have been awarded 997 megawatts of capacity in the 2013 -- 2014 PJM Reliability Pricing Model Base Residual Auction, or BRA. In the event we secure adequate load capacity to meet our obligations under the 2013-2014 PJM BRA, we will have 3,975 in total megawatts managed.
The above statements are based on current expectations. These statements are forward-looking and actual results may differ materially. The Company assumes no obligation to publicly update or revise its outlook. Investors are reminded that actual results may differ from these estimates for the reasons described below under the caption "Caution Regarding Forward Looking Statements" and in our filings with the Securities and Exchange Commission.
Additional Information
Comverge will discuss these results for the second quarter 2010 as well as its expectations for the future in a conference call scheduled today at 5:00 p.m. EDT. To participate in the call, dial 877-334-1969 or 760-666-3589 for international participants.
Additionally, the results will be reported in the Investor Relations section on Comverge's website at http://ir.comverge.com. An audio replay of the call will be available beginning July 29, 2010 at 8:00 p.m. and available until August 5, 2010 at 12:00 a.m. EDT (midnight) by dialing in 800-642-1687 (706- 645-9291 for international participants) and using conference code number 83321791.
Additional financial information can be found in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, which has been filed today with the Securities and Exchange Commission.
About Comverge
With more than 500 utility and 2,100 commercial customers, as well as five million deployed residential devices, Comverge brings unparalleled industry knowledge and experience to offer the most reliable, easy-to-use, and cost-effective intelligent energy management programs. We deliver the insight and control that enables energy providers and consumers to optimize their power usage through the industry's only proven, comprehensive set of technology, services and information management solutions. For more information, visit www.comverge.com.
Caution Regarding Forward Looking Statements
This release contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this release are not and do not constitute historical facts, do not constitute guarantees of future performance and are based on numerous assumptions which, while believed to be reasonable, may not prove to be accurate. These forward looking statements include projected revenue guidance, projected contracted revenues, projected regulatory changes or approvals, the amount of revenue and megawatts that will be generated by long-term contracts or open market programs and certain assumptions upon which such forward-looking statements are based. The forward-looking statements in this release do not constitute guarantees of future performance and involve a number of factors that could cause actual results to differ materially, including risks associated with Comverge's business involving our products, the development and distribution of our products and related services, regulatory changes or grid operator rule changes, regulatory approval of our contracts, economic and competitive factors, our key strategic relationships, and other risks more fully described in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed today. Comverge assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.
Regulation G Disclosure - Non-GAAP Financial Information Non-GAAP financial measures are based upon our unaudited consolidated statements of operations for the periods shown, giving effect to the adjustments shown in the reconciliations set forth below. This presentation is not in accordance with, or an alternative for, U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, Comverge believes that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation below, provides meaningful information and therefore uses it to supplement its GAAP reporting and internally in evaluating operations, managing and benchmarking performance. The Company has chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations below, and to provide an additional measure of performance.
SCHEDULE 1
COMVERGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Product $ 5,294 $ 5,077 $ 10,755 $ 9,913
Service 11,753 8,188 19,673 14,932
----------- ----------- ----------- -----------
Total revenue 17,047 13,265 30,428 24,845
Cost of revenue
Product 4,382 2,982 8,006 6,086
Service 7,308 4,445 12,350 8,503
----------- ----------- ----------- -----------
Total cost of revenue 11,690 7,427 20,356 14,589
----------- ----------- ----------- -----------
Gross profit 5,357 5,838 10,072 10,256
Operating expenses
General and
administrative expenses 9,214 8,101 17,312 15,990
Marketing and selling
expenses 4,066 4,683 8,844 8,442
Research and development
expenses 1,543 1,209 2,908 2,325
Amortization of
intangible assets 536 552 1,072 1,104
----------- ----------- ----------- -----------
Operating loss (10,002) (8,707) (20,064) (17,605)
Interest and other
expense, net 291 369 353 564
----------- ----------- ----------- -----------
Loss before income taxes (10,293) (9,076) (20,417) (18,169)
Provision for income taxes 55 65 115 107
