EnergyConnect Group Reports 2008 Results
EnergyConnect Group, Inc. (OTCBB: ECNG - News) announced financial results today for the twelve months ended January 3, 2009. The Company reported revenues from continuing operations of $25,859,000 for the year 2008, which was comprised solely of the Company’s demand response segment’s activities. The 2008 revenues reported were approximately twice the revenue of $12,626,000 for the year 2007. This year over year increase of $13,233,000 was the result of revenue generated by new participant transactions, increased revenue from existing participant transactions and increases in capacity revenue.
Revenue from continuing operations for the three months ended January 3, 2009 was $1,776,000 compared to $2,218,000 in the same period in 2007. Revenue for the quarter was negatively affected by soft electricity prices and by rule changes implemented by PJM on June 13th and again on November 4th. The June rule change required recalculation of customer baselines. The November change, which delayed the settlement of transactions for a portion of our customers, required certain customers to file electricity curtailment plans for settlements to be processed.
At the end of 2008, the Company reviewed the carrying value of the goodwill associated with the acquisition of EnergyConnect and as a result of current market conditions and internally prepared valuations, the Company’s management concluded the balance of goodwill associated with its acquisition was impaired in its entirety and charged $29,354,000 to operations during the year ended January 3, 2009. This non-cash expense contributed to a net loss from continuing operations of $34,066,000 or $0.37 per share for the twelve months ended January 3, 2009. Excluding this impairment charge, the Company’s net loss from continuing operations would have been $4,712,000 or $0.05 per share compared to a net loss from continuing operations of $4,341,000 or $0.05 per share for the twelve months ended December 29, 2007. The net losses from continuing operations were $31,933,000 and $2,365,000 for the three months ended January 3, 2009 and December 29, 2007, respectively.
Operating expenses for the twelve months ended January 3, 2009 were $41,575,000, compared to $8,402,000 in the twelve months ended December 29, 2007. These numbers include stock-based compensation of $870,000 and $920,000 for 2008 and 2007, respectively and a goodwill impairment charge of $29,354,000 for 2008. Excluding these two non-cash charges, operating expenses were $11,351,000 and $7,482,000 for the years ended January 3, 2009 and December 29, 2007, respectively This increase in overhead expense of $3,869,000 was due to increased sales and software development headcount to support the effort to build the Company’s revenue base. Quarterly operating expenses totaled $32,253,000 and $2,687,000 in the three months ended January 3, 2009 and December 29, 2007, respectively, which included $226,000 and $252,000 of stock-based compensation for those same periods, respectively, and a goodwill charge of $29,354,000 in the fourth quarter of 2008. Excluding these non-cash charges, operating expenses for the fourth quarters in 2008 and 2007 were $2,673,000 and $2,435,000, respectively.
On January 5, 2009, the Company appointed Kevin Evans as its new President and Chief Executive Officer. Commenting on the 2008 results, Evans said, “While we more than doubled our revenue in 2008 compared to 2007, the second half and in particular the fourth quarter of the year were challenging due to continued rules changes in PJM’s Economic Demand Response Program and more fundamentally, lower overall electricity prices across PJM.” Evans continued, “That said, the Economic Demand Response Program remains an essential component of PJM’s Demand Response Program. Building the business of price responsive load management is our sweet spot. I am confident that EnergyConnect has the ability to successfully serve this market in the coming year.”
Addressing the Company’s financing needs, Evans commented, “Last week we closed a $5 million convertible debt facility which provides the necessary funds to support the business for the foreseeable future.”
