WAKE FOREST, N.C.-- (BUSINESS WIRE) -- PowerSecure International, Inc. (NASDAQ:POWR) today reported another quarter of strengthening results, posting revenues of $27.7 million and diluted earnings per share (“E.P.S.”) of $0.09 for its third quarter of 2009. On a sequential basis, compared to the second quarter of 2009 the Company’s revenues increased 10.3%, and E.P.S. increased 125%. Additionally, third quarter gross margin as a percentage of revenue reached 37.0%, an all-time high for any quarter in the Company’s history.

The Company’s third quarter 2009 results were lower compared to the third quarter of 2008 primarily due to the completion of a large number of projects for Publix Supermarkets in 2008. As reported, third quarter 2009 revenue and E.P.S. was lower than third quarter 2008 revenue and E.P.S. by 17.4% and 47.1%, respectively. Excluding Publix project revenues in both years’ third quarters, revenues for the third quarter of 2009 were $24.3 million and revenues for the third quarter of 2008 were $24.6 million (see Non-GAAP financial measure reconciliation below).

Sidney Hinton, CEO of PowerSecure, said, “We are very pleased with the consistent improvement we are seeing in our results – including achieving our highest ever quarterly gross margin percentage. Each successive quarter in 2009 has shown higher revenue, higher gross margin, higher operating profit, and higher E.P.S. The consistent strengthening of our results demonstrates the determination and drive of the PowerSecure team to execute extraordinarily well and deliver increasing value to our customers in a difficult environment.”

Mr. Hinton continued, “Our growth and diversification strategies are working, and assuming the economy cooperates, the progress we have made in a challenging 2009 positions us to have a very good 2010. A major demonstration of our success is our EfficientLights business, which we expect to generate $20 million of revenue in 2009, growing 650% over 2008.”

Mr. Hinton added that the progression of the Company’s Utility Services business also continues to be very positive, and is a significant growth driver in PowerSecure’s Utility Infrastructure area. This unit is seeing strong demand from utilities for transmission and distribution services, and was up 41% sequentially in the third quarter compared to the second quarter. The progression and development of these new businesses has offset a more protracted recovery in the Company’s Interactive Distributed Generation business, which has continued to broaden and diversify its utility and customer base despite pressures from the economy.

“We are excited about the strategic positions each of our businesses holds in the marketplace,” said Mr. Hinton, “as well as the strong value they deliver our utility partners and business customers, and their long-term growth opportunities and promise. That said, we are not sitting still, and we are actively developing new, complementary business lines and technologies to bring to market – examples of which are our new EfficientLights Street Light and our new SmartStation substation – to sustain our growth well into the future.”

For the third quarter of 2009, the Company’s Energy and Smart Grid Solutions segment showed strong sequential improvement, as revenues of $23.6 million, were $2.9 million, or 14.1%, more than the second quarter of 2009. This third quarter revenue result was $5.1 million less than the third quarter of 2008 due to $5.5 million of lower Publix revenues. The Energy and Smart Grid Solutions segment includes the strategic business areas of Interactive Distributed Generation^®, Energy Efficiency, and Utility Infrastructure. These three business areas realized the following revenue variances compared to the third quarter of 2008 (“year-over-year” variances) and the second quarter of 2009 (“sequential” variances):

1) Interactive Distributed Generation: On a sequential basis, Interactive Distributed Generation revenues for the third quarter were 8% less than the second quarter of 2009. On a year-over-year basis, Interactive Distributed Generation revenues were 46% lower than the third quarter of 2008, and were 33% lower excluding Publix projects in both years.

2) Energy Efficiency: The Company’s EfficientLights revenues for the third quarter were a record $8.3 million, which represented a sequential increase of over 80%, and a year-over-year increase of over 800%. This growth was partially offset by revenue decreases in the Company’s EnergyLite business, driven by planned reductions in the Company’s focus on EnergyLite to more aggressively pursue EfficientLights opportunities. In total, Energy Efficiency revenues were up 74% on a sequential basis, and up 280% on a year-over-year basis.

