Comverge Reports Third Quarter 2009 Financial Results
Quarterly Revenue Increases 37%
EAST HANOVER, N.J., November 9, 2009 Comverge, Inc. (Nasdaq: COMV), a leading provider of comprehensive smart grid, demand management, and energy efficiency solutions, today announced its third quarter financial and operating results for 2009.
"Our third quarter performance kept us firmly on track to meet or exceed our targets for annual growth in megawatts under management and estimated future contract revenue," said Michael D. Picchi, Interim President and CEO of Comverge. "Our operational execution remained solid as we realized 37% year-over-year revenue growth, grew our Virtual Peaking Capacity deferred revenues 36%, and built out 18 megawatts of capacity in these programs. We remain confident about the outlook for our performance in the remainder of this year."
Picchi continued, "The awarding of $3.4 billion in stimulus funds by the Department of Energy to support smart grid projects that modernize the U.S. electricity grid under the American Recovery and Reinvestment Act is an exciting and unique opportunity. A number of our utility customers will be recipients of stimulus funds and Comverge expects our leading demand management solutions to be part of a number of these smart grid projects."
Financial Summary
Third quarter revenues for 2009 were $33.2 million compared to $24.3 million in the third quarter of 2008, a 37% increase. Revenues for both periods exclude revenues from residential Virtual Peaking Capacity (VPC) contracts, which are deferred and recognized in the fourth quarter. Deferred revenue on the balance sheet from the VPC contracts was $25.0 million as of September 30, 2009 compared to $4.3 million at year-end 2008, an increase of $20.7 million during the first nine months of 2009. The $20.7 million increase during the first nine months of 2009 is compared to a $15.2 million increase in VPC deferred revenue during the first nine months of 2008, a 36% increase.
Adjusted EBITDA for the third quarter of 2009 was a negative $3.9 million compared to a negative $4.7 million for the third quarter of 2008. 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 third quarter of 2009 was $9.4 million, or $0.44 per share basic and diluted, compared to a net loss of $81.8 million, or $3.85 per share basic and diluted for the third quarter of 2008. Net loss for the third quarter of 2009 included a one time expense of $4.3 million, or $0.20 per share basic and diluted, related to the retirement of Robert M. Chiste, the company's former President and CEO. Net loss for the third quarter of 2008 included a non-cash impairment charge for goodwill and certain intangible assets of $75.4 million. Net of a $1.0 million tax benefit, the net non-cash impairment charge of $74.4 million was a loss of $3.49 per share in the third quarter of 2008.
Business Highlights
Comverge third quarter 2009 business highlights include:
-- Entered into a 5-year agreement with a major Virginia-based energy
provider to provide 117 megawatts of contracted demand side management
capacity from commercial and industrial consumers, supply more than
150,000 advanced metering infrastructure compatible energy management
devices for residential customers and provide our Apollo(R) Demand
Response Management System software.
-- Announced that our 4-year, 40 megawatt VPC contract with Southern
California Edison (SCE) had received regulatory approval.
-- Increased total megawatts under management by 63 megawatts during the
third quarter of 2009. As of September 30, 2009 total megawatts under
management were:
- Megawatts under long-term contracts, with regulatory approval 919
- Megawatts under open market programs 1181
- Megawatts to be provided under turnkey programs 320
- Megawatts managed for a fee 437
---
- Total megawatts 2857
Recent Developments and Current Outlook
Comverge announced the appointment of A. Laurence Jones, Joseph M. O'Donnell and Scott B. Ungerer to its Board of Directors effective October 26, 2009.
Comverge's management and Board of Directors use three metrics to measure the company's operational progress: (i) megawatts owned under long-term contracts, (ii) megawatts managed under open market programs, and (iii) estimated future revenues from long-term contracts. We believe these metrics are the most important to the growth and long-term success of the company.
Our 2009 targets for growth in these metrics and our progress towards these metrics in the first nine months of 2009 are:
-- Add a net 275 megawatts of capacity under long-term contracts. 218
megawatts of capacity under long-term contracts were added during the
first nine months of 2009;
-- Add a net 225 megawatts in open market programs. 287 megawatts were
added in open market programs during the first nine months of 2009; and
-- Add a net $150 million increase in the amount of estimated future
revenues from long-term contracts. A net $169 million in estimated
future revenues were added in the first nine months of 2009.
