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Opower Announces First Quarter 2014 Financial Results

Opower (NYSE: OPWR), a leading provider of cloud-based software for the utility industry, today announced its financial results for the first quarter ended March 31, 2014.

“We are pleased to report a strong start to 2014, with revenue up 50% from the first quarter of 2013,” said Daniel Yates, Chief Executive Officer of Opower. “Our strong revenue growth in the quarter was driven by new customer launches and expanding existing relationships. Utilities are increasingly turning to Opower to help them engage their customers and deliver reliable reductions in energy demand.”

Yates added, “We are still in the early days of addressing a multi-billion dollar opportunity to help utilities achieve their demand management objectives and improve their engagement capabilities. We are focused on investing in the expansion of our sales organization and technology leadership. We believe this strategy will further solidify Opower’s lead in this large, underpenetrated market, and enable us to drive increasing shareholder value over the longer-term.”

First Quarter 2014 Financial Highlights

Revenue

  • Revenue was $28.6 million, an increase of 50% from the comparable period in 2013.

Operating Income (Loss)

  • GAAP operating loss was $(7.3) million, compared to an operating loss of $(2.8) million in the comparable period in 2013.
  • Non-GAAP operating loss was $(5.7) million, compared to a non-GAAP operating loss of $(2.5) million in the comparable period in 2013.

Net Income (Loss)

  • GAAP net loss was $(7.0) million, compared to a net loss of $(2.7) million for the comparable period in 2013. GAAP net loss per share was $(0.32), based on 22.0 million weighted-average common shares outstanding, compared to a GAAP net loss per share of $(0.13) for the comparable period in 2013, based on 20.6 million weighted-average common shares outstanding.
  • Non-GAAP net loss was $(5.3) million, compared to a non-GAAP net loss of $(2.4) million in the comparable period in 2013. Non-GAAP net loss per diluted share was $(0.13), based on 41.2 million non-GAAP weighted-average common shares outstanding, compared to a non-GAAP net loss per diluted share of $(0.06) for the comparable period in 2013, based on 39.8 million non-GAAP weighted-average common shares outstanding.

Adjusted EBITDA

  • Adjusted EBITDA was a loss of $(4.3) million, compared to an adjusted EBITDA loss of $(1.8) million in the comparable period in 2013.

Balance Sheet

  • Cash and cash equivalents at March 31, 2014 totaled $25.5 million, compared with $28.8 million at the end of 2013. Cash balances at the end of the first quarter do not reflect net proceeds of approximately $122 million from our initial public offering, including the exercise of the underwriters’ overallotment option, all of which closed subsequent to the end of the first quarter.

Business Outlook

Opower is issuing guidance for the second quarter and full year 2014 as indicated below:

Second Quarter 2014:

  • Total revenue is expected to be in the range of $28.8 million to $29.2 million.
  • Adjusted EBITDA is expected to be a loss in the range of $(7.4) million to $(7.0) million.

Full Year 2014:

  • Total revenue is expected to be in the range of $116.5 million to $118.5 million.
  • Adjusted EBITDA is expected to be a loss in the range of $(30) million to $(28) million.

Conference Call Information

What:       Opower First Quarter 2014 Financial Results Conference Call
When: Wednesday, May 14, 2014
Time: 5:00 p.m. ET
Live Call: (877) 201-0168, domestic
(647) 788-4901, international
Conference ID # 29277712
Webcast:

http://investors.opower.com (live and replay)

The webcast will be archived on Opower’s website for three months.

About Opower

Working with more than 90 utility partners and serving more than 32 million consumers across eight countries, Opower is a leading provider of cloud-based software to the utility industry. Opower’s platform uses big data analytics and behavioral science to enable utilities to achieve energy outcomes, including energy efficiency, customer engagement and demand response. Founded in 2007 and listed on the NYSE under the symbol “OPWR”, Opower is headquartered in Arlington, Virginia, with offices in San Francisco, London, Singapore and Tokyo.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Non-GAAP operating income, non-GAAP net loss, non-GAAP net loss per share, non-GAAP weighted-average common shares outstanding and adjusted EBITDA.

We define non-GAAP operating income, non-GAAP net loss and non-GAAP net loss per share as operating loss, net loss and net loss per share, respectively, excluding the impact of stock-based compensation. The weighted-average shares outstanding used to calculate non-GAAP net loss per share gives effect to the conversion of the preferred stock as of the beginning of each of the periods presented.

