Lime Energy Co. (NASDAQ: LIME), a leader in designing and
implementing demand-side energy efficiency programs for utilities,
today announced its results for the second quarter and first half
of 2016.
“We knew that the second quarter would be challenging due to
delays in key utility programs; however, we are working towards our
return to profitability as we move into the second half of the
year,” said Adam Procell, Lime Energy President & CEO. “We
are moving forward with our plans to scale the Company and continue
to leverage innovative technology to achieve our goals.”
Second quarter highlights(Comparisons are to the second
quarter of 2015)
- Revenue of $21.0 million, down $10.9
million
- Gross profit margins of 29.7%, compared
to 34.0%
- Selling, general and administrative
(“SG&A”) increased $0.8 million to $10.2 million
- Other income of $1.1 million versus an
other expense of ($1.7) million in previous year
- Net loss of $3.4 million, increased
from net loss of $1.0 million
- Basic and diluted loss per share from
continuing operations of $0.39 as compared to $0.12
- Adjusted EBITDA(1) of ($3.1)
million, down from adjusted EBITDA of $2.0 million
First half highlights(Comparisons are to the first half
of 2015)
On March 24, 2015 Lime Energy completed its purchase of
EnerPath. Because the closing of the transaction occurred in the
2015 first quarter, the highlights and comparisons below and the
other financial information included in this earnings release
includes only stand-alone data for Lime Energy for the period from
January 1, 2015 to March 23, 2015 along with the combined
results from March 24, 2016 to June 30, 2016.
- Revenue of $44.2 million, down $6.1
million
- Gross profit margin of 29.8%, compared
to 32.6%
- Selling, general and administrative
(“SG&A”) increased $5.0 million to $20.2 million
- Other expense of ($2.6) million versus
($3.9) million in previous year
- Net loss of $10.7 million, increased
from net loss of $3.1 million
- Basic and diluted loss per share from
continuing operations of $1.19 as compared to $0.82
- Adjusted EBITDA of ($5.4) million, down
from adjusted EBITDA of $2.2 million
______________________(1) See below for reconciliation of
non-GAAP measures
Revenue. The company’s 2016 2nd quarter revenues were $21.0
million, down $10.9 million or 34% year-over-year from 2015 2nd
quarter. The majority of the decrease related to the delay of two
key utility programs, LADWP and New Jersey. In the second quarter,
we restarted at LADWP in mid-April with sales, and we just
started to record revenues and gross profit in June. We expect the
LADWP program to meaningfully contribute to our 2016 Q3 results. We
are also awaiting to hear back on the New Jersey Small Business
Direct program. A RFP (request for proposal) was sent out at the
end of May. We submitted our proposal in June and conducted a
final interview in July. We are expecting to hear back in August.
If successful, the program would start back up in
September with sales and contribute revenues and gross profit
in 2016 fourth quarter.
Gross Profit. Gross profit margins in the 2016 2nd quarter were
29.7%, down 430 basis point from the previous 2015 2nd quarter.
This decline resulted from the mix of utility programs, a shift in
utility measures, and various cost overruns on projects.
SG&A Expenses. Selling, general and administrative
expenses for the 2016 second quarter were $10.2 million, an
increase of $0.8 million. The increase was primarily due to
increased I.T. development work procured through outside
consultants, in addition to severance charges relating to the
departure of the previous CFO. The I.T. development resulted in
both increased consulting expense and increased depreciation
expense (from the capitalized elements).
Other Expense. Other income, net was $1.1 million for the three
months ended June 30, 2016, compared to other expense, net of
($1.7) million, for the three months ended June 30, 2015.
The $2.8 million improvement was primarily a result of a $4.4
million increase in the gain from the change in derivative
liability, offset by a $1.0 million charge for the SEC
investigation and $0.6 million increase in net interest
expense.
SEC Investigation. In 2012, the SEC commenced an investigation
with respect to certain of the Company’s revenue recognition
practices and financial reporting. The Company has cooperated with
the Staff of the Enforcement Division of the U.S. Securities and
Exchange Commission (“SEC staff”) throughout the course of the
investigation. During the second quarter of 2016, the Company
reached an agreement in principle with the SEC staff to resolve the
investigation. At this time, in accordance with ASC 450,
“Contingencies”, the Company has recorded a $1.0 million charge to
income, the amount it believes is now probable will be paid. This
charge is recorded in Other Expenses in the Condensed Consolidated
Statement of Operations. The SEC staff has not yet presented the
proposed settlement to the Commission, and no assurance can be
given that the Commission will approve the proposed settlement or
that the amount estimated will not change.
Adjusted EBITDA. Adjusted EBITDA for the quarter was ($3.1)
million, a decrease of $5.1 million. The decrease was primarily
driven by a reduction in revenue and gross profit margin.
