PowerSecure Reports First Quarter 2015 Results
-- Record first quarter revenues on 51 percent year-over-year growth --
-- Distributed generation gross margin increases to 38.6 percent --
-- Data center, microgrid and hospital awards drive backlog to record $402 million --
-- Gross margins expand in all segments --
WAKE FOREST, N.C., May 6, 2015 /PRNewswire/ -- PowerSecure International, Inc. (NYSE: POWR) today reported its first quarter 2015 results.
- Revenues increase 50.6 percent y-o-y to first quarter record of $79.5 million
- GAAP EPS of $0.01
- Record total backlog of $402 million, near term backlog of $224 million
- Distributed generation gross margin increases to 38.6 percent
- Energy efficiency gross margin expands to 37.0 percent
"Our focus on operational excellence has delivered a strong quarter, with healthy year-over-year revenue and margin growth in every segment. We are especially excited about the momentum we are gaining, with new data center, microgrid and hospital projects propelling our backlog to another record high," said Sidney Hinton, chief executive officer of PowerSecure.
"With the revenue growth we saw in the first quarter, a record backlog and deep pipeline of opportunities, we believe we are in an outstanding position for 2015, and 2016, as we leverage our proven and differentiated expertise to deliver the sophisticated, high value solutions our customers need," Hinton added.
First Quarter 2015:
Revenues
PowerSecure's first quarter 2015 (1Q 2015) revenues of $79.5 million, an increase of $26.7 million, or 50.6 percent, over the first quarter of 2014 (1Q 2014), were driven by revenue increases in all segments, including an 80.9 percent year-over-year (y-o-y) increase in revenues from non-solar distributed generation (DG) products and services, a 60.0 percent y-o-y increase in revenues from energy efficiency (EE) products and services, a 7.7 percent y-o-y increase in revenues from utility infrastructure (UI) products and services, and a 1157.0 percent y-o-y increase in revenues from solar energy products and services, as shown below.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Segment Revenues: |
|||||||||||
Distributed Generation |
$ |
30,731 |
$ |
16,990 |
$ |
13,741 |
80.9 |
% |
|||
Solar Energy |
6,348 |
505 |
5,843 |
1,157.0 |
% |
||||||
Utility Infrastructure |
28,883 |
26,828 |
2,055 |
7.7 |
% |
||||||
Energy Efficiency |
13,562 |
8,474 |
5,088 |
60.0 |
% |
||||||
Intersegment Eliminations |
(15) |
- |
(15) |
n/m |
|||||||
Total |
$ |
79,509 |
$ |
52,797 |
$ |
26,712 |
50.6 |
% |
Gross Margin
GAAP gross margin as a percentage of revenue was 26.8 percent in 1Q 2015, compared to 20.9 percent in 1Q 2014. On a non-GAAP basis, gross margin in 1Q 2014 was 21.5 percent. The increase in y-o-y gross margin was due to higher revenues, increased operational efficiency and product mix.
Quarter Ended |
||||||
March 31, |
||||||
2015 |
2014 |
|||||
Company GAAP Gross Margin % |
26.8 |
% |
20.9 |
% |
||
Company non-GAAP Gross Margin %* |
26.8 |
% |
21.5 |
% |
* - Non-GAAP gross margin percentage excludes 1Q 2014 restructuring charges to cost of sales. See non-GAAP reconciliation below.
Operating Expenses
Operating expenses for 1Q 2015 were $20.9 million, compared to $17.7 million on a GAAP basis and $17.2 million on a non-GAAP basis in 1Q 2014, as shown in the table below. The increase in 1Q 2015 operating expenses consists of incremental operating cost related to the recent acquisitions of our mission critical and retail energy services capabilities, increased personnel and stock compensation expenses, higher professional fees and an increase in selling expenses due to investments in the data center sales team.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Consolidated Operating Expenses: |
|||||||||||
General and administrative |
$ |
15,634 |
$ |
13,044 |
$ |
2,590 |
19.9 |
% |
|||
Selling, marketing and service |
2,748 |
2,009 |
739 |
36.8 |
% |
||||||
Depreciation and amortization |
2,477 |
2,178 |
299 |
13.7 |
% |
||||||
Subtotal - Operating Expenses - non-GAAP |
20,859 |
17,231 |
3,628 |
21.1 |
% |
||||||
GAAP Adjustments: |
|||||||||||
Restructuring charges |
- |
427 |
(427) |
n/m |
|||||||
Total - Operating Expenses - GAAP |
$ |
20,859 |
$ |
17,658 |
$ |
3,201 |
18.1 |
% |
Operating Margin
Operating margin as a percentage of revenue was 0.6 percentage points in 1Q 2015. This compares to negative 12.5 percentage points in 1Q 2014 on a GAAP basis and negative 11.1 percentage points in 1Q 2014 on a non-GAAP basis. The increase in our operating margin was driven by the increase in gross margin, and by a meaningful decrease in operating expenses as a percentage of revenues.