3) Utility Infrastructure: Utility Infrastructure realized a 3% sequential increase in revenues for the third quarter, driven by new utility services business which offset lower revenues from large infrastructure projects in the final stages of completion. On a year-over-year basis, this unit realized a 35% decrease in revenues, also driven by lower revenues from large infrastructure projects, and partially offset by the growth in new utility services business.

For the third quarter of 2009, the Company’s Energy Services segment realized a 15% year-over-year decrease in revenues from its Southern Flow business. On a sequential basis, Southern Flow revenues were down 7% from the second quarter of 2009. The Company’s WaterSecure business posted pre-tax income of $0.5 million, down 45% on a year-over-year basis, but up 7% on a sequential basis compared to the second quarter of 2009. These Energy Services segment results were impacted by year-over-year declines in the price of oil and the adverse impact of low natural gas prices on industry production and investment.

Gross margin as a percentage of revenue for the third quarter 2009 was 37.0%, the highest quarterly gross margin percentage in the Company’s history. On a year-over-year basis gross margin was up 4.5 percentage points, and on a sequential basis gross margin was up 4.2 percentage points.

Third quarter 2009 operating expenses were $8.1 million, down 9.9% on a year-over-year basis, and up 5.9% on a sequential basis compared to the second quarter of 2009. The reductions versus prior year were due to cost reduction measures taken in anticipation of the difficult economic climate, as well as reductions in selling expense due to lower year-over-year revenues. The sequential quarterly increase in operating expenses was driven by additional compensation expense resulting from the Company’s improving financial results, higher selling expense due to higher revenues, and an increase in depreciation from capital deployed to support the Company’s growing recurring revenue business. Additionally, the Company’s operating expenses reflect continuing investments in new product development and infrastructure for several growth initiatives, which include but are not limited to its new PowerPackages business unit, the EfficientLights Street Light product, and its SmartStation substation technology.

As of the date of this press release, the Company’s revenue backlog expected to be recognized after September 30, 2009 is $90 million. This includes revenue related to new business announcements made by the Company on September 29 and October 14, 2009, and is $2 million more than the $88 million of revenue backlog reported in the Company’s second quarter earnings release (issued on August 6, 2009). The Company’s revenue backlog and the estimated timing of revenue recognition is outlined below, including “project-based revenues” expected to be recognized as projects are completed, and “recurring revenues” expected to be recognized over the life of the contracts:

The Company will host a conference call commencing today at 5:30 p.m. eastern time to discuss its third quarter 2009 results, business operations, strategic initiatives and prospects for the future. The conference call will be webcast live and can be accessed from the Investor Relations section of the Company's website at www.powersecure.com. Participants can also access the call by dialing 888-679-8034 (or 617-213-4847 if dialing internationally), and providing pass code 46035764. If you are unable to participate during the live webcast, a replay of the conference call will be available beginning today at 8:30 p.m. eastern time through midnight on December 4, 2009. To listen to the replay, dial toll-free 888-286-8010 (or 617-801-6888 if dialing internationally), and enter pass code 57245515. In addition, the webcast will be archived on the Company's website at www.powersecure.com.

About PowerSecure

PowerSecure International, Inc. is a leading provider of Energy and Smart Grid Solutions to electric utilities, and their commercial, institutional, and industrial customers, as well as Energy Services to the oil and natural gas industry. The Company’s Energy and Smart Grid Solutions businesses provide products and services in the areas of Interactive Distributed Generation®, Utility Infrastructure, and Energy Efficiency. The Company is a pioneer in developing Interactive Distributed Generation® systems with sophisticated, proactive smart grid capabilities, including the ability to 1) forecast peak electricity demand and electronically deploy the systems to deliver more efficient, and environmentally friendly power, 2) provide utilities with dedicated electric power generation assets for their demand response needs, and 3) provide customers with the most dependable standby power in the industry. The Company also provides utilities with regulatory consulting, power system and transmission engineering and construction, and provides businesses with energy efficiency products and services, including its state-of-the art EfficientLights lighting solution for refrigerated cases. The Company provides Energy Services to the oil and natural gas industry through its Southern Flow and WaterSecure business units. Additional information about the Company is available at www.powersecure.com.