The Company records certain expenses that may not be reflective of the actual cash expended in the business. The table below shows the effect of these non-cash charges on net loss from continuing operations:
| Twelve Months | Twelves Months | ||||
| ($000′S) | Ended 1/3/2009 | Ended 12/29/2007 | |||
| Net loss from continuing operations (GAAP) | $ | (34,066) | $ | (4,341) | |
| Stock-based compensation | $ | 870 | $ | 920 | |
| Goodwill impairment | $ | 29,354 | $ | - | |
| Depreciation and amortization | $ | 365 | $ | 276 | |
| Net loss from continuing operations | |||||
| excluding non-cash expenses (non-GAAP) | $ | (3,477) | $ | (3,145) | |
About EnergyConnect
EnergyConnect delivers industry leading Demand Response technologies and services to commercial and industrial consumers enabling them to manage their use of electricity in response to market prices or regional power shortages. The EnergyConnect technology platform provides a scalable, cost-effective, clean technology to enhance the grid’s efficiency and reliability. For more information about this leading edge technology or about investor relations, visit: www.energyconnectinc.com
Forward Looking Statements
This press release includes statements that may constitute “forward-looking” statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause or contribute to such differences that include, but are not limited to, competitive factors, the success of new products in the marketplace, dependence upon third-party vendors, and the ability to obtain financing. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
| ENERGYCONNECT GROUP, INC. | |||||
| CONSOLIDATED BALANCE SHEET ($000′S) | |||||
| Jan. 3 | Dec. 29 | ||||
| 2009 | 2007 | ||||
| (Unaudited) | |||||
| Cash | $ | 710,101 | $ | 891,699 | |
| Accounts receivable | 4,373,818 | 1,532,843 | |||
| Other current assets | 533,528 | 551,601 | |||
| Discontinued operations | - | 12,666,606 | |||
| Total current assets | 5,617,447 | 15,642,749 | |||
| Goodwill and intangibles | 1,633,623 | 31,260,297 | |||
| Other long term assets | 370,138 | 211,581 | |||
| Discontinued operations | - | 971,017 | |||
| Total assets | $ | 7,621,208 | $ | 48,085,644 | |
| Accounts payable | $ | 5,116,296 | $ | 2,975,847 | |
| Bank line of credit | 117,257 | 118,456 | |||
| Other current liabilities | 127,016 | 122,651 | |||
| Discontinued operations | - | 13,549,408 | |||
| Total current liabilities | 5,360,569 | 16,766,362 | |||
| Long term liabilities-discontinued operations | - | 61,326 | |||
| Total liabilities | 5,360,569 | 16,827,688 | |||
| Shareholders’ equity | 2,260,639 | 31,257,956 | |||
| Total liabilities and shareholders’ equity | $ | 7,621,208 | $ | 48,085,644 | |
ENERGYCONNECT GROUP, INC. |
||||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||
| ($000’s, except share data) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three months ended | Twelve months ended | |||||||||||
| Jan. 3 | Dec. 29 | Jan. 3 | Dec. 29 | |||||||||
| 2009 | 2007 | 2009 | 2007 | |||||||||
| Revenue | $ | 1,776 | $ | 2,218 | $ | 25,859 | $ | 12,626 | ||||
| Cost of goods sold | 1,475 | 1,876 | 18,420 | 8,789 | ||||||||
| Gross profit | 301 | 342 | 7,439 | 3,837 | ||||||||
| Sales, general and administrative | 2,673 | 2,435 | 11,351 | 7,482 | ||||||||
| Impairment of goodwill | 29,354 | - | 29,354 | - | ||||||||
| Stock-based compensation | 226 | 252 | 870 | 920 | ||||||||
| Total operating expenses | 32,253 | 2,687 | 41,575 | 8,402 | ||||||||
| Loss from operations | (31,952) | (2,345) | (34,136) | (4,565) | ||||||||
| Other income (expense) | 19 | (20) | 70 | 224 | ||||||||
| Loss before provision for income tax | (31,933) |
(2,365) |
(34,066) |
(4,341) |
||||||||
| Provision for income tax | - | - | - | - | ||||||||
| Loss from continuing operations | (31,933) | (2,365) | (34,066) | (4,341) | ||||||||
| Discontinued operations | - | (9,488) | (11) | (9,695) | ||||||||
| Net loss | $ | (31,933) | $ | (11,853) | $ | (34,077) | $ | (14,036) | ||||
| Income (loss) from continuing operations per share | ||||||||||||
| Basic | $ | (0.34) | $ | (0.03) | $ | (0.37) | $ | (0.05) | ||||
| Diluted | (0.34) | (0.03) | (0.37) | (0.05) | ||||||||
| Discontinued operations | ||||||||||||
| Basic | $ | (0.00) | $ | (0.11) | $ | (0.00) | $ | (0.12) | ||||
| Diluted | (0.00) | (0.11) | (0.00) | (0.12) | ||||||||
| Net income (loss) per share | ||||||||||||
| Basic | $ | (0.34) | $ | (0.14) | $ | (0.37) | $ | (0.17) | ||||
| Diluted | (0.34) | (0.14) | (0.37) | (0.17) | ||||||||
| Shares used in per share calculations | ||||||||||||
| Basic | 95,156,885 | 83,557,569 | 91,245,072 | 82,536,027 | ||||||||
| Diluted | 95,156,885 | 83,557,569 | 91,245,072 | 82,536,027 | ||||||||
For further information, please contact:
Randy Reed, CFO
503.419.3580
Posted on Tuesday, March 3rd, 2009 - Press Releases