As of the date of this release, we have 1015 megawatts under long-term capacity contracts which represents approximately $527 million of estimated future contract revenues. Of these amounts, 117 megawatts of capacity under long-term contracts representing an expected $32 million in contracted future revenues, are still awaiting regulatory approval. Furthermore, we have been awarded 683 megawatts of capacity in the 2012-2013 PJM Economic Load Response Program, or ELRP. In the event we receive regulatory approval on these 117 megawatts and we secure adequate load capacity to meet our obligations under the 2012-2013 PJM ELRP, we will exceed 3,300 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 third quarter as well as its expectations for the future in a conference call scheduled today at 10:00 a.m. EST. To participate in the call, dial 888-713-4541 or 913-312-1502 for international participants.
An audio replay of the call will be available beginning November 9, 2009 at 1:00 p.m. and available until November 16, 2009 12:00 a.m. EST, (midnight) by dialing in 888-203-1112 (719-457-0820 for international participants) and using conference code number 9490642. Additionally, the results will be reported in the Investor Relations section on Comverge's website at http://ir.comverge.com.
Additional financial information can be found in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, which has been filed today with the Securities and Exchange Commission.
About Comverge
Comverge, with over 3300 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 is a registered trademark of Comverge, Inc. Apollo is a trademark of Comverge, Inc.
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, potential incremental revenue from stimulus funding, 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 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:
Investor Relations
Dan Pfeffer
VP, Treasurer-Investor Relations
678-802-8302
invest@comverge.com
SCHEDULE 1
COMVERGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
------------------ ------------------
Revenue
Product $6,263 $4,796 $16,176 $12,247
Service 26,932 19,489 41,864 32,012
------ ------ ------ ------
Total revenue 33,195 24,285 58,040 44,259
Cost of revenue
Product 3,793 2,973 9,879 7,672
Service 19,948 14,060 28,451 21,102
------ ------ ------ ------
Total cost of revenue 23,741 17,033 38,330 28,774
------ ------ ------ ------
Gross profit 9,454 7,252 19,710 15,485
Operating expenses
General and
administrative expenses 12,419 9,507 28,409 26,423
Marketing and selling
expenses 4,340 4,314 12,782 12,194
Research and development
expenses 1,158 140 3,483 676
Amortization of
intangible assets 553 610 1,657 1,922
Impairment charges - 75,432 - 75,432
-- ------ -- ------
Operating loss (9,016) (82,751) (26,621) (101,162)
Interest and other
expense, net 376 158 940 14
--- --- --- --
Loss before income taxes (9,392) (82,909) (27,561) (101,176)
Provision (benefit) for
income taxes 52 (1,140) 159 (970)
-- ------ --- ----
Net loss $(9,444) $(81,769) $(27,720) $(100,206)
======= ======== ======== =========
Net loss per share
Basic and diluted $(0.44) $(3.85) $(1.29) $(4.75)
====== ====== ====== ======
Weighted average shares
used in computation 21,551,171 21,258,430 21,442,715 21,101,887
SCHEDULE 2
COMVERGE, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
------------------ -----------------
Revenue:
Utility Products & Services $9,185 $6,042 $23,785 $15,507
Residential Business 2,285 5,577 9,256 10,680
Commercial & Industrial Business 21,725 12,666 24,999 18,072
------ ------ ------ ------
Total Revenue $33,195 $24,285 $58,040 $44,259
======= ======= ======= =======
Cost of Revenue:
Utility Products & Services $5,506 $3,459 $13,745 $8,877
Residential Business 1,272 3,165 5,605 5,784
Commercial & Industrial Business 16,963 10,409 18,980 14,113
------ ------ ------ ------
Total Cost of Revenue $23,741 $17,033 $38,330 $28,774
======= ======= ======= =======
Gross Profit:
Utility Products & Services $3,679 $2,583 $10,040 $6,630
Residential Business 1,013 2,412 3,651 4,896
Commercial & Industrial Business 4,762 2,257 6,019 3,959
----- ----- ----- -----
Total Gross Profit $9,454 $7,252 $19,710 $15,485
====== ====== ======= =======
SCHEDULE 3
COMVERGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2009 2008
---- ----
Assets
Cash and cash equivalents $22,799 $19,571
Restricted cash 1,000 1,968
Marketable securities 27,170 28,276
Accounts receivable, net 11,963 18,877
Billed accounts receivable, net 18,963 5,908
Unbilled accounts receivable 6,123 4,960
Deferred costs 12,794 2,197
Other current assets 1,315 1,273
----- -----
Total current assets 102,127 83,030
Restricted cash 3,096 2,089
Property and equipment, net 22,215 20,572
Intangible assets, net 9,488 10,251
Goodwill 8,179 8,179
Other assets 848 1,036
--- -----
Total assets $145,953 $125,157
======== ========
Liabilities and Shareholders' Equity
Accounts payable 6,511 7,672
Accrued expenses 16,343 8,006
Deferred revenue 27,327 6,694
Current portion of long-term debt 4,012 3,226
Other current liabilities 6,778 2,400
----- -----
Total current liabilities 60,971 27,998
Deferred revenue 2,525 2,220
Long-term debt 32,654 24,888
Other liabilities 2,877 2,391
----- -----
Total long-term liabilities 38,056 29,499
Common stock 22 22
Additional paid-in capital 227,700 220,638
Common stock held in treasury (211) (119)
Accumulated deficit (180,650) (152,930)
Accumulated other comprehensive income 65 49
-- --
Total shareholders' equity 46,926 67,660
------ ------
Total liabilities and shareholders' equity $145,953 $125,157
======== ========
SCHEDULE 4
COMVERGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2009 2008 2009 2008
------------------ -------------------
Cash flows from operating activities
Net loss $(9,444) $(81,769) $(27,720) $(100,206)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Depreciation 298 289 810 664
Amortization of intangible assets 724 610 2,089 1,922
Stock-based compensation 3,986 1,664 6,803 5,416
Impairment charges - 75,432 - 75,432
Other 136 (725) 780 (693)
Changes in working capital 1,512 8,571 23,860 6,846
----- ----- ------ -----
Net cash provided by (used in)
operating activities (2,788) 4,072 6,622 (10,619)
Cash flows from investing activities
Changes in restricted cash (928) 1,790 (39) (722)
Purchases of marketable
securities (10,296) (8,797) (24,777) (31,642)
Maturities of marketable
securities 4,500 6,346 25,750 35,826
Purchases of property and
equipment (4,425) (4,761) (13,011) (9,193)
Cash paid for acquisitions, net - (48) - (48)
-- --- -- ---
Net cash used in investing
activities (11,149) (5,470) (12,077) (5,779)
Cash flows from financing activities
Borrowings under debt
facilities, net 2,803 1,904 8,552 5,598
Other 128 95 131 (300)
--- -- --- ----
Net cash provided by
financing activities 2,931 1,999 8,683 5,298
Net change in cash and cash
equivalents (11,006) 601 3,228 (11,100)
Cash and cash equivalents at
beginning of period 33,805 28,054 19,571 39,755
------ ------ ------ ------
Cash and cash equivalents at
end of period $22,799 $28,655 $22,799 $28,655
======= ======= ======= =======
SCHEDULE 5
COMVERGE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO THE
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURE
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
------------------ ------------------
Net loss $(9,444) $(81,769) $(27,720) $(100,206)
Depreciation and amortization 1,022 899 2,899 2,586
Interest expense (income), net 459 171 1,007 (30)
Provision (benefit) for income
taxes, net 52 (1,140) 159 (970)
-- ------ --- ----
EBITDA (7,911) (81,839) (23,655) (98,620)
Non-cash stock compensation
expense 3,986 1,664 6,803 5,416
Non-cash impairment charge - 75,432 - 75,432
-- ------ -- ------
Adjusted EBITDA $(3,925) $(4,743) $(16,852) $(17,772)
======= ======= ======== ========
See "Non-GAAP Financial Information" above in this earnings press release
for information on the use of this Non-GAAP financial measure