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World Energy Solutions Announces Q2 Financial Results



World Energy Solutions Announces Q2 Financial Results

WORCESTER, Mass., Aug. 8, 2013 (GLOBE NEWSWIRE) -- World Energy Solutions,
Inc. (Nasdaq:XWES), a leading energy management services firm, today announced
financial results for the three and six months ended June 30, 2013.

Financial Highlights (All figures are in US dollars; comparisons of
performance are made between Q2 2013 results and Q2 2012 results, unless
otherwise noted.)

Revenue

  * Revenue for the six-month period was up 19% to $16.6 million
  * Quarterly revenue increased 10% to $7.9 million

Backlog

  * Total backlog plus deferred revenue rose 18% to $51.2 million
  * Annualized backlog increased 10% to $23.9 million

Operating Results

  * Cash flow from operations was $0.6 million, or $0.05 per share, for the
    quarter; $1.2 million, or $0.10 per share, for the six-month period
  * Gross margins in the quarter improved to 73%, up from 70%
  * Net loss for the quarter was ($1.7) million or ($0.14) per share

Liquidity and Balance Sheet

  * Deferred revenue increased $0.7 million during the quarter to $7.0 million
  * Retired $0.5 million in debt to SVB in the quarter
  * Cash and cash equivalents were $2.2 million at quarter end

"Overall, I am pleased with our execution this quarter and our performance
over the first half year, where we grew revenue 19 percent and generated $0.10
per share in cash flow from operations," said Phil Adams, CEO of World Energy
Solutions. "Our second quarter delivered the most revenue we've seen in a
second quarter – traditionally our seasonally slowest quarter. We had many
successes which underscore the attractive fundamentals of our business. We had
strong new bookings in our Energy Procurement segment; our Northeast
Mid-Market team experienced its first successes up-selling auction deals; and
cross-selling activity amongst our Energy Efficiency Services and Mid-Market
groups continued to increase. In addition, we had more than half a million
dollars in deals due to close in the quarter slip to Q3 and since close.

"While I am encouraged by these developments, this is clearly a transitional
quarter for us. This is the second quarter where we continue to work through
the effects of a revenue recognition policy change that defers revenue from
certain mid-market deals to future quarters while incurring in-period expense.
That said, we remain bullish on our business and know from experience that as
we continue to execute the GAAP numbers will follow."

Financial Review

Year-to-Date 2013

Revenue for the six months ended June 30, 2013 rose 19% over the same period
last year to $16.6 million, as Energy Procurement grew 21%. This reflects
continued execution in the Company's retail product line, including the
acquisition of NEP in Q4 2012. Energy Efficiency Services increased 4%, as we
completed more projects covered by the four utility efficiency programs in
2013 as compared to 2012 and capitalized on cross-sell opportunities.

Gross margins were 74% for the six months ended June 30, 2013 compared to 72%
for the same period last year, reflecting a greater mix of higher margin
procurement revenue in 2013 compared to 2012. Energy Procurement gross margins
increased 3% to 83% as a result of increased revenue with costs only slightly
increasing over the six-months ended June 30, 2012. Energy Efficiency Services
gross margins were 15% compared to 27% for the six-months ended June 30, 2012,
reflecting a low contribution margin on a large municipal project completed
during the period and increased payroll costs associated with additional
personnel in 2013 compared to 2012 as we hired in advance of expected revenue
growth in the second half of 2013. Operating expenses as a percentage of sales
increased 2% to 85% as the increase in costs exceeded the growth in revenue.
The increase in operating expenses was primarily due to higher payroll,
commissions and amortization of intangible assets related to the NEP
acquisition and general headcount increases in the Company's sales, marketing
and back office operations. As a result, the Company's operating margin
remained at (11)% and EBITDA* margin was 1% for both periods.

Q2 2013

Revenue for the three months ended June 30, 2013 rose 10% over the same period
last year to $7.9 million, as Energy Procurement grew 19%. This reflects
continued execution in the Company's base business, including the acquisition
of NEP in Q4 2012. Energy Efficiency Services declined 27%, as several
projects completed at or near quarter end did not get utility approval until
the third quarter due to a change in one utility's close out procedures. These
projects will be reflected in the Company's third quarter results.

