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PowerSecure International Inc. Reports Operating Results (10-Q)

August 06, 2012 | About:
10qk

10qk

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PowerSecure International Inc. (POWR) filed Quarterly Report for the period ended 2012-06-30.

Powersecure International, Inc. has a market cap of $90.6 million; its shares were traded at around $4.88 with a P/E ratio of 68.7 and P/S ratio of 0.7.

Highlight of Business Operations:

Our Utility and Energy Technologies segment distributed generation revenues are significantly affected by the number, size and timing of our Interactive Distributed Generation and Utility Infrastructure projects as well as the percentage of completion of in-process projects, and the percentage of customer-owned as opposed to PowerSecure-owned distributed generation recurring revenue projects. Our Interactive Distributed Generation sales have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future. The increase in our Utility and Energy Technologies segment revenues in the second quarter 2012 over the second quarter 2011 consisted of a $3.4 million, or 26.8%, increase in revenues from Interactive Distributed Generation products and services, a $3.0 million, or 50.7%, increase in revenues from Energy Efficiency products, and a $1.4 million, or 12.2%, increase in revenues from Utility Infrastructure products and services. The increase in our Interactive Distributed Generation product sales and services reflects an increase in both our PowerSecure-owned recurring revenue systems and customer-owned project sales. During the second quarter 2012, 20.9% of our distributed generation revenues were derived from recurring revenue sales, an increase over the second quarter 2011 when 19.7% of our distributed generation revenues were derived from recurring revenue sales. The increase in our Energy Efficiency sales and services in the second quarter 2012 compared to the second quarter 2011 primarily reflects an increase in revenues from our portfolio of LED lighting products including existing and new products that were introduced in 2010 and 2011 as well as an increase in the number of customers. The increase in our Utility Infrastructure product sales and services was due to an increase in the number of utilities that we service, and an increase in those utilities spending levels on transmission and distribution system maintenance and construction.

Our Utility and Energy Technologies segment distributed generation revenues are significantly affected by the number, size and timing of our Interactive Distributed Generation and Utility Infrastructure projects as well as the percentage of completion of in-process projects, and the percentage of customer-owned as opposed to PowerSecure-owned distributed generation recurring revenue projects. Our Interactive Distributed Generation sales have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future. The increase in our Utility and Energy Technologies segment revenues in the six month period 2012 over the six month period 2011 consisted of a $7.0 million, or 36.4%, increase in revenues from Utility Infrastructure products and services, a $5.6 million, or 51.8%, increase in revenues from Energy Efficiency products, and a $4.8 million, or 20.0%, increase in revenues from Interactive Distributed Generation products and services. The increase in our Interactive Distributed Generation product sales and services reflects an increase in both our PowerSecure-owned recurring revenue systems and customer-owned project sales. During the six month period 2012, 22.6% of our distributed generation revenues were derived from recurring revenue sales, an increase over the six month period 2011 when 18.3% of our distributed generation revenues were

Our Utility and Energy Technologies segment gross profit increased $4.7 million, or 27.7%, in the six month period 2012 compared to the six month period 2011. As a percentage of revenue, our Utility and Energy Technologies segment gross profit margin in the six month period 2012 was 30.6%, a decrease of 1.1 percentage points compared to the six month period 2011. An important driver in the period-over-period change in our gross profit margin is the relative gross margins we generally earn in each of our Distributed Generation, Utility Infrastructure and Energy Efficiency product and service categories. Our Distributed Generation products and services generally yield gross profit margins in the 25-45% range, our Utility Infrastructure products and services generally yield gross profit margins in the 5-30% range, and our Energy Efficiency products generally yield gross margins in the 20-40% range. The gross profit margin we realize within these ranges largely correlates to the amount of value-added product and services we deliver, with highly engineered, turn-key projects realizing higher gross profit margins due to the benefits they deliver our customers and the value we deliver because we are vertically integrated. Because of these gross profit margin differences, changes in the mix of our product lines affect our consolidated gross profit margin results. Our lower gross profit margins in the six month period 2012 compared to the six month period 2011 were due to an increase in the growth and amount of Utility Infrastructure revenue in the six month period 2012, which is generally our lowest gross margin product and service category. In addition, gross margins were negatively impacted by the mild winter weather early in the six month period of 2012, which caused Utility Infrastructure workloads to be reduced at certain utilities and the redeployment of those crews to other utilities and projects. Therefore, although Utility Infrastructure revenues increased significantly compared to the same period in 2011, inefficiencies in cost of sales related to the demobilization and redeployment of crews negatively impacted six month period 2012 gross margin results. As is always the case, variability in our quarterly gross margins is also caused by regular on-going differences in the mix of specific projects completed in each quarter. In the long-term, we expect that gross profit margins for this segment will increase because of anticipated greater productivity, operations and manufacturing efficiencies, improvements in technology, and growth in our higher-margin recurring revenue projects.

the six month period 2012, we used $3.5 to million to acquire a 90% ownership interest in PowerSecure Solar, we used $2.3 million to purchase and install equipment at our recurring revenue distributed generation sites, we used $1.2 million principally to acquire operational assets, and we received $1.4 million from the sale of our WaterSecure operations. During the six month period 2011, we received $25.6 million from the sale of our WaterSecure operations, we received $16.5 million from the sale of our Southern Flow business, we used $7.6 million to purchase and install equipment at our recurring revenue distributed generation sites, and we used $1.7 million principally to acquire operational assets.

Our capital expenditures during the six month period 2012 were approximately $3.5 million, of which we used $2.3 million to purchase and install equipment for our PowerSecure-owned recurring revenue distributed generation systems, and we used $1.2 million to purchase equipment and other capital items. Our capital expenditures during the six month period 2011 were approximately $9.3 million, of which we used $7.6 million to purchase and install equipment at our recurring revenue distributed generation sites, and we used $1.7 million to purchase equipment and other capital items.

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