EAST HANOVER, N.J., November 10, 2008 Comverge, Inc. (Nasdaq: COMV) announced today its operating results for the third quarter of 2008.
"During the third quarter Comverge won its largest Virtual Peaking Capacity® (VPC) contract ever in terms of potential future contracted revenues, demonstrated strong year over year revenue growth generated positive cash flow from operations, and introduced a new PowerPortal® In-Home Display product that is an important part of our AMI portfolio of products and software." said Robert M. Chiste, Comverge Chairman, President and CEO. "In addition, we recently entered into a five-year $25 million credit facility, improving our long-term liquidity position. Despite these challenging economic times, we have over $85 million of liquidity available to grow our business and take advantage of market opportunities which is a significant point of differentiation for us."
Comverge remains focused on the following three long-term value creation metrics by which the company operates: (1) megawatts owned under long-term contracts, (2) megawatts managed under open market programs, and (3) future estimated payments from long-term contracts. We have made significant progress on these three measures, through the first nine months of 2008, as evidenced by the following:
Megawatts owned under long term contracts have increased by 387
megawatts during 2008, which includes 165 megawatts still subject to
regulatory approval. Our annual goal for megawatt growth is 250 to 300
megawatts added per year under new or expanded long-term contracts;
Megawatts managed in open market programs have increased by 437
megawatts during 2008. Our annual goal for megawatt growth is 400 to
500 megawatts added in open market programs; and
Future estimated payments from long-term contracts have increased by
$202 million during 2008, which includes in excess of $114 million
still subject to regulatory approval. Our annual goal for increasing
contracted future payments from long-term contracts is $150 million to
$175 million.
"We are very pleased to be on track to meet or exceed our goals related to these value creation metrics in 2008, as we believe this growth builds the foundation for increasing stockholder value over the long-term," added Chiste.
Business Highlights
Comverge's business highlights for the third quarter of 2008 include:
Awarded a Virtual Peaking Capacity 15-year contract with Arizona Public
Service to provide up to 125 megawatts of contracted capacity for which
regulatory approval is required;
Expanded our Advance Metering Initiative (AMI) product portfolio with
the introduction of the PowerPortal, In-Home Display unit;
Total megawatts under management are:
Megawatts under long term contracts, with
regulatory approval 701
Megawatts under open market programs 899
Megawatts managed for a fee 437
Total megawatts (excluding 165 subject
to regulatory approval) 2,037
Financial Summary
Third quarter revenues for 2008 were $24.3 million, a 143% increase compared to $10.0 million in the third quarter of 2007. Revenues for both periods do not include revenues from our residential VPC contracts, which are deferred and recognized in the fourth quarter. Deferred revenues related to our VPC contracts were $17.7 million as of September 30, 2008, compared to $17.5 million as of September 30, 2007.
Adjusted EBITDA loss for the third quarter of 2008 was $4.7 million compared to an Adjusted EBITDA loss of $4.4 million for the third quarter of 2007. Adjusted EBITDA for both periods excludes the gross profit from our most profitable revenues, our deferred VPC contract revenues. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, non-cash stock compensation expense and non-cash impairment charge (see Schedule 4 - Reconciliation of Non-GAAP Financial Measure to the Most Directly Comparable GAAP Financial Measure).
Net loss for the third quarter of 2008 was $81.8 million, or $3.85 per share, compared to a net loss of $5.3 million, or $0.28 per share for the third quarter of 2007. Net loss includes a previously announced non-cash impairment charge for goodwill and certain intangible assets of $75.4 million related to our acquisition of Enerwise Global Technologies, Inc. in 2007. Net of a $1.1 million tax benefit, the net non-cash impairment charge of $74.3 million was a $3.49 loss per share.
Comverge ended the quarter with unrestricted cash and marketable securities of $57.5 million and generated $2.3 million in cash flow from operations during the third quarter of 2008.
Recent Developments
As of the date of this release, we have 866 megawatts under long-term contract, which will contribute to expected contracted future revenues of $445 million. Of these amounts, 165 megawatts of capacity are still awaiting regulatory approval. This includes capacity under the Arizona Public Service and Southern California Edison long-term VPC contracts, representing what we expect to be in excess of $114 million in contracted future revenues. In the event we receive regulatory approval on these 165 megawatts, our total megawatts managed will be 2,202 megawatts.