We define adjusted EBITDA as net loss adjusted to exclude our income tax provision, other income (expense), including interest, depreciation and amortization, and stock-based compensation.

We believe that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Opower's financial condition and results of operations. We use these non-GAAP measures for financial, operational and budgetary decision-making purposes, and to compare our performance to that of prior periods for trend analyses. We believe that these non-GAAP financial measures provide useful information regarding past financial performance and future prospects, and permit us to analyze more thoroughly key financial metrics used to make operational decisions. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other software companies, many of which disclose similar non-GAAP financial measures.

We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is their exclusion of significant income and expenses that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management on which income and expenses are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release, and not to rely on any single financial measure to evaluate our business.

Cautionary Language Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our revenue, net income and profitability metrics for the company’s second quarter and full year 2014, and statements regarding our market position in our industry. These forward-looking statements are made as of the date of this press release and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, unpredictable sales cycles and implementation times; changes to the regulatory landscape could alter our customers’ buying patterns; our ability to respond to evolving technological changes; our ability to retain and attract customers; the risk of technological developments and innovations by others; failure to manage growth and effectively scale the organization; failure to protect and enforce our intellectual property rights; assertions by third parties that we infringe their intellectual property rights; the risk of losing key employees; changes to current accounting rules; and general political or destabilizing events, including war, conflict or acts of terrorism. For a detailed discussion of these and other risk factors, please refer to the risks detailed in our filings with the Securities and Exchange Commission, including, without limitation, our final prospectus for our initial public offering filed on April 4, 2014 and subsequent periodic and current reports. Past performance is not necessarily indicative of future results. We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

           

OPOWER, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 
 
December 31,

2013

March 31,

2014

 
Assets

Current assets:

Cash and cash equivalents $ 28,819 $ 25,483
Accounts receivable, net 20,228 23,568
Prepaid expenses and other current assets   1,988     3,138  
Total current assets 51,035 52,189
 
Property and equipment, net 10,813 11,491
Other assets   1,287     2,190  
Total assets $ 63,135   $ 65,870  
 

Liabilities and Stockholders' Deficit

Current liabilities:

Accounts payable $ 1,163 $ 1,067
Accrued expenses 4,452 5,436
Deferred revenue 50,623 57,369
Accrued compensation and benefits 4,817 5,198
Other current liabilities   1,831     1,624  
Total current liabilities 62,886 70,694
 
Deferred revenue 1,767 670
Notes payable 2,418 2,467
Other liabilities   2,327     2,217  
Total liabilities   69,398     76,048  
 

Stockholder's deficit:

Convertible preferred stock
Series A preferred stock 1,466 1,466
Series B preferred stock 16,355 16,355
Series C preferred stock   49,872     49,872  
Total convertible preferred stock   67,693     67,693  
 
Common stock - -
Additional paid-in capital 9,407 12,618
Accumulated deficit (83,243 ) (90,223 )
Accumulated other comprehensive loss   (120 )   (266 )

Total stockholders' deficit

  (6,263 )   (10,178 )
   

Total liabilities and stockholders' deficit

$ 63,135   $ 65,870  
           

OPOWER, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited, in thousands, except per share data)

 
Three Months Ended

March 31,

2013 (2)

2014
 
Revenue $ 19,023 $ 28,573
Cost of revenue (1)   7,949     9,935  
Gross profit 11,074 18,638
 

Operating expenses (1):

Sales and marketing 6,586 11,999
Research and development 5,733 10,754
General and administrative   1,573     3,218  
Total operating expenses   13,892     25,971  
 
Operating loss (2,818 ) (7,333 )
 

Other income (expense):

Gain on foreign currency

125 295
Interest expense (13 ) (66 )
Other, net   -     168  
Loss before income taxes (2,706 ) (6,936 )
Provision for income taxes   7     44  
Net loss $ (2,713 ) $ (6,980 )
 

Weighted-average common stock outstanding:

Basic and diluted 20,553 22,002
 
Net loss per share:
Basic and diluted $ (0.13 ) $ (0.32 )
 
(1) Stock-based compensation was allocated as follows:
 
 
 
Three Months Ended

March 31,

2013(2)

