Slower-Than-Expected Adoption Causes EnerNOC, Inc. to Explore Strategic Alternatives
On the one hand, EnerNOC (NASDAQ: ENOC) delivered a solid showing for its seasonally slow fourth quarter because its results were better than expected. Furthermore, the company announced that it won several contracts recently. That said, the near-term opportunity for its solutions hasn't materialized as quickly as it expected, which is leading it to explore a variety of alternatives for its business, including a sale of the entire company.
EnerNOC results: The raw numbers
Data source: EnerNOC.
What happened with EnerNOC this quarter?
Demand response saved the day:
- EnerNOC's revenue declined versus the year-ago period due in part to the recent sales of severalnon-core businesses. That said, revenue came in above the high end of the company's $40 million to $50 million guidance range thanks to recent contract wins.
- Demand response revenue was up 6.2% versus last year's fourth quarter to $34.8 million, which was well above the high end of its $25 million to $30 million guidance range. Software revenue, on the other hand, plunged 42.1% to $15.3 million, which was right at the bottom of its $15 million to $20 million forecast. That said, the company did grow full-year software subscription revenue by 40% when adjusting for a divested product line.
- The company's loss was also less than expected. Heading into the quarter, the company expected adjusted EBITDA to be a negative $16 million to $22 million. However, EnerNoc turned in a negative $11.7 million in adjusted EBITDA for the quarter. Meanwhile, the company's forecast for net income was that it would be in the range of negative $1.09 to $1.29 per share. However, the fourth-quarter net loss came in at $1.04 per share.
- Despite the loss, the company did generate $18.1 million in free cash flow during the quarter, growing its cash position to $98 million to end the year.
Image source: Getty Images.
What management had to say
CEO Tim Healy commented on the company's results by saying that:
EnerNOC has continued to sign up customers to both its demand response and software solutions. Just recently it signed multimillion-dollar demand response contracts with FirstEnergy (NYSE: FE) and Exelon (NYSE: EXC) subsidiary PECO. The FirstEnergy deal will help the company meet its demand reduction targets in Pennsylvania. Meanwhile, the company launched a strategic partnership with Brookfield Business Partners (NYSE: BBU) subsidiary Brookfield Global Integrated Solutions, which manages more than 300 million square feet of real estate across the globe. That agreement builds on a pilot program between the two companies that delivered an annualized 25% in energy savings.
Despite all this progress, EnerNOC is disappointed with the rate of adoption for its solutions. That's clear from the company's guidance where it sees revenue falling to a range of $310 million to $340 million, which at the midpoint is down nearly 20% from 2016. Meanwhile, it sees its net loss widening.
As a result of lower-than-expected demand, especially for its software solutions, Healy said:
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Matt DiLallo owns shares of Brookfield Business Partners L.P. Limited Partnership Units. The Motley Fool owns shares of and recommends EnerNOC. The Motley Fool has a disclosure policy.