World Energy Solutions, Inc. (World Energy) has reported revenues of $12.4 million for the year-end 2008, up 35%, compared with the revenues of $9.18 million in the previous year-end. It also reported a net loss of $6.79 million, or $0.08 per share, for the year-end 2008, compared with the net loss of $8.64 million, or $0.11 per share, in the previous year-end.

Business Highlights

Record Annual Revenue and Backlog;

Total backlog increased 57% to $19.0 million;

Annualized backlog grew 20% to $9.1 million;

Continued Improvement in Quarterly Results

Fourth quarter of 2008 cash usage reduced to $25,000;

Fourth quarter of 2008 operating loss narrows to $1.0 million vs. $2.2 million in fourth quarter of 2007;

Strong Performance in All Product Lines;

Major milestones in Environmental Commodities;

Supported the Regional Greenhouse Gas Initiatives’ (RGGI) first two compliance auctions for CO2 allowances;

Transacted major environmental commodity types, including:

CERs, VERs, RECs and Alberta Offsets;

Growth in Wholesale;

Revenue grew 29% over 2007;

Client base more than tripled to 39;

Momentum in Retail;

Record retail bookings;

Key government renewals;

Channel partner network grew 40% to 59;

“In 2008, World Energy successfully executed its strategy across all product lines, delivering record revenue while reducing cash usage significantly over the course of the year” said Richard Domaleski, chief executive officer, World Energy.

“Most notable was the growth in our annualized and total backlog to $9.1 million and $19.0 million, respectively, as we closed key renewals and our sales force continued to build momentum. We made solid progress in our Wholesale product line, more than tripling our client base while increasing revenues 29% despite a difficult commodities market in mid-2008. And with our RGGI win we built a strong, first-mover position in the primary carbon market, attracting the attention of cap and trade programs around the world.

“Fiscal 2009 has started well, as evidenced by activity to date in Q1. For the balance of the year we will look to extend our leadership in Retail, increase our return on investment in Wholesale, and capitalize on our unique credentials in Green. We’ll achieve this while continuing to manage the business responsibly – reaching cash flow positive in 2009 – and remaining vigilant for the right opportunities to grow.”

Financial Review

The year-over-year revenue growth reflects a full year of revenue from large state procurements conducted during 2007, record bookings generated by the company’s Retail sales force, a 40% increase in the company’s channel partner network and the 225% increase in Wholesale customers.

During 2008, the company continued to make planned investments to build the team and infrastructure to support growth. Total operating expenses for the year increased 2% over the prior year to $14.7 million, primarily reflecting general salary increases and the inclusion of the former Energy Gateway employees for a full 12 months during 2008 versus seven months during the year ended December 31, 2007. The company’s fixed operating cost structure has remained stable since the fourth quarter of 2007 and declined in the second half of 2008. Net loss for 2008 was $6.8 million, or ($0.08) per share, compared with a net loss of $8.6 million, or ($0.11) per share, in 2007. This decrease was primarily due to an increase in revenue and a decrease in income tax expense, partially offset by a decrease in interest income and, to a lesser extent, the increased operating expenses discussed above.

Revenue for the fourth quarter ended December 31, 2008 rose by 6% over the same period last year to $3.3 million, which reflects increases in the company’s Retail and Environmental Commodities product lines.

Selling and marketing expenses for the fourth quarter were $2.3 million, compared with $2.6 million in the prior year, reflecting decreases in consulting and marketing expenses. Fourth-quarter general and administrative expenses were $1.1 million, compared with $1.6 million in the fourth quarter of 2007, reflecting decreases in employee, compliance and recruiting costs.

Net loss for the fourth quarter of 2008 was $1.0 million, or ($0.01) per share, compared with a net loss of $5.2 million, or ($0.06) per share, in the fourth quarter of 2007. This decrease was due to a $3.1 million reduction in income tax expense and, to a lesser extent, decreases in operating expenses discussed above and the 6% increase in revenue.

At December 31, 2008, the company had no bank debt and cash and cash equivalents of $1.7 million, compared with $7.0 million at December 31, 2007. The year-over-year change reflects the company’s continued execution of its strategic initiatives, including funding of operations of $4.7 million and software development of $0.4 million. As World Energy has continued to build and refine its business model, the company has focused its resources and steadily reduced cash usage throughout 2008. The company believes it has the resources to execute its growth plans and reach cash flow positive during 2009. The execution of a credit facility with Silicon Valley Bank that allows for advances up to $3.0 million provides the company with increased financial strength and flexibility to execute its growth strategy and capitalize on potential growth opportunities as they arise.