EnerNOC, Inc. (ENOC)

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EnerNOC, Inc. (ENOC)

Q2 2009 Earnings Call

July 27, 2009 5:00 pm ET


Will Lyons – Investor Relations Manager

Tim Healy – Chairman and Chief Executive Officer

David Brewster – President

Neal Isaacson – Chief Financial Officer


John Quealy - Canaccord Adams

Jeff Osborne - Thomas Weisel Partners

Michael Horwitz - Robert W. Baird & Co., Inc.

Paul Clegg - Jefferies & Co.

Sam Dubinsky - Oppenheimer & Co.

[Sean Lockman] – Ardour Capital



Please stand by. Good day and welcome to the EnerNOC second quarter 2009 earnings conference call. Today’s conference is being recorded. At this time I would like to turn the call over to Mr. Will Lyons, Investor Relations Manager. Please go ahead sir.

Will Lyons

Thanks [Erin]. Good afternoon everyone and welcome to EnerNOC’s investor conference call for the second quarter ended June 30, 2009. I’m Will Lyons, Investor Relations Manager at EnerNOC, and with me on the call today is our Chairman and CEO, Tim Healy, our President, David Brewster, and our Chief Financial Officer, Neal Isaacson.

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 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 view on July 27, 2009. 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 second quarter 2009 financial press release which was issued today after the market closed. This release can be found on the Investor section of our corporate website, www.enernoc.com. With that I’ll turn the call over to Tim.

Tim Healy

Thanks Will. Good afternoon everyone. Coming off an exciting Q2, I’m pleased to report that EnerNOC continues its steady march towards profitability. In my prepared remarks today I will provide an overview of our second quarter performance and evolving product suite, and briefly update some key metrics regarding our persistent growth and operating leverage.

David will then describe an exciting development that enhances our product suite and positions us for continued growth. Then Neal will round out the call with a detailed summary of our strong, second quarter financial results. In sum, you’ll hear that EnerNOC continues to execute ahead of plan and as a result we were able to once again raise both our revenue and EPS guidance for the year.

We are very pleased with the company’s second quarter performance which was highlighted by continued strong revenue, as well as GAAP and non-GAAP loss per share results. Specifically, for the second quarter we achieved total revenue of $42.4 million, an increase of 79% year-over-year. GAAP and non-GAAP loss per share were $0.29 and $0.12 respectively, which represent improvement of 45 and 70% respectively year-over-year. All of these results are above the high end of our [inaudible] for the period.

Gross margin was 42.8% for the quarter, demonstrating our continued ability to extract very high value from our megawatt portfolio. We increased our gross profit to $18.1 million, up 104% compared to Q2 2008.

Now some participants on this call may recall that we had our highest megawatt quarter ever in Q1, which is consistent with our track record of generally adding the most megawatts to our portfolio in the first and fourth quarters of the year. However, I’m pleased to point out that our significant Q1 momentum spilled over into Q2 this year and helped us to exit the second quarter with over 3150 megawatts of dispatchable, demand response capacity under management, an increase of over 450 megawatts during the quarter and over 1100 megawatts year-to-date.

To put this in perspective, over the past 12 months we have nearly doubled our recurring revenue asset base. These year-to-date megawatt additions have exceeded our internal expectations and have us well on track to achieve greater revenue goals than previously anticipated.

As a result, we are pleased to announce that we are raising both ends of our 2009 revenue guidance to a new range of $172 million to $185 million. As we have described before, a leading indicator of the operating leverage in our model is our megawatts under management per full time employee, which has increased to approximately 8.8 as of the end of the second quarter. This metric is up sequentially from 7.6 at the end of the first quarter and up approximately 70% since mid-2008, demonstrating that we are at scale and are able to manage a growing network of assets without commensurate growth in our headcount.

Most importantly, this leverage is reflected in our enhanced EPS guidance of $0.76 to $0.86 net loss per share for 2009. We added nearly 500 customers and over 700 sites to our network during the period. We believe that our rapid business expansion over the past few quarters is due to our leading technology applications and differentiated performance track record, as well as the fact that commercial, institutional and industrial customers are continuing to look inward for energy savings that EnerNOC is uniquely positioned to deliver.

A bigger and stronger network helps us to continue to deliver strong performance in our demand response events. And anyone who has set foot into our offices recently would see the flurry of demand response activity that is happening day in and day out these days. In fact, in just the first 18 business days of July, we have reliably delivered megawatt reductions in New England, Puget Sound, Idaho, New Mexico, California and Colorado. Since the beginning of June we have also dispatched demand response resources in Arizona, Florida, and Vermont.

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