EnerNOC, Inc. (ENOC)

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EnerNOC, Inc. (ENOC)

Q4 2009 Earnings Call

February 11, 2010 5:00 PM EST


Will Lyons – IR Manager

Tim Healy – Chairman and CEO

David Brewster – President

Tim Weller – CFO


Paul Coster – JPMorgan

John Quealy – Canaccord Adams

Steve Milunovich – Merrill Lynch

Jeff Osborne – Thomas Weisel

Paul Clegg – Jefferies

Michael Horwitz – Baird

Pavel Molchanov – Raymond James

Patrick Jobin – Credit Suisse

Vishal Shah – Barclays Capital

Shawn Lockman – Ardour Capital

Ben Schuman – Pacific Crest

Elaine Kwei – Piper Jaffray

Jeremy Hellman – Divine Capital



Good day, ladies and gentlemen, and welcome to the EnerNOC fourth quarter and year-end 2009 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Will Lyons, Investor Relations Manager. You may begin.

Will Lyons

Thanks, Devon. Good afternoon, everyone, and welcome to EnerNOC’s investor conference call for the fourth quarter ended December 31st, 2009. I am Will Lyons, Investor Relations Manager at EnerNOC, and with me today on the call is our Chairman and CEO, Tim Healy; our President, David Brewster; and our Chief Financial Officer, Tim Weller.

Today’s presentation contains estimates and other statements that are forward-looking under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information concerning these factors is contained in EnerNOC’s filings with the SEC including, including our annual report on Form 10-K and quarterly reports on Form 10-Q, available at www.sec.gov. The forward-looking statements included in this call represent the company’s views on February 11th, 2010, and EnerNOC disclaims any obligation to update these statements to reflect future events or circumstances.

This call also includes discussion of both GAAP and non-GAAP financial measures. Information regarding EnerNOC’s use of these measures as well as a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure is available in our fourth quarter 2009 financial press release which was issued today after the market closed. The release can be found on the Investor section of our corporate website, www.enernoc.com.

I will now turn the call over to Tim Healy.

Tim Healy

Thanks, Will. Good afternoon, everyone. In early 2009, we discussed our major corporate objectives for the year. Those objectives included growing our total revenues by more than 40% to over a $150 million, driving leverage in the model to generate a GAAP per share loss of less than a $1.20, and generating positive cash flow from operations in the second half of 2009. I am pleased to report to you today that we delivered on all of those commitments. In fact, bolstered by great traction of our demand response solutions, we exceeded our 2009 expectations.

We ended the year at a $190.7 million in total revenues, which was above our guidance range, a range that we steadily increased throughout the year. We expanded our gross margin to 45.3% in 2009, up from 38.9% in 2008. We delivered positive cash flow from operations of $18.3 million in the second half of 2009. We increased EnerNOC’s operational leverage as evidenced by the growth in our megawatts under management per full-time employee metric. At year-end, we managed 8.5 megawatts per FTE up from 6.0 megawatts at the end of 2008.

When you account for the fact that we have an increasing percentage of employees that are focused on driving the adoption of our other applications, this metric becomes 10.6. As a result of this increased leverage, we managed to a GAAP loss of just $0.32 per basic and diluted share in 2009, which represents an improvement of more than a $1.50 per share relative to 2008. In positioning us for a strong 2010, we closed out the year with over 3,550 megawatts under management, a 73% increase in our core business. We are very pleased with these results, and later in this call, you will hear Tim Weller provide some additional color on these numbers.

In 2009, we also continued to deliver on our promises to utility and grid operators as evidenced by our strong demand response event performance throughout the year. During 2009, we delivered over a 100% average event performance based on nominated versus delivered capacity in more than a 130 demand response events. We believe that this performance track record is a key competitive differentiator particularly for prospective utility customers that are considering adding demand response resources to their portfolio.

During the fourth quarter, we completed the acquisition of Cogent Energy, a leading energy engineering and building commissioning firm, headquartered in California. We believe that Cogent is a good strategic fit as it provides us with additional energy and mechanical engineering expertise to help develop and supplement our monitoring based commissioning application. It also adds a professional services capability to enhance our ability to strengthen our C&I customer relationships and cross-sell them a broader suite of services. Furthermore, Cogent has strong utility relationships with Pacific Gas & Electric and SoCal Ed, as well as C&I relationships with the University of California, Cal State University, and other important California based institutions.

On past conference calls, we have alluded to the fact that California will be a key region for our monitoring based commissioning services, and we believe that this acquisition will accelerate the traction that we are already experiencing in that market. Our plan is to extend Cogent’s leading service offerings to other targeted geographies, particularly those in which we already have a significant demand response presence.

As EnerNOC management looks ahead in 2010, we are pleased with what we see in our business pipeline. We are currently in a very active Q1 selling period for PJM and other key programs that have late spring or early summer enrollment deadlines. Our utility solutions team is working to extend bilateral contracts and bring a number of new utility deals over the finish line. We are pleased with our current and expanding leadership in the bilateral market as evidenced by a number of key contract announcements in California, Washington, and Canada in the past several months. These developments expand the market for EnerNOC to deliver our demand response applications and strengthen our positioning for new and emerging opportunities such as those potential resulting from Pennsylvania Act 129.

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