This press release contains forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements other than statements of historical facts, including but not limited to statements concerning the outlook for the Company's future revenues, earnings, margins, cash resources and cash flow and other financial and operating information and data; the Company's future business operations, strategies and prospects; and all other statements concerning the plans, intentions, expectations, projections, hopes, beliefs, objectives, goals and strategies of management, including statements about other future financial and non-financial items, performance or events and about present and future products, services, technologies and businesses; and statements of assumptions underlying the foregoing. Forward-looking statements are not guarantees of future performance or events and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed, projected or implied by such forward-looking statements. Important risks, uncertainties and other factors include, but are not limited to, the recent downturn, disruption and volatility in the economy, financial markets and business markets and the effects thereof on the Company's markets and customers, the demand for its products and services, and the Company's access to capital; the size, timing and terms of sales and orders, including the Company's revenue backlog discussed in this press release, and the risk of customers delaying, deferring or canceling purchase orders or making smaller purchases than expected; the timely and successful development, production and market acceptance of new and enhanced products, services and technologies of the Company; the ability of the Company to obtain adequate supplies of key components and materials of sufficient reliability and quality for its products and technologies on a timely and cost-effective basis and the effects of related warranty claims and disputes; the ability of the Company to successfully expand its core distributed generation products and services, to successfully develop and achieve market acceptance of its new energy-related businesses, to successfully expand its recurring revenue projects, to manage its growth and to address the effects of any future changes in utility tariff structures and environmental requirements on its business solutions; the effects of competition; changes in customer and industry demand and preferences; the ability of the Company to continue the growth and diversification of its customer base; the ability of the Company to attract, retain, and motivate its executives and key personnel; changes in the energy industry in general and the electricity, oil, and natural gas markets in particular, including price levels; the effects of competition; the ability of the Company to secure and maintain key contracts and relationships; the effects of pending and future litigation, claims and disputes; and other risks, uncertainties and other factors identified from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2008, as well as subsequently filed reports on Form 10-Q and Form 8-K. Accordingly, there can be no assurance that the results expressed, projected or implied by any forward-looking statements will be achieved, and readers are cautioned not to place undue reliance on any forward-looking statements. The forward-looking statements in this press release speak only as of the date hereof and are based on the current plans, goals, objectives, strategies, intentions, expectations and assumptions of, and the information currently available to, management. The Company assumes no duty or obligation to update or revise any forward-looking statements for any reason, whether as the result of changes in expectations, new information, future events, conditions or circumstances or otherwise.

Non-GAAP Financial Measures:

References by the Company to its third quarter 2009 and third quarter 2008 “Revenue excluding Publix project revenue” is a non-GAAP financial measure. It refers to the Company's GAAP revenues after subtracting revenue realized from Publix Supermarkets in both periods.

The Company believes providing non-GAAP measures which adjust for this item is a useful tool permitting management and the board of directors to measure, monitor and evaluate the Company's operating performance and to make operating decisions. Non-GAAP revenue shown above is also used by management to assist it in planning and forecasting future operations and making future operating decisions.

The Company also believes this non-GAAP measure provides meaningful information to investors in terms of enhancing their understanding of the Company's core operating performance and results, and allows investors to more easily compare the Company's financial performance in different fiscal periods. Non-GAAP revenue calculated by subtracting Publix project revenue from GAAP revenue should be considered only as a supplement to, and not as a substitute for or in isolation from, other measures of financial information prepared in accordance with GAAP, such as GAAP revenue, GAAP net income, GAAP net income per share, GAAP income from continuing operations, or GAAP income from continuing operations per share.