As previously announced, we obtained a 5-year $25 million senior credit facility with Silicon Valley Bank which will be utilized to repay $15 million of our maturing convertible notes and $10 million for our working capital needs and issuance of letters of credit. This new credit facility, combined with our strong cash position and our GE Capital credit facility, provides us with over $85 million of capital available to grow our business. We anticipate no need to access the capital markets in the coming year.
Additional Information
Comverge will discuss these results for the third quarter of 2008 and our expectations for the future in a conference call scheduled today, November 11, 2008 at 5:00 p.m. EST. This call can be accessed via Comverge's website at http://ir.comverge.com. To participate in the call, dial 877-419-6598 (719- 325-4864 for international calls) and indicate your intention to join the call.
An audio replay of the call will be available at approximately 10 p.m. EST today, November 11, 2008 until 12 a.m. (midnight) Tuesday, November 18, 2008 by dialing 888-203-1112 (719-457-0820 for international calls), using conference code number 5074513. Additionally, the results will be reported in the Investor Relations section on Comverge's website at http://ir.comverge.com.
This webcast will be available online and archived on Comverge's website until December 31, 2008 at 12:00 a.m. EST.
Additional financial information on Comverge can be found in the Company's Quarterly Report on Form 10-Q for the quarter-ended September 30, 2008, which will be filed tomorrow with the Securities and Exchange Commission.
About Comverge
Comverge, with over 2,200 megawatts of clean energy capacity under management, is a leading provider of clean energy solutions that improve grid reliability and supply electric capacity on a more cost effective basis than conventional alternatives by reducing base load and peak load energy consumption. For more information, visit www.comverge.com. Virtual Peaking Capacity and PowerPortal are registered trademarks of Comverge, Inc.
For Comverge Investors
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 year end revenues for 2008, projected contracted revenues, projected regulatory changes or approvals, the amount of revenue and megawatts that will be generated by long-term contracts 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, rule changes with open markets, economic and competitive factors, our key strategic relationships, and other risks more fully described in our most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K. 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.
For Additional Information
Michael Picchi
Executive Vice President and CFO
770-696-7660
Chris Neff
Director of Marketing
Comverge, Inc
973-947-6064
SCHEDULE 1
COMVERGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Product $ 4,796 $ 3,717 $ 12,247 $10,854
Service 19,489 6,291 32,012 9,508
Total revenue 24,285 10,008 44,259 20,362
Cost of revenue
Product 2,973 2,281 7,672 6,965
Service 14,060 4,599 21,102 6,055
Total cost of revenue 17,033 6,880 28,774 13,020
Gross profit 7,252 3,128 15,485 7,342
Operating expenses
General and
administrative
expenses 9,507 5,722 26,423 14,457
Marketing and
selling expenses 4,314 2,687 12,194 6,749
Research and
development expenses 140 190 676 819
Amortization of
intangible assets 610 280 1,922 308
Impairment charges 75,432 - 75,432 -
Operating loss (82,751) (5,751) (101,162) (14,991)
Interest and other
(income) expense, net 158 (462) 14 (830)
Loss before
income taxes (82,909) (5,289) (101,176) (14,161)
Provision (benefit)
for income taxes (1,140) 7 (970) 21
Net loss $(81,769) $(5,296) $(100,206) $(14,182)
Net loss per share
Basic and diluted $ (3.85) $ (0.28) $(4.75) $(1.12)
Weighted average
shares used in
computation 21,258,430 19,105,624 21,101,887 12,714,474
SCHEDULE 2
COMVERGE, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Utility Products
and Services $5,775 $4,748 $14,830 $13,616
Residential Business 5,577 694 10,680 2,167
Commercial and
Industrial Business 12,933 4,566 18,749 4,579