Earnings Per Share
Diluted earnings per share (EPS) were $0.01 in 1Q 2015, compared to a loss of ($0.19) in 1Q 2014. Excluding the charges discussed below, non-GAAP EPS were a loss of ($0.17) in 1Q 2014.
Non-GAAP Financial Measures
Our non-GAAP financial measures for 1Q 2014 exclude a $0.7 million charge primarily related to the restructuring of the company's energy efficiency LED lighting operations to position its product lines for enhanced future growth and profitability. The restructuring was implemented to realize the manufacturing and sourcing synergies contemplated by the company in its 2013 acquisition of Solais Lighting. The actions taken included eliminating certain duplicative facilities, resourcing from new lower cost suppliers, reducing the number of product offerings, and reducing personnel and overhead. $0.3 million of this 1Q 2014 charge related to inventory and was recorded in cost of sales, and $0.4 million related to severance, facilities and equipment expenses which was recorded as "restructuring charge" in operating expense.
Capital Resources and Working Capital
The company ended 1Q 2015 with $23.8 million in cash, zero drawn on its $20 million revolving credit facility, and term debt and capital leases of $21.4 million. The company's capital expenditures during 1Q 2015 were $2.8 million in total, with $1.1 million of this capital invested to deploy systems to support PowerSecure-owned long-term recurring revenue distributed generation projects, and the remaining $1.7 million primarily invested in capital improvements, purchase of equipment for its utility infrastructure business and investments in information technology.
Backlog
The company's revenue backlog stands at an all-time high of $402 million, as of the company's last new business press release dated April 29, 2015. This includes a total of $85 million in new business from awards announced on March 17, 2015 and April 29, 2015. The company's revenue backlog represents revenue expected to be recognized after March 31, 2015, for periods including the second quarter of 2015 onward.
The company's $402 million revenue backlog and the estimated timing of revenue recognition are outlined below, including "project-based revenues" expected to be recognized as projects are completed, and "recurring revenues" expected to be recognized over the life of the underlying contracts:
Revenue Backlog expected to be recognized after March 31, 2015 |
|||
Anticipated |
Estimated Primary |
||
Description |
Revenue |
Recognition Period |
|
Project-based Revenue -- Near term |
$224 million |
2Q15 through 4Q15 |
|
Project-based Revenue -- Long term |
$111 million |
1Q16 through 4Q16 |
|
Recurring Revenue |
$ 67 million |
2Q15 through 2020 |
|
Revenue Backlog expected to be recognized after March 31, 2015 |
$402 million |
||
Note: Anticipated revenue and estimated primary recognition periods are subject to risks and uncertanities |
|||
as indicated in the Company's safe harbor statement, below. Consistent with past practice, these figures |
|||
are not intended to constitute the Company's total revenue over the indicated time periods, as the Company |
|||
has additional, regular on-going revenues. Examples of additional, regular recurring revenues include |
|||
revenues from engineering fees, and service revenue, among others. Numbers may not add due to rounding. |
Orders in the company's revenue backlog are subject to delay, deferral, acceleration, resizing or cancellation from time to time, and estimates are utilized in the determination of the backlog amounts. Given the irregular sales cycle of customer orders, and especially of large orders, the revenue backlog at any given time is not necessarily an accurate indication of our future revenues.
PowerSecure Segment Results:
Commencing with 1Q 2015, the company has begun reporting the financial results of its solar energy business as a separate segment, so the company now has four operating segments. For current period reporting and prior period comparisons, the distributed generation segment does not include any financial results from the solar energy business.
