World Energy Solutions Reports Financial Results for Q3 2009

Company Backlog Rises Over 40% on Record Bookings

WORCESTER, MA Nov. 5 /CNW/ - World Energy Solutions, Inc. (NASDAQ: XWES; TSX: XWE), an operator of online exchanges for energy and green commodities, today announced its financial results for the third quarter ended September 30, 2009 . All figures below are in U.S. dollars, and growth percentages compare the results of the three months ended September 30, 2009 with the three months ended September 30, 2008 , unless stated otherwise.

    
    Q3 2009 Highlights
    ------------------

    -   Revenue increased
           -  Quarter: 5% to $3.5 million
           -  Year To Date: 21% to $11.1 million
    -   Backlog reached record levels
           -  Annualized: $10.4 million, up 18%
           -  Total: $21.1 million, up 41%
    -   Net loss decreased
           -  Quarter: 48% to $0.6 million
           -  Year To Date: 64% to $2.1 million
    -   The Company renewed its $3 million credit facility with Silicon
        Valley Bank
    -   Key product line highlights
           -  Retail: Record bookings spurred by Ohio power market openings
           -  Government: Successful auctions conducted on behalf of Rhode
              Island (natural gas) and GSA Great Lakes Region (electricity)
           -  Wholesale: TransAlta announced successful first long-term power
              auction and plans for second event in Q4
           -  Green: Executed fifth RGGI compliance auction
    -   Subsequent to quarter's end
           -  Entered into financing agreement for up to US$2.5 million with
              Bond Capital, Ltd. (see separate press release dated
              November 5, 2009)
           -  Announced breakthrough transaction for 1.4 million CERs
    

"In the face of a tough economy, we saw our backlog reach record levels as we delivered substantial bookings in our Retail product line, driven primarily by success in the newly opened Ohio market," said Richard Domaleski, Chief Executive Officer, World Energy Solutions. "This new business and a general increase in transaction activity both in Retail and Wholesale will positively impact our results in Q4 and into 2010. Overall, World Energy remains on a solid growth trajectory for 2009, and on track to reach cash flow positive in the fourth quarter."

    
    Financial Review
    ----------------
    

Revenue for the quarter ended September 30, 2009 rose by 5% over the same period last year to $3.5 million , which reflects increases in the Company's Retail product line driven by strong auction and natural gas bookings, specifically new customer wins in the Ohio market. The results also reflect the continued success of the Green product line with the completion of the fifth RGGI auction.

World Energy's third-quarter results reflect continued improvements in the Company's cost structure. Cost of revenue decreased $0.2 million and gross profit margin increased to 74%, compared to 66% in the same period in the prior year. Total operating expenses decreased by 6% to $3.2 million , primarily reflecting decreased compliance costs as well as reduced payroll, travel and benefit costs. Operating expenses as a percentage of revenue declined by more than 10% over the prior year as the Company was able to lower its operating cost structure while delivering the 5% increase in revenue.

Net loss for the third quarter of 2009 was $0.6 million , or $(0.08) per share, compared with a net loss of $1.2 million , or $(0.15) per share, in the third quarter of 2008. This decrease was primarily due to an overall decline in cost of revenue and operating expenses and the year-over-year increase in revenue.

Revenue for the nine months ended September 30, 2009 rose 21% over the same period in the prior year to $11.1 million due to increased auction activity in all the Company's product lines and new customer wins.

Cost of revenue decreased $0.7 million and gross profit margin increased to 73%, compared to 60% in the first nine months of 2008. Total operating expenses for the nine months ended September 30, 2009 decreased 10% to $10.2 million from $11.3 million in the same period last year primarily due to decreases in payroll and benefit costs, as well as lower compliance and travel costs. Net loss for the year-to-date period was $2.1 million , or $(0.25) per share, compared with $5.8 million , or $(0.69) per share, in the first nine months of 2008.

At September 30, 2009 , the Company had no bank debt and cash and cash equivalents of $0.7 million . Net cash used in operations for the nine months ended September 30, 2009 was $0.9 million , resulting primarily from a $0.7 million increase in trade accounts receivable and the net loss for the period, excluding the effects of non-cash expense items. Non-cash expense items, including depreciation, amortization and share-based compensation, were $1.8 million , substantially offsetting the $2.1 million net loss for the first nine months of 2009. The Company also renewed its credit facility with Silicon Valley Bank for 18 months through March 7, 2011 . The Company did not take any advances against the credit facility during the original 12-month term and does not plan to draw against the facility. The Company continues to believe it has the financial resources to execute its growth plans and reach cash flow positive in the fourth quarter.

