The 2009 first quarter results were achieved in spite of an anticipated year-over-year reduction in revenue from the company’s largest customer, Publix Super Markets, of $11.8 million due to the completion of many projects in 2008. This anticipated reduction in revenue from Publix constituted 85% of the first quarter 2009 year-over-year revenue decrease.
The company’s first quarter 2009 gross margin as a percent of revenue was a healthy 29.8%, equaling the prior year period’s result. This is particularly strong given that certain elements of the company’s cost of sales are relatively fixed in the short-term, and therefore do not decrease directly with lower revenues (such as personnel and operational infrastructure).
The company took proactive measures to reduce its costs during 2008 and early 2009 in anticipation of the continuing difficult economic climate. These actions included reductions in personnel, overhead, and incentive pay. These reductions, in addition to lower selling expense due to lower revenues, resulted in first quarter operating expenses of $7.4 million, which decreased $1.6 million, or 18% compared to the prior year period, and decreased $2.6 million, or 26% compared to the second quarter of 2008 (their highest level in 2008).
The company also reported that its balance sheet remains strong and continues to be well-positioned to support its growth initiatives, including on-going opportunities to deploy capital for interactive distributed generation recurring revenue projects. The company’s first quarter ending cash balance was $23.0 million, and the company’s $50 million revolving credit facility remains undrawn.
In the first quarter, the company’s Energy and Smart Grid Solutions segment, including the strategic growth areas of interactive distributed generation, utility infrastructure, and energy efficiency, posted an overall 1.2 percentage point increase in gross margin as a percent of revenue, to 31.4%, and realized the following year-over-year revenue variances:
1) Interactive Distributed Generation: This area realized a 65% decrease in revenues, 87% of which was due to the anticipated reduction in Publix revenue.
2) Utility Infrastructure: This area realized a 21% decrease in revenues, driven by year-over-year decreases in revenues from large utility infrastructure projects, partially offset by increases in new utility services business.
3) Energy Efficiency: This area realized an 89% increase in revenues. The company’s EfficientLights business unit drove these increases, delivering revenues of $2.2 million for the quarter, an increase of over 400%. This growth was partially offset by revenue decreases in the company’s EnergyLite business unit, driven by planned reductions in the company’s investment in EnergyLite in favor of more aggressively deploying resources towards EfficientLights business opportunities.
In the first quarter, the company’s energy services segment realized a 1% increase in revenues from its Southern Flow business unit. The company’s WaterSecure business unit (which holds the company’s investment in a water processing business primarily serving oil and natural gas producers, and for which revenues are not recognized due to being accounted for via the equity method) posted pre-tax income of $0.6 million, down 48% from the prior year period, driven by declines in the price of oil. Notably, WaterSecure’s pre-tax income was essentially even sequentially with the fourth quarter of fiscal 2008 despite a 25% reduction in the average price of oil period-to-period.
Sidney Hinton, chief executive officer of PowerSecure, said, Above all, our first quarter of 2009 demonstrates the resilience, determination, and talents of our people, who delivered excellent results which exceeded our expectations, despite the unprecedented conditions in the economy and dislocation in the capital markets that is affecting all businesses. They set their minds to make up for what we anticipated to be a difficult revenue quarter by working smarter and leaner. At the same time, they executed with 100% focus to deliver great results for our customers. This customer focus is a hallmark of our company, and has enabled us to continue to succeed in a very difficult economic environment. Importantly, our strong execution continues to grow the confidence our utility partners and customers have in us, which is the fuel that will sustain our future growth and success.
Hinton continued, The marketplace has continued to evolve over the course of the recent economic crisis, and we continue to be confident that our capabilities are center of the plate for addressing the strategic energy priorities of our utility partners, businesses, and institutional customers. A clear example of this is the strong uptake we are seeing from retailers investing in our leading-edge EfficientLights technology, as well as increases in demand for our utility services capabilities. Although the deep economic recession and capital market crisis will continue to impact our business in the near-term, we remain very confident in our position in the marketplace and our prospects for long-term profitable growth.