Gross margins were 73% for the quarter ended June 30, 2013 compared to 70% for
the same period last year, reflecting a greater mix of higher margin
procurement revenue in 2013 compared to 2012. Energy Procurement gross margins
increased 2% to 82% as a result of increased revenue with costs only slightly
increasing over Q2 2012. Energy Efficiency Services gross margins were 9%
compared to 27% in Q2 2012, reflecting a low contribution margin on a large
municipal project completed during the quarter and increased payroll costs
associated with additional personnel in Q2 2013 as we hired in advance of
expected revenue growth in the second half of 2013. Operating expenses as a
percentage of sales increased 8% to 89% as the increase in costs exceeded the
growth in revenue. The increase in operating expenses was primarily due to
higher payroll, commissions and amortization of intangible assets related to
the NEP acquisition and general headcount increases in the Company's sales,
marketing and back office operations. As a result, the Company's operating
margin declined 5% to (16)% and EBITDA* margin was (3)% compared to (1)% in
the prior year quarter. As revenue continues to grow and the Company works
through the effects of its mid-market revenue recognition policy change, the
Company expects operating margins to improve, reflecting the inherent leverage
in its model.

At June 30, 2013, the Company had cash and cash equivalents of $2.2 million,
compared with $3.3 million at December 31, 2012 and $2.1 million at March 31,
2013. The increase in cash and cash equivalents during the quarter was
primarily due to $0.6 million of cash flow from operations which was
substantially offset by $0.5 million of principal payments on long-term debt.
Cash flow from operations for the six months ended June 30, 2013 increased
$0.3 million, or 30%, compared to the same period in 2012. The Company
continues to maintain its $2.5 million line-of-credit and has not borrowed
against that facility to date.  

Note: Backlog relates to contracts in force on a given date representing
transactions between bidders and listers on our platform related to commodity
brokerage assuming listers consume energy at their historical usage levels or
deliver credits at expected levels. Total backlog represents the commission
that the Company would derive over the remaining life of those contracts.
Annualized backlog represents the commission that the Company would derive
from those contracts within the 12 months following the date on which the
backlog is calculated. Total and annualized backlog at June 30, 2013 included
commodity backlog of $43.5 million and $23.2 million, respectively. In
addition, total and annualized backlog include contracted management fees
between World Energy and energy consumers for energy management and auction
administration services of $0.7 million that are expected to be received over
the following 12-month period. These management fees can be terminated within
30 days per the terms of the contracts.

Conference Call & Webcast

World Energy will hold a conference call today, August 8, 2013, at 10:00 a.m.
(ET) to discuss its financial results and other corporate developments. To
access the conference call by telephone, dial 1 (888) 517-2458 (domestic) or 1
(847) 413-3538 (international) and enter passcode 6462953#. A replay will be
available two hours after the completion of the call, and for one month
following the call, by dialing 1 (888) 843-7419 for domestic participants or 1
(630) 652-3042 for international participants, and entering passcode 9895528#
when prompted. Participants may also access a live webcast of the conference
call through the investor relations section of World Energy's website,
www.worldenergy.com. Please connect at least 15 minutes prior to the
conference call to ensure adequate time for any software download that may be
required to join the webcast. An archived replay of the webcast will be
available for 30 days.

* Non-GAAP Financial Measures

World Energy provides all information required in accordance with GAAP and
also provides certain "non-GAAP financial measures." A non-GAAP financial
measure refers to a numerical financial measure that is included in (or
excluded from) the most directly comparable financial measure calculated and
presented in accordance with GAAP in the Company's financial statements. World
Energy provides EBITDA, adjusted EBITDA and free cash flow as additional
information relating to our operating results. These non-GAAP measures exclude
expenses related to share-based compensation, depreciation related to our
fixed assets, amortization expense related to acquisition-related assets and
other assets, interest expense on bank borrowings, notes payable to sellers
and contingent consideration, interest income on invested funds and notes
receivable, and income taxes.

Management believes it is useful to exclude depreciation, amortization, net
interest and income tax expense as these are essentially fixed amounts that
cannot be influenced by management in the short term. In addition, management
believes it is useful to exclude share-based compensation as this is not a
cash expense.