    
    * Backlog relates to contracts in force on a given date representing
        transactions between buyers and sellers on our platform related to
        commodity brokerage assuming sellers consume energy at their
        historical usage levels or deliver credits at expected levels. Total
        backlog represents the revenue that the Company would derive over the
        remaining life of those contracts. Annualized backlog represents the
        revenue 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 September 30, 2009 included commodity
        backlog of $20.0 million and $9.3 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 $1.1 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, November 5, 2009 , at 10:00 a.m. ET to discuss its Q3 2009 financial results. To access the conference call by telephone, dial 416-644-3419 or 1-800-814-4860. The conference call will be archived for replay until Thursday, November 12, 2009 at midnight. To access the archived conference call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation code 4169818 followed by the number sign.

A live audio webcast of the conference call will be available at www.worldenergy.com and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to secure a line and 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 365 days.

About World Energy Solutions, Inc.

World Energy (NASDAQ: XWES; TSX: XWE) operates online exchanges for energy and green commodities. For buyers and sellers of electricity, natural gas, capacity, and green-energy assets who are impacted by today's volatile markets, World Energy's proven approach has transformed the normally complex procurement process into a powerful, streamlined vehicle for cost savings. In addition to enabling customers to seek competitive pricing on traditional energy commodities, World Energy is taking a leadership position in the emerging environmental-commodities markets. Its award-winning World Green Exchange(R) supports the ground-breaking Regional Greenhouse Gas Initiative's (RGGI) cap and trade program for CO2 emissions. For more information, please visit www.worldenergy.com.

This press release contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: we have a history of losses and cannot provide any assurance we will be profitable in any given period; our revenue is dependent on actual future energy purchases pursuant to completed procurements; the demand for our services is affected by changes in regulated prices or cyclicality or volatility in competitive market prices for energy; we depend on a small number of key energy consumers, suppliers and channel partners; there are factors outside our control that affect transaction volume in the electricity market; and there are other factors identified in our Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission.

    
                         WORLD ENERGY SOLUTIONS, INC.

         SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                           Three Months Ended           Nine Months Ended
                              September 30,               September 30,
                     --------------------------------------------------------
                           2009          2008          2009          2008
                     -------------- ------------- ------------- -------------

    Revenue           $  3,458,262  $  3,289,515  $ 11,118,517  $  9,164,727
    -------
    Cost of revenue        893,668     1,113,325     2,968,516     3,626,237
                     -------------- ------------- ------------- -------------
    Gross profit         2,564,594     2,176,190     8,150,001     5,538,490
    Sales and
     marketing           2,314,962     2,355,907     7,548,431     7,770,567
    General and
     administrative        884,841     1,041,321     2,693,796     3,562,946
                     -------------- ------------- ------------- -------------
    Operating loss        (635,209)   (1,221,038)   (2,092,226)   (5,795,023)
    --------------
    Interest income
     (expense), net         (1,493)        5,218        (4,654)       38,944
                     -------------- ------------- ------------- -------------
    Loss before
     income taxes         (636,702)   (1,215,820)   (2,096,880)   (5,756,079)
    Income tax benefit           -             -             -             -
                     -------------- ------------- ------------- -------------
    Net loss
    --------          $   (636,702) $ (1,215,820) $ (2,096,880) $ (5,756,079)
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------
    Loss per share:
      Net loss per
       common share -
       basic and
       diluted        $      (0.08) $      (0.15) $      (0.25) $      (0.69)
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------
    Weighted average
     shares outstanding -
     basic and diluted   8,468,500     8,321,595     8,445,252     8,287,530
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------



               SUMMARY OF CONDENSED CONSOLIDATED BALANCE SHEET

                                                          September 30, 2009
                                                         --------------------
    Assets
    ------
      Current assets                                            $  3,986,665
      Property and equipment, net                                    406,910
      Goodwill                                                     3,178,701
      Other assets                                                 5,492,632
                                                         --------------------
        Total assets                                            $ 13,064,908
                                                         --------------------
                                                         --------------------
    Liabilities and stockholders' equity
    ------------------------------------
      Accrued commissions                                       $    818,579
      Accounts payable and accrued liabilities                     2,160,867
      Other current liabilities                                      636,984
                                                         --------------------
        Total current liabilities                                  3,616,430
      Total long-term liabilities                                     20,146
      Stockholders' equity                                         9,428,332
                                                         --------------------
        Total liabilities and stockholders' equity              $ 13,064,908
                                                         --------------------
                                                         --------------------
    

For further information: Jim Parslow, World Energy Solutions, Inc., [phone], [email protected]; Craig Armitage, The Equicom Group, [phone] x278, [email protected]