----------- ----------- ----------- -----------
Net loss $ (10,348) $ (9,141) $ (20,532) $ (18,276)
=========== =========== =========== ===========
Net loss per share (basic
and diluted) $ (0.42) $ (0.43) $ (0.83) $ (0.85)
=========== =========== =========== ===========
Weighted average shares
used in computation 24,618,730 21,403,508 24,598,205 21,385,061
SCHEDULE 2
COMVERGE, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Utility Products &
Services $ 11,106 $ 7,939 $ 20,186 $ 14,600
Residential Business 2,269 3,019 4,368 6,971
Commercial & Industrial
Business 3,672 2,307 5,874 3,274
----------- ----------- ----------- -----------
Total Revenue $ 17,047 $ 13,265 $ 30,428 $ 24,845
=========== =========== =========== ===========
Cost of Revenue:
Utility Products &
Services $ 8,116 $ 4,362 $ 14,108 $ 8,239
Residential Business 1,265 1,690 2,604 4,333
Commercial & Industrial
Business 2,309 1,375 3,644 2,017
----------- ----------- ----------- -----------
Total Cost of Revenue $ 11,690 $ 7,427 $ 20,356 $ 14,589
=========== =========== =========== ===========
Gross Profit:
Utility Products &
Services $ 2,990 $ 3,577 $ 6,078 $ 6,361
Residential Business 1,004 1,329 1,764 2,638
Commercial & Industrial
Business 1,363 932 2,230 1,257
----------- ----------- ----------- -----------
Total Gross Profit $ 5,357 $ 5,838 $ 10,072 $ 10,256
=========== =========== =========== ===========
SCHEDULE 3
COMVERGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December
June 30, 31,
2010 2009
----------- ----------
(Unaudited)
Assets
Cash and cash
equivalents $ 10,432 $ 16,069
Restricted cash 1,584 3,000
Marketable securities 24,953 34,409
Billed accounts
receivable, net 13,544 8,119
Unbilled accounts
receivable 7,064 11,873
Inventory, net 8,167 6,605
Deferred costs 6,102 1,715
Other current assets 1,484 938
----------- ----------
Total current assets 73,330 82,728
Restricted cash 2,838 2,636
Property and
equipment, net 19,575 18,340
Intangible assets, net 7,352 8,779
Goodwill 8,179 8,179
Other assets 270 235
----------- ----------
Total assets $ 111,544 $ 120,897
=========== ==========
Liabilities and
Shareholders' Equity
Accounts payable $ 8,392 $ 6,874
Accrued expenses 6,159 11,574
Deferred revenue 19,785 5,890
Current portion of
long-term debt 3,000 3,000
Other current
liabilities 6,579 5,648
----------- ----------
Total current
liabilities 43,915 32,986
Deferred revenue 1,911 1,203
Long-term debt 8,250 9,750
Other liabilities 2,613 2,914
----------- ----------
Total long-term
liabilities 12,774 13,867
Shareholders' equity
Common stock 25 25
Additional paid-in
capital 260,153 258,660
Treasury stock (203) (63)
Accumulated deficit (205,128) (184,596)
Accumulated other
comprehensive income 8 18
----------- ----------
Total shareholders'
equity 54,855 74,044
----------- ----------
Total liabilities and
shareholders' equity $ 111,544 $ 120,897
=========== ==========
SCHEDULE 4
COMVERGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (10,348) $ (9,141) $ (20,532) $ (18,276)
Adjustments to net loss to net cash from
operating activities
Depreciation 294 261 576 512
Amortization of intangible assets 708 686 1,412 1,365
Stock-based compensation 843 1,429 1,325 2,817
Other 271 555 501 644
Changes in operating assets and
liabilities 6,413 14,220 6,474 22,348
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities (1,819) 8,010 (10,244) 9,410
Cash flows from investing activities
Changes in restricted cash (320) (4) 1,214 889
Maturities (purchases) of marketable
securities, net 9,815 (1,112) 9,055 6,769
Purchases of property and equipment (2,151) (4,645) (3,916) (8,586)
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities 7,344 (5,761) 6,353 (928)
Cash flows from financing activities
Borrowings (payments) under debt
facilities, net (750) 3,410 (1,500) 5,749
Other 45 55 (246) 3
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities (705) 3,465 (1,746) 5,752
Net change in cash and cash equivalents 4,820 5,714 (5,637) 14,234
Cash and cash equivalents at beginning of
period 5,612 28,091 16,069 19,571
----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period $ 10,432 $ 33,805 $ 10,432 $ 33,805
=========== =========== =========== ===========
SCHEDULE 5
COMVERGE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO THE
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURE
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
2010 2009 2010 2009
----------- ---------- ----------- -----------
Net loss $ (10,348) $ (9,141) $ (20,532) $ (18,276)
Depreciation and amortization 1,002 947 1,988 1,877
Interest expense, net 292 358 357 548
Provision for income taxes 55 65 115 107
----------- ---------- ----------- -----------
EBITDA (8,999) (7,771) (18,072) (15,744)
Non-cash stock compensation
expense 843 1,429 1,325 2,817
----------- ---------- ----------- -----------
Adjusted EBITDA $ (8,156) $ (6,342) $ (16,747) $ (12,927)
=========== ========== =========== ===========
See "Non-GAAP Financial Information" above in this earnings press release for
information on the use of this
Non-GAAP financial measure.
For Additional Information
Investor Relations
Dan Pfeffer, VP, Treasurer-Investor Relations
678-802-8302
Media Relations
Marie Bahl
Senior Director of Corporate Marketing
678-802-8371