2014
Cost of revenue $ 28 $ 79
Sales and marketing 84 749
Research and development 178 297
General and administrative   22     537  
Total stock-based compensation $ 312   $ 1,662  
 

 

(2) During the first quarter of 2014, the Company updated its methodology for allocating certain general and administrative costs to more closely align these costs to the functional departments consuming the related services. As a result, certain prior period costs have been reclassified from general and administrative expenses to cost of revenue, sales and marketing expenses, and research and development expenses primarily based on the headcount in each of these functional areas. The reclassifications for the three months ended March 31, 2013 reduced general and administrative expenses by $0.8 million and increased cost of revenue, sales and marketing expenses, and research and development expenses by $0.1 million, $0.4 million and $0.3 million, respectively. These reclassifications had no effect on previously reported operating loss, net loss or cash flows.

             

OPOWER, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 
Three Months Ended

March 31,

2013 2014
 
Operating Activities
Net loss $ (2,713 ) $ (6,980 )
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 723 1,347
Stock-based compensation expense 312 1,662
Non-cash interest expense 12 49
Asset impairment - 82
Other (19 )

(34

)

 
Changes in operating assets and liabilities:
Accounts receivable (9,097 ) (3,067 )
Prepaid expenses and other current assets (16 )

(883

)
Other assets -

(166

)
Accounts payable 641 (96 )
Accrued expenses 38 506
Accrued compensation and benefits (284 ) 375
Deferred revenue 9,986 5,298
Other liabilities   (177 )  

(226

)
Net cash used in operating activities   (594 )  

(2,133

)
 
Investing Activities
Additions to property and equipment   (1,534 )  

(2,038

)
Net cash used in investing activities   (1,534 )  

(2,038

)
 
Financing Activities
Proceeds from issuance of common stock 1,250 1,251
Issuance of notes payable 2,500 -
Payment of offering costs - (296 )
Principal payments on capital lease obligations   -    

(84

)
Net cash provided by financing activities   3,750    

871

 
 
Effect of exchange rate changes on cash and cash equivalents (77 )

(36

)
 
Net increase (decrease) in cash and cash equivalents 1,545 (3,336 )
Cash and cash equivalents, beginning of period   24,597     28,819  
Cash and cash equivalents, end of period $ 26,142   $ 25,483  
 
             

OPOWER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share data)

 
Three Months Ended

March 31,

  2013     2014  

 

Reconciliation of Net Loss to Adjusted EBITDA:
Net loss $ (2,713 ) $ (6,980 )
Provision for income taxes 7 44
Other (income) expense, including interest (112 ) (397 )
Depreciation and amortization 723 1,347
Stock-based compensation   312     1,662  
Adjusted EBITDA $ (1,783 ) $ (4,324 )
 
Reconciliation of Cost of Revenue to Non-GAAP Cost of Revenue:
Cost of revenue $ 7,949 $ 9,935
Less: Stock-based compensation   28     79  
Non-GAAP cost of revenue $ 7,921   $ 9,856  
 
Reconciliation of Gross Margin to Non-GAAP Gross Margin:
Gross margin 58.2 % 65.2 %
Add back: Stock-based compensation   0.1 %   0.3 %
Non-GAAP gross margin   58.4 %   65.5 %
 

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses:

Operating expenses $ 13,892 $ 25,971
Less: Stock-based compensation   284     1,583  
Non-GAAP operating expenses $ 13,608   $ 24,388  
 
Reconciliation of Operating Loss to Non-GAAP Operating Loss:
Operating loss $ (2,818 ) $ (7,333 )
Add back: Stock-based compensation   312     1,662  
Non-GAAP operating loss $ (2,506 ) $ (5,671 )
 
Reconciliation of Net Loss to Non-GAAP Net Loss:
Net loss $ (2,713 ) $ (6,980 )
Add back: Stock-based compensation   312     1,662  
Non-GAAP net loss $ (2,401 ) $ (5,318 )
 

Shares Used in Computing Non-GAAP Per Share Amounts:

Weighted-average common stock outstanding, basic and diluted 20,553 22,002

Add: Additional weighted-average shares giving effect to the conversion of preferred stock as of the beginning of the period

  19,247     19,247  
Non-GAAP weighted-average common stock outstanding, basic and diluted   39,800     41,249  
Non-GAAP net loss per common share $ (0.06 ) $ (0.13 )

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