Distributed Generation (non-solar)
Distributed generation revenues in 1Q 2015 of $30.7 million reflect an 80.9 percent increase compared to non-solar DG revenues in 1Q 2014. Total DG gross margin in 1Q 2015, was 38.6 percent, compared to 37.5 percent in 1Q 2014.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Revenue |
$ |
30,731 |
$ |
16,990 |
$ |
13,741 |
80.9 |
% |
|||
Quarter Ended |
|||||||||||
March 31, |
|||||||||||
2015 |
2014 |
||||||||||
Gross Margin % |
38.6 |
% |
37.5 |
% |
The increase in DG revenues was driven primarily by increased data center revenue, including $8.7 million of mission critical revenues, hospital project revenues and recurring revenue from company-owned DG systems. The increase in DG gross margin was due to the higher margin profile of our DG project mix.
Utility Infrastructure
Utility infrastructure revenues in 1Q 2015 of $28.9 million reflect a 7.7 percent increase versus 1Q 2014. Utility infrastructure gross margin in 1Q 2015 increased to 13.3 percent from 9.9 percent in 1Q 2014.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Revenue |
$ |
28,883 |
$ |
26,828 |
$ |
2,055 |
7.7 |
% |
|||
Quarter Ended |
|||||||||||
March 31, |
|||||||||||
2015 |
2014 |
||||||||||
Gross Margin % |
13.3 |
% |
9.9 |
% |
The y-o-y increase in UI revenues was primarily due to new transmission, grid hardening and distribution projects for new and existing customers. The increase in UI gross margin was due to improved operational efficiency and the higher margin profile of our UI project mix.
Energy Efficiency
Energy efficiency revenues in 1Q 2015 of $13.6 million reflect a 60.0 percent increase versus 1Q 2014. EE gross margin in 1Q 2015 increased to 37.0 percent from 24.2 percent in 1Q 2014. On a non-GAAP basis, excluding the restructuring charge, 1Q 2014 EE gross margin was 27.9 percent.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Revenue |
$ |
13,562 |
$ |
8,474 |
$ |
5,088 |
60.0 |
% |
|||
Quarter Ended |
|||||||||||
March 31, |
|||||||||||
2015 |
2014 |
||||||||||
GAAP Gross Margin % |
37.0 |
% |
24.2 |
% |
|||||||
Non-GAAP Gross Margin %* |
37.0 |
% |
27.9 |
% |
* Non-GAAP gross margin % excludes restructuring charges in 1Q 2014. See non-GAAP reconciliation below.
The y-o-y increase in revenues was primarily driven by both higher LED sales to retailers and increased revenue from energy efficiency services projects, including incremental revenue from the recently acquired retail energy services business. The increase in our EE gross margin was driven primarily by decreases in cost of goods sold as a result of transitioning to a more efficient sourcing and manufacturing process for our LED solutions.
Solar Energy
Solar energy revenues in 1Q 2015 of $6.3 million reflect a 1157.0 percent increase versus 1Q 2014. Solar energy gross margin in 1Q 2015 increased to 9.7 percent from negative 6.7 percent in 1Q 2014.
Quarter Ended |
Period-over-Period |
||||||||||
March 31, |
Difference |
||||||||||
2015 |
2014 |
$ |
% |
||||||||
Revenue |
$ |
6,348 |
$ |
505 |
$ |
5,843 |
1,157.0 |
% |
|||
Quarter Ended |
|||||||||||
March 31, |
|||||||||||
2015 |
2014 |
||||||||||
GAAP Gross Margin % |
9.7 |
% |
(6.7) |
% |
The y-o-y increase in solar energy revenues was primarily due to revenue from the utility-scale solar projects previously announced in 2014. The increase in solar energy gross margin was due to the significant increase in y-o-y revenues in 1Q 2015 compared to 1Q 2014.
Conference Call Information
Company management will webcast a conference call at 8:30 a.m. ET on Wednesday, May 6, 2015. To access the live webcast, please log on to the investor section of the company's website at http://www.powersecure.com. The call can also be accessed by dialing 888-680-0879 (or 617-213-4856 if dialing internationally) and providing pass code 76458944. If you are unable to participate during the live webcast, a replay of the conference call will be available approximately two hours after the completion of the call through midnight on May 20, 2015. To listen to the replay, dial 888-286-8010 (or 617-801-6888 if dialing internationally), and enter passcode 79960513. In addition, the webcast will be archived on the company's website at www.powersecure.com.
