EnerNOC, Inc. Trounces Its Expectations

By Markets Fool.com

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The third quarter is traditionally a seasonally strong one for EnerNOC (NASDAQ: ENOC), so it expected to turn in a solid showing. However, the quarter turned out to be much better than it expected, leading the company to report guidance-beating results. Because of that, it was able to raise its full-year guidance for the third time this year.

EnerNOC results: The raw numbers

Metric

Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)

Revenue

$167.8 million

$217.3 million

(22.3%)

Net income

$20.6 million

$13.0 million

58.8%

Net income per share

$0.65

$0.44

47.7%

YOY = Year over year. Data source: EnerNOC.

What happened with EnerNOC this quarter?

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Strong subscription software growth drove EnerNOC's results:

  • While EnerNOC's revenue declined year over year, that was partially due to asset sales as the company focuses its attention on its core subscriptions software business, where revenue was up 47% year over year. That helped push revenue well above the top end of the company's guidance range of $141 million to $161 million.
  • Driving the year-over-year revenue decline was demand response revenue, which slumped 25.2%, to $149.1 million. However, that was well above the expected range of $125 million to $142 million. Meanwhile, software revenue edged up 3.9%, to $18.7 million, which was at the higher end of the company's guidance range of $16 million to $19 million.
  • As a result of the stronger-than-anticipated revenue, EnerNOC's earnings were well above its guidance. Consolidated adjusted earnings before interest, taxes, deprecation, and amortization were $31.4 million, compared with a guidance range of $15 million to $22 million. Meanwhile, GAAP net income of $0.65 per share trounced the company's expectations for $0.00 to $0.24 per share in earnings.
  • During the quarter, the company completed the sale of its utility customer engagement software business, which followed the sale of its utility service business last quarter. These sales narrowed the focus of the company's subscription-based energy intelligence software business to serve its enterprise customers exclusively.

What management had to say

CEO Tim Healy commented on the company's results during the quarter, saying:

We delivered another quarter of strong financial results as our demand response business performed very well during its seasonally important third quarter. With accelerating momentum in our demand response business and the announced restructuring of our software business, we are taking important steps toward maximizing the value of our assets.

EnerNOC continues to add customers to its demand response business, which is driving results. For example, the company noted that it has now surpassed 1,000 megawatts of enrolled demand response capacity in Korea, which is the first time it has exceeded that level in an international market. Furthermore, it recently signed demand response contracts with Consolidated Edison (NYSE: ED), Southern California Edison (a subsidiary of Edison International), and Pacific Gas & Electric. The deal with Consolidated Edison, for example, is a targeted effort to reduce electricity demand in some parts of New York City, which could delay or even eliminate the need for Consolidated Edison to build a new $1.2 billion substation. Those potential savings are what's driving customers to EnerNOC's solutions.

Looking forward

EnerNOC's guidance-beating quarter is fueling an increase in its full-year guidance. The company now expects full-year revenue to be in the range of $394 to $404 million, up from its prior range of $370 million to $400 million. Meanwhile, it sees its GAAP net loss narrowing to a range of $1.99 to $1.79 per share, which is down from its prior estimate of a loss in the range of $2.95 to $2.60 per share.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of and recommends EnerNOC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.