Total Revenue $24,285 $10,008 $44,259 $20,362
Cost of Revenue:
Utility Products
and Services $3,391 $2,862 $8,667 $8,131
Residential Business 3,165 531 5,784 1,400
Commercial and
Industrial Business 10,477 3,487 14,323 3,489
Total Cost
of Revenue $17,033 $6,880 $28,774 $13,020
Gross Profit:
Utility Products
and Services $2,384 $1,886 $6,163 $5,485
Residential Business 2,412 163 4,896 767
Commercial and
Industrial Business 2,456 1,079 4,426 1,090
Total Gross Profit $7,252 $3,128 $15,485 $7,342
SCHEDULE 3
COMVERGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2008 2007
Assets
Cash and cash equivalents $28,655 $39,755
Restricted cash 2,207 2,151
Marketable securities 28,865 33,174
Accounts receivable, net 24,074 12,194
Inventory, net 4,168 2,988
Deferred costs 5,829 1,615
Other current assets 1,639 2,841
Total current assets 95,437 94,718
Restricted cash 880 214
Property and equipment, net 19,865 14,011
Intangible assets, net 9,225 18,828
Goodwill 8,179 74,369
Other assets 828 1,005
Total assets $134,414 $203,145
Liabilities and Shareholders' Equity
Accounts payable 4,333 4,571
Deferred revenue 20,113 4,340
Accrued expenses 11,815 3,976
Current portion of long-term debt 20,035 -
Other current liabilities 4,900 7,131
Total current liabilities 61,196 20,018
Deferred revenue 1,555 1,697
Long-term debt 9,778 26,337
Other liabilities 2,099 2,462
Total long-term liabilities 13,432 30,496
Common stock 22 21
Additional paid-in capital 219,132 211,403
Common stock held in treasury (64) -
Accumulated deficit (159,030) (58,824)
Accumulated other comprehensive income (274) 31
Total shareholders' equity 59,786 152,631
Total liabilities and
shareholders' equity $134,414 $203,145
SCHEDULE 4
COMVERGE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO THE
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURE
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited)
Net loss $(81,769) $(5,296) $(100,206) $(14,182)
Depreciation and
amortization 899 450 2,586 718
Interest (income)
expense, net 171 (469) (30) (908)
Provision for
income taxes (1,140) 7 (970) 21
EBITDA $(81,839) $(5,308) $(98,620) $(14,351)
Non-cash stock
compensation expense 1,664 865 5,416 1,542
Non-cash impairment
charge 75,432 - 75,432 -
Adjusted EBITDA $(4,743) $(4,443) $(17,772) $(12,809)
See "Non-GAAP Financial Information" above in this earnings press release
for information on the use of this Non-GAAP financial measure
SCHEDULE 5
COMVERGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Cash flows from
operating activities
Net loss $(81,769) $(5,296) $(100,206) $(14,182)
Adjustments to
reconcile net loss
to net cash used in
operating activities
Depreciation 289 170 664 410
Amortization of
intangible assets 610 280 1,922 308
Stock-based
compensation 1,664 865 5,416 1,542
Impairment charges 75,432 - 75,432 -
Other (725) (171) (693) (135)
Changes in working
capital 6,821 3,475 3,911 8,112
Net cash provided
by (used in)
operating
activities 2,322 (677) (13,554) (3,945)
Cash flows from
investing activities
Changes in
restricted cash 1,790 - (722) -
Cash paid for
acquisitions, net
of cash acquired (48) (23,509) (48) (23,791)
Purchases of
marketable
securities (8,797) (8,868) (31,642) (73,193)
Maturities of
marketable
securities 6,346 39,327 35,826 40,800
Purchases of
property and
equipment (3,011) (608) (6,258) (2,306)
Net cash provided
by (used in)
investing
activities (3,720) 6,342 (2,844) (58,490)
Cash flows from
financing activities
Proceeds from
exercises of
stock options 107 48 354 1,206
Borrowings under
credit agreement 1,904 1,760 5,598 3,394
Repayment of
senior loan
agreement - (1,000) - (1,000)
Net proceeds
(payments) from
issuance of common
stock - (362) (614) 86,400
Payment of employee
taxes due to net
settlement stock
option exercises (12) - (40) -
Payment of debt
issuance costs - - - (1,274)
Net cash provided
by financing
activities 1,999 446 5,298 88,726
Net change in cash
and cash equivalents 601 6,111 (11,100) 26,291
Cash and cash
equivalents at
beginning of period 28,054 23,954 39,755 3,774
Cash and cash
equivalents at
end of period $28,655 $ 30,065 $28,655 $ 30,065