About PowerSecure
PowerSecure International, Inc. is a leading provider of utility and energy technologies to electric utilities, and their industrial, institutional and commercial customers. PowerSecure provides products and services in the areas of Interactive Distributed Generation ® (IDG®), solar energy, energy efficiency and utility infrastructure.
The company is a pioneer in developing IDG® power systems with sophisticated smart grid capabilities, including the ability to 1) forecast electricity demand and electronically deploy the systems to deliver more efficient, and environmentally friendly, power at peak power times, 2) provide utilities with dedicated electric power generation capacity to utilize for demand response purposes and 3) provide customers with the most dependable standby power in the industry. Its proprietary distributed generation system designs utilize a range of technologies to deliver power, including renewables.
The company's energy efficiency products and services include energy efficient lighting solutions that utilize LED technologies to improve lighting quality, and the design, installation and maintenance of energy conservation measures which we offer, primarily as a subcontractor, to large energy service company providers, called ESCOs, for the benefit of commercial, industrial and institutional customers as end users and directly to retailers.
PowerSecure also provides electric utilities with transmission and distribution infrastructure maintenance and construction services, and engineering and regulatory consulting services. Additional information is available at www.powersecure.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements other than statements of historical facts, including but not limited to statements concerning the outlook for the company's growth and profitability and its future revenues, earnings, margins, cash resources and cash flow and other financial and operating information and data; the company's future business operations, strategies and prospects; the impact and prospects of acquisitions; strategic alliances and relationships and new business awards and projects; and all other statements concerning the plans, intentions, expectations, projections, hopes, beliefs, objectives, goals and strategies of management, including statements about other future financial and non-financial items, performance or events and about present and future products, services, technologies and businesses; and statements of assumptions underlying the foregoing.
Forward-looking statements are not guarantees of future performance or events and are subject to a number of known and unknown risks, uncertainties and other factors that are difficult to predict and could cause actual results to differ materially from those expressed, projected or implied by such forward-looking statements. Important risks, uncertainties and other factors include, but are not limited to, the on-going uncertainty and inconsistency in the economy, financial markets and business markets and the effects thereof on the company's markets and customers, the demand for its products and services, and the company's access to capital; the size, timing and terms of sales and orders, including the company's revenue backlog discussed in this press release, and the risk of customers delaying, deferring or canceling purchase orders or making smaller purchases than expected; the potential adverse financial and reputational consequences that can result from safety risks and hazards such as accidents inherent in the company's operations; the company's ability to execute on its business orders, awards and projects efficiently and with operational excellence, such as its recent large solar awards, in order to generate customer satisfaction, company profitability and future new business; the impact of the company's acquisitions; the company's ability to reduce and control its costs and expenses and enhance its operating income; the company's ability to maintain and grow its utility infrastructure revenues on a profitable basis, including maintaining and improving its pricing, utilization rates and productivity rates; the impact of the company's restructuring actions on its LED lighting operations; the timely and successful development, production and market acceptance of new and enhanced products, services and technologies of the company; the ability of the company to obtain adequate supplies of key components and materials of sufficient reliability and quality for its products and technologies on a timely and cost-effective basis and the effects of related warranty claims and disputes; the ability of the company to successfully expand its core distributed generation products and services, to successfully develop and achieve market acceptance of its new energy-related businesses, to successfully expand its recurring revenue projects, to manage its growth and to address the effects of any future changes in utility tariff structures and environmental requirements on its business solutions; the effects of competition; changes in customer and industry demand and preferences; the ability of the company to continue the growth and diversification of its customer base; the ability of the company to attract, retain, and motivate its executives and key personnel; changes in the energy industry in general and the electricity, oil, and natural gas markets in particular, including price levels; the effects of competition; the ability of the company to secure and maintain key contracts and relationships; the effects of pending and future litigation, claims and disputes including the securities class action; and other risks, uncertainties and other factors identified from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K, as well as subsequently filed reports on Form 10-Q and Form 8-K, copies of which may be obtained by visiting the investor relations page of the company's website at www.powersecure.com or the SEC's website at www.sec.gov.