Management defines free cash flow as net cash provided by operating activities
less capital expenditures. Management defines capital expenditures as
purchases of property and equipment, which includes capitalization of
internal-use software development costs.

Management uses these non-GAAP measures for internal reporting and bank
reporting purposes. World Energy provides these non-GAAP financial measures in
addition to GAAP financial results, because management believes that these
non-GAAP financial measures provide useful information to certain investors
and financial analysts in helping them to better understand the Company's
operating results and underlying operational trends. They also provide a
consistent basis for comparison across accounting periods.

These non-GAAP financial measures are not prepared in accordance with GAAP.
These measures may differ from the GAAP information, even where similarly
titled, used by other companies and therefore should not be used to compare
the Company's performance to that of other companies. There are significant
limitations associated with the use of non-GAAP financial measures. The
presentation of this additional information is not meant to be considered in
isolation or as a substitute for net income prepared in accordance with GAAP.

Whenever World Energy reports non-GAAP financial measures, a reconciliation of
the non-GAAP financial measure to the most closely applicable GAAP financial
measure will be made available. Investors are encouraged to review these
reconciliations to ensure they have a thorough understanding of the reported
non-GAAP financial measures and their most directly comparable GAAP financial
measures. Reconciliation of GAAP net income to EBITDA and adjusted EBITDA is
shown below:

                 Three Months Ended               Six Months Ended
                 June 30,                         June 30,
                 2013           2012             2013            2012
GAAP net loss    $ (1,654,155)   $ (917,022)     $ (2,611,040)   $ (1,700,086)
Add: Interest     277,397         98,263            480,134       187,707
expense
Add: Income       131,305        22,500           262,610          50,000
taxes
Add:
Amortization of   974,758          698,894       1,949,516        1,458,141
intangibles
Add:
Amortization of   8,506          8,734            17,013           21,671
other assets
Add:              55,070         49,520          110,739          103,070
Depreciation
Non-GAAP EBITDA   $ (207,119)    $ (39,111)       $ 208,972       $ 120,503
(deficit)
Non-GAAP EBITDA   $ (0.02)       $ —              $ 0.02          $ 0.01
per share
Add: Share-based  146,323        79,903           292,309         199,444
compensation
Non-GAAP
adjusted EBITDA   $ (60,796)     $ 40,792         $ 501,281       $ 319,947
(deficit)
Non-GAAP
adjusted EBITDA   $ (0.01)       $ —             $ 0.04           $ 0.03
per share
Weighted average 11,982,656      11,928,460      12,050,866       11,952,420
diluted shares
                                                  
                                                  
                 Reconciliation of Free Cash     Reconciliation of Free Cash
                 Flow                            Flow
                 for Three Months Ended June 30, for Six Months Ended June 30,
                 2013           2012             2013            2012
Net cash
provided by       $ 581,728     $ 1,449,660       $ 1,247,125     $ 957,394
operating
activities
Net cash
provided by
operating         $ 0.05        $ 0.12            $ 0.10          $ 0.08
activities per
share
Less: Purchases
of property and       (65,023)        (244,527)         (74,239)     (276,142)
equipment
Free cash flow    $ 516,705     $ 1,205,133       $ 1,172,886     $ 681,252
Free cash flow    $ 0.04        $ 0.10            $ 0.10          $ 0.06
per share

About World Energy Solutions, Inc.

World Energy Solutions, Inc. (Nasdaq:XWES) is an energy management services
firm that brings together the passion, processes and technologies to take the
complexity out of energy management and turn it into bottom-line impact for
the businesses, institutions and governments we serve. To date, the Company
has transacted more than $40 billion in energy, demand response and
environmental commodities on behalf of its customers, creating more than $2
billion in value for them. World Energy is also a leader in the global carbon
market, where its World Energy Exchange® supports the Regional Greenhouse Gas
Initiative (RGGI), the first mandatory market-based regulatory program in the
U.S. to reduce greenhouse gas emissions. For more information, please visit
www.worldenergy.com.