Accordingly, there is no assurance that the results expressed, projected or implied by any forward-looking statements will be achieved, and readers are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements in this press release speak only as of the date hereof and are based on the current plans, goals, objectives, strategies, intentions, expectations and assumptions of, and the information currently available to, management. The company assumes no duty or obligation to update or revise any forward-looking statements for any reason, whether as the result of changes in expectations, new information, future events, conditions or circumstances or otherwise.
Contact:
John Bluth
PowerSecure International, Inc.
(919) 453-2103
PowerSecure International, Inc. |
|||||
Condensed Consolidated Statements of Operations (unaudited) |
|||||
($000's except per share data) |
|||||
Three Months Ended |
|||||
March 31, |
March 31, |
||||
2015 |
2014 |
||||
Revenue |
79,509 |
52,797 |
|||
Cost of sales |
58,180 |
41,756 |
|||
Gross Profit (excluding depreciation and amortization) |
21,329 |
11,041 |
|||
Operating expenses |
|||||
General and administrative |
15,634 |
13,044 |
|||
Selling, marketing, and service |
2,748 |
2,009 |
|||
Depreciation and amortization |
2,477 |
2,178 |
|||
Restructuring charges |
0 |
427 |
|||
Total operating expenses |
20,859 |
17,658 |
|||
Operating income (loss) |
470 |
(6,617) |
|||
Other income (expense) |
|||||
Interest income and other income |
1 |
4 |
|||
Interest expense |
(269) |
(300) |
|||
Income (loss) before income taxes |
202 |
(6,913) |
|||
Income tax expense (benefit) |
81 |
(2,654) |
|||
Net income (loss) |
121 |
(4,259) |
|||
EARNINGS (LOSS) PER SHARE AMOUNTS ("E.P.S") |
|||||
Basic |
0.01 |
(0.19) |
|||
Diluted |
0.01 |
(0.19) |
|||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|||||
Basic |
22,385 |
21,979 |
|||
Diluted |
22,489 |
21,979 |
PowerSecure International, Inc. |
|||
Condensed Consolidated Balance Sheets (unaudited) |
|||
($000's) |
|||
March 31, |
December 31, |
||
ASSETS |
2015 |
2014 |
|
CURRENT ASSETS: |
|||
Cash and cash equivalents |
23,846 |
33,775 |
|
Trade receivables, net of allowance for doubtful accounts |
90,287 |
81,381 |
|
Inventories |
37,191 |
35,144 |
|
Income taxes receivable |
317 |
382 |
|
Deferred tax asset, net |
2,320 |
2,320 |
|
Prepaid expenses and other current assets |
2,194 |
3,478 |
|
Total current assets |
156,155 |
156,480 |
|
PROPERTY, PLANT, AND EQUIPMENT: |
|||
Equipment |
63,833 |
62,231 |
|
Furniture and fixtures |
625 |
617 |
|
Land, building, and improvements |
7,630 |
7,413 |
|
Total property, plant, and equipment at cost |
72,088 |
70,261 |
|
Less accumulated depreciation and amortization |
21,933 |
20,392 |
|
Property, plant, and equipment, net |
50,155 |
49,869 |
|
OTHER ASSETS: |
|||
Goodwill |
40,210 |
40,210 |
|
Restricted annuity contract |
3,137 |
3,137 |
|
Intangible rights and capitalized software, net of accum amort |
13,570 |
13,642 |
|
Other assets |
1,943 |
1,879 |
|
Total other assets |
58,860 |
58,868 |
|
TOTAL ASSETS |
265,170 |
265,217 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
CURRENT LIABILITIES: |
|||
Accounts payable |
39,080 |
39,699 |
|
Accrued and other liabilities |
41,850 |
41,113 |
|
Accrued restructuring liabilities |
26 |
114 |
|
Current portion of long-term debt |
3,731 |
3,731 |
|
Current portion of capital lease obligation |
745 |
986 |
|
Total current liabilities |
85,432 |
85,643 |
|
LONG-TERM LIABILITIES: |
|||
Revolving Line of Credit |
0 |
0 |
|
Term loan, net of current portion |
16,899 |
17,832 |
|
Capital lease obligation, net of current portion |
0 |
0 |
|
Deferred tax liability, net |
1,433 |
1,460 |
|
Other long-term liabilities |
4,040 |
3,913 |
|
Total long-term liabilities |
22,372 |
23,205 |
|
STOCKHOLDERS' EQUITY: |
|||
Preferred stock - undesignated |
0 |
0 |
|
Preferred stock - Series C |
0 |
0 |
|
Common stock |
224 |
224 |
|
Additional paid-in-capital |
162,084 |
161,163 |
|
Accumulated other comprehensive earnings (loss) |
(122) |
(77) |
|
Retained earnings (deficit) |
(4,820) |
(4,941) |
|
Total stockholders' equity |
157,366 |
156,369 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
265,170 |
265,217 |
PowerSecure International, Inc. |
|||
Condensed Consolidated Statements of Cash Flows (unaudited) |
|||
($000's) |
|||
Three Months Ended |
|||
March 31, |
March 31, |
||
2015 |
2014 |
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||
Net income (loss) |
121 |
(4,259) |
|
Adjustments to reconcile net income (loss) to net cash provided by |
|||
(used in) operating activities: |
|||
Depreciation and amortization |
2,477 |
2,178 |
|
Stock compensation expense |
650 |
278 |
|
(Gain) Loss on disposal of miscellaneous assets |
(22) |
41 |
|
Changes in operating assets and liabilities, net of |
|||
effect of acquisitions: |
|||
Trade receivables, net |
(8,906) |
7,548 |
|
Inventories |
(2,047) |
(1,362) |
|
Other current assets and liabilities |
1,348 |
(2,731) |
|
Other noncurrent assets and liabilities |
(9) |
84 |
|
Accounts payable |
(619) |
(7,497) |
|
Accrued and other liabilities |
737 |
(6,070) |
|
Accrued restructuring liabilities |
(88) |
(475) |
|
Net cash provided by (used in) operating activities |
(6,358) |
(12,265) |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||
Purchases of property, plant and equipment |
(2,012) |
(1,334) |
|
Additions to intangible rights and software development |
(802) |
(151) |
|
Proceeds from sale of property, plant and equipment |
146 |
212 |
|
Net cash provided by (used in) investing activities |
(2,668) |
(1,273) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||
Net borrowings (payments) on revolving line of credit |
0 |
0 |
|
Principal payments on long-term debt |
(933) |
(933) |
|
Principal payments on capital lease obligations |
(241) |
(229) |
|
Proceeds from stock option exercises |
271 |
1,995 |
|
Net cash provided by (used in) financing activities |
(903) |
833 |
|
NET INCREASE (DECREASE) IN CASH |
|||
AND CASH EQUIVALENTS |
(9,929) |
(12,705) |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
33,775 |
50,915 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
23,846 |
38,210 |
|
Non-GAAP Pro forma Financial Measure Discussion
Our references to our first quarter 2014 "non-GAAP pro forma" financial measures of cost of sales, gross margins, gross margins as a percentage of revenue, operating expenses, operating expenses as a percentage of revenue, operating income, operating income as a percentage of revenue, net income, and diluted E.P.S. discussed and shown in this report constitute non-GAAP financial measures.
For the first quarter of 2014, our non-GAAP financial measures refer to our GAAP results, excluding a $0.7 million charge primarily related to the restructuring of the company's energy efficiency LED lighting operations to position its product lines for enhanced future growth and profitability. The restructuring was implemented to realize the manufacturing and sourcing synergies contemplated by the company in its 2013 acquisition of Solais Lighting. The actions taken included eliminating certain duplicative facilities, resourcing from new lower cost suppliers, reducing the number of product offerings, and reducing personnel and overhead. $0.3 million of this charge relates to inventory and was recorded in cost of sales, and $0.4 million relates to severance, facilities and equipment expenses which was recorded as "restructuring charge" in operating expense.
We believe providing non-GAAP measures which show our pro forma results with these items adjusted is valuable and useful as it allows our management and our board of directors to measure, monitor and evaluate our operating performance in 2014, and in future periods, with the same consistent financial context as the business was managed in those periods. Additionally, because these items were non-recurring, our non-GAAP pro forma measures are more comparable to our prior period and future period results.