This press release contains forward-looking statements. The words
"anticipates," "believes," "estimates," "expects," "intends," "may," "plans,"
"projects," "will," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain these identifying words. The Company has based these forward-looking
statements on its current expectations and projections about future events,
including without limitation, its expectations of backlog and energy prices.
Although the Company believes that the expectations underlying any of its
forward-looking statements are reasonable, these expectations may prove to be
incorrect and all of these statements are subject to risks and uncertainties.
Should one or more of these risks and uncertainties materialize, or should
underlying assumptions, projections or expectations prove incorrect, actual
results, performance or financial condition may vary materially and adversely
from those anticipated, estimated or expected. Such risks and uncertainties
include, but are not limited to the following: the Company's revenue and
backlog are dependent on actual future energy purchases pursuant to completed
procurements; the demand for the Company's services is affected by changes in
regulated prices or cyclicality or volatility in competitive market prices for
energy; the potential impact on the Company's historical and prospective
financial results of a change in accounting policy may negatively impact its
stock price; and other factors outside the Company's control that affect
transaction volume in the electricity market. Additional risk factors are
identified in the Company's Annual Report on Form 10-K for the year ended
December 31, 2012 and subsequent reports filed with the Securities and
Exchange Commission. The forward-looking statements made in this press release
are made as at the date hereof. The Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the
date on which the statement is made or to reflect the occurrence of
unanticipated events, other than as required by securities laws.

WORLD ENERGY SOLUTIONS, INC.
 
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
                   Three Months Ended          Six Months Ended
                   June 30,                     June 30,
                   2013           2012         2013            2012
                                               $ 16,593,139    $ 13,978,606
Revenue            $ 7,935,657    $ 7,185,199
                                               4,377,606       3,981,898
Cost of revenue    2,144,455      2,158,485
                                               12,215,533      9,996,708
Gross profit       5,791,202       5,026,714
                                   
Sales and          4,890,347      3,718,771    9,868,428       7,532,954
marketing expenses
 
General and                                    4,228,694       3,979,239
administrative      2,167,021      2,104,202
expenses
                                                (1,881,589)     (1,515,485)
Operating loss       (1,266,166)   (796,259)
Interest expense,                               (480,134)       (187,707)
net                    (277,397)      (98,263)
                                                  13,293        53,106
Other income          20,713        —
                                   
Loss before income   (1,522,850)   (894,522)    (2,348,430)     (1,650,086)
taxes 
                                                                
Income tax expense 131,305        22,500       262,610         50,000
                                                $ (2,611,040)   $ (1,700,086) 
Net loss            $ (1,654,155)  $ (917,022)
                                                                
Net loss per
common share –      $ (0.14)       $ (0.08)     $ (0.22)        $ (0.14)
basic and diluted
 
Weighted average                   
shares outstanding  11,982,656    11,893,365   11,974,428      11,880,669
– basic and
diluted
                                                                

 
SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET
 
                                                              June 30, 2013
Assets                                                         
Cash and cash equivalents                                     $ 2,191,478 
Trade accounts receivable, net                                7,005,602 
Other current assets                                          2,704,064
Property and equipment, net                                   604,828
Goodwill                                                      16,167,834
Intangible and other assets, net                              17,739,637
Long-term portion of deferred tax asset                       5,690,370
Total assets                                                  $ 52,103,813
                                                               
Liabilities and stockholders' equity
Accrued commissions                                           $   1,443,132
Accounts payable and accrued liabilities                      7,803,403
Deferred revenue and customer advances                        2,421,488
Notes payable and current portion of long-term debt           3,960,127
Total current liabilities                                     15,628,150
Deferred revenue and customer advances, and other liabilities 4,580,805
Long-term debt                                                7,430,223
Stockholders' equity                                          24,464,635
Total liabilities and stockholders' equity                    $ 52,103,813

CONTACT: Jim Parslow
         World Energy Solutions, Inc.
         (508) 459-8100
         jparslow@worldenergy.com
        
         or
        
         Dan Mees
         World Energy Solutions, Inc.
         (508) 459-8156
         dmees@worldenergy.com
        
         Susan Forman
         Dian Griesel Inc.
         (212) 825-3210
         sforman@dgicomm.com
        
         or
        
         In Canada:
         Craig Armitage
         The Equicom Group
         (416) 815-0700 x278
         carmitage@equicomgroup.com

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