We believe these non-GAAP pro forma measures also provide meaningful information to investors in terms of enhancing their understanding of our first quarter 2015, as they allow investors to more easily compare our financial performance on a consistent basis compared to the prior year periods. These non-GAAP pro forma measures also correspond with the way we expect investment analysts to evaluate and compare our results. Our non-GAAP pro forma measures should be considered only as supplements to, and not as substitutes for or in isolation from, or superior to, our other measures of financial information prepared in accordance with GAAP, such as GAAP revenue, cost of sales, gross margin, gross margin as a percentage of revenue, operating expenses, operating expenses as a percentage of revenue, operating income, operating income as a percentage of revenue, net income and diluted E.P.S.
The following table provides a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
PowerSecure International, Inc. |
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Non-GAAP Pro forma Measures |
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($000's except per share data, some rounding throughout) |
|||||||
Three Months Ended March 31, 2014 |
|||||||
As Reported |
Acquisition Expense |
Pro forma |
|||||
Revenue |
52,797 |
52,797 |
|||||
Cost of sales |
41,756 |
(312) |
41,444 |
||||
Gross Profit (excluding deprec/amort) |
11,041 |
312 |
11,353 |
||||
Gross profit % revenue |
20.9% |
21.5% |
|||||
Operating expenses |
|||||||
General and administrative |
13,044 |
13,044 |
|||||
Selling, marketing, and service |
2,009 |
2,009 |
|||||
Depreciation and amortization |
2,178 |
2,178 |
|||||
Restructuring charges |
427 |
(427) |
0 |
||||
Total operating expenses |
17,658 |
(427) |
17,231 |
||||
Total operating exp % rev |
33.4% |
32.6% |
|||||
Operating income (loss) |
(6,617) |
739 |
(5,878) |
||||
Other income (expense) |
|||||||
Interest income and other income |
4 |
4 |
|||||
Interest expense |
(300) |
(300) |
|||||
Income (loss) before income taxes |
(6,913) |
739 |
(6,174) |
||||
Income tax expense (benefit) |
(2,654) |
284 |
(2,370) |
||||
Net income (loss) |
(4,259) |
455 |
(3,804) |
References to our first quarter 2015 and first quarter 2014 adjusted EBITDA, which we define as our earnings before interest, taxes, depreciation and amortization, and charges, as discussed and shown in this release, constitutes a non-GAAP "pro forma" financial measure.
We believe that adjusted EBITDA, as a non-GAAP pro forma financial measure, provides meaningful information to investors in terms of enhancing their understanding of our operating performance and results, as it allows investors to more easily compare our financial performance on a consistent basis compared to the prior year periods. This non-GAAP financial measure also corresponds with the way we expect investment analysts to evaluate and compare our results. Any non-GAAP pro forma financial measures should be considered only as supplements to, and not as substitutes for or in isolation from, or superior to, our other measures of financial information prepared in accordance with GAAP, such as net income.
We define and calculate adjusted EBITDA as net income, minus 1) interest income and other income, plus 2) income tax expense (or minus an income tax benefit) and 3) interest expense and 4) depreciation and amortization and 5) stock compensation expense and 6) restructuring charges. We disclose adjusted EBITDA because we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to adjusted EBITDA are broadly used by analysts, rating agencies, investors, and financial institutions in assessing our performance. Accordingly, we believe that the presentation of adjusted EBITDA provides useful information to investors. The following table provides a reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
PowerSecure International, Inc. |
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Non-GAAP Pro forma Measures |
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Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization, and Charges) |
||||
Calculations and Reconciliation |
||||
($000's except per share data, some rounding throughout) |
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Three Months Ended |
||||
March 31, |
March 31, |
|||
2015 |
2014 |
|||
Adjusted EBITDA Calculation/Reconciliation |
||||
Net income (loss) |
121 |
(4,259) |
||
Items to Subtract from Net Income |
||||
Interest income and other income |
(1) |
(4) |
||
Items to Add to Net Income |
||||
Restructuring Charges - Cost of Sales |
0 |
312 |
||
Restructuring Charges - Op Expense |
0 |
427 |
||
Income tax expense (benefit) |
81 |
(2,654) |
||
Interest expense |
269 |
300 |
||
Depreciation and Amortization |
2,477 |
2,178 |
||
Stock compensation expense |
650 |
278 |
||
Adjusted EBITDA |
3,597 |
(3,422) |
SOURCE PowerSecure International, Inc.
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