Liquidity. The Company ended the quarter with $2.7 million in
cash and $5.9 million of availability to borrow on our credit
facility for a total liquidity of $8.6 million, assuming a positive
covenant resolution with our lender. Currently, we are not in
compliance with the EBITDA covenant under the credit facility, but
we expect to receive a waiver from the bank along with
renegotiating the EBITDA covenant targets. Asset coverage and
borrowing base calculations are in compliance. In the second
quarter 2016, the credit facility was increased to $10 million from
$6.0 million. At June 30, 2016, we have no principal
borrowings on the credit facility although there are two letters of
credit outstanding amounting to $1.4 million.
Failure to satisfy a continued listing rule
As previously reported on Current Reports on Form 8-K, the
Company currently does not meet the continued listing requirement
set forth in Listing Rule 5550(b)(1), which requires companies
listed on the NASDAQ Capital Market to maintain a minimum of $2.5
million in stockholders’ equity for continued listing. On
July 12, 2016, we received a letter from the NASDAQ Listing
Qualification staff indicating that, unless the Company timely
requests a hearing before the NASDAQ Listing Qualifications Panel
(the “Panel”), the Company’s securities would be delisted from the
NASDAQ Capital Market due to the Company’s non-compliance with
Listing Rule 5550(b).
We have a hearing before the Panel scheduled on August 25,
2016, at which we will present a plan to evidence compliance with
the Listing Rule 5550(b)(1), which requires the Company to
maintain a minimum of $2.5 million in stockholders’ equity, or with
Listing Rule 5550(b)(3), which requires net income from
continuing operations of $500,000. The Company’s common stock will
continue to trade on the NASDAQ Capital Market under the symbol
“LIME” pending the completion of the hearing process and the
expiration of any extension period granted by the Panel. A ruling
is likely to be received seven days after the hearing.
There can be no assurance that we will be successful in
receiving an extension from the Panel to regain compliance or in
maintaining its listing on the NASDAQ Capital Market, which could
impair the liquidity and market price of the Company’s common stock
including limited availability of market quotations for its stock.
NASDAQ’s determination to delist the Company’s common stock could
materially and adversely affect the Company’s access to capital
markets and its ability to raise capital on acceptable terms, if at
all.
About Lime Energy Co.
Lime Energy is building a new energy future. As a leading
national provider of energy efficiency for utilities’ small
business customers, Lime Energy designs and implements direct
install programs for its utility clients which have consistently
exceeded program savings goals. Its award-winning, integrated
services programs provide utilities with reliable energy efficiency
resources while delivering the highest levels of customer
satisfaction. This next generation approach is helping utilities
across the country to go deeper and broader with the cheapest,
cleanest and fastest energy resource that we have — energy
efficiency.
Conference Call Information
Lime Energy will host a conference call with investors
Wednesday, August 17, 2016, at 4:30 p.m. ET to discuss
these results which can be accessed as follows:
North America: 1 (844) 282-4412International:
1 (513) 988-8485Passcode: 58714366
A live audio webcast will be available through Lime Energy’s
Investor Relations section of its website at
http://www.lime-energy.com/investors/.
The webcast is also being distributed through the Thomson
Reuters StreetEvents Network. Institutional investors can access
the call via Thomson Reuters’ StreetEvents (www.streetevents.com),
a password-protected event management site.
Forward Looking Statements
This press release and the referenced earnings conference call
includes forward-looking statements within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995 including statements that reflect Lime Energy’s current
expectations about its future results, performance, prospects and
opportunities. You can identify these forward-looking statements by
the use of words and phrases such as “may,” “expects,”
“anticipates,” “believes,” “intends,” “estimates,” “plans,”
“should,” “typical,” “preliminary,” “hope,” or similar
expressions.
These forward-looking statements are based on our current
expectations or beliefs regarding future events or circumstances,
and you should not place undue reliance on these statements. Such
statements involve known and unknown risks, uncertainties,
assumptions and other factors many of which are out of the
Company’s control and difficult to forecast that may cause actual
results to differ materially from those that may be described or
implied.
These risks and uncertainties are described in Lime Energy’s
most recent Annual Report on Form 10-K or as may be described
from time to time in Lime Energy’s subsequent SEC filings; such
risk factors are incorporated herein by reference. These statements
include but are not limited to statements regarding the operations
of Lime Energy, the timing of delayed utility programs, outcome of
pending bids, outcome of discussions with the SEC and outlook for
obtaining a favorable settlement, ability to have a positive
covenant resolution with our lender; and maintaining the company’s
listing on NASDAQ.
The Company assumes no, and hereby disclaims any, obligation to
update any of the foregoing or any other forward-looking
statements. The Company nonetheless reserves the right to make such
updates from time to time by press release, periodic report or
other method of public disclosure without the need for specific
reference to this press release. No such update shall be deemed to
indicate that other statements not addressed by such update remain
correct or create an obligation to provide any other updates.
LIME ENERGY CO. Condensed
Consolidated Statement of Operations
($ Thousands, except per share
amounts)
Three Months Ended June 30, Change
2016 2015 $ % Revenue $
21,014 $ 31,950 $ (10,936 ) -34.2 % Cost of sales 14,770 21,078
(6,308 ) -29.9 % Gross profit 6,244 10,872 (4,628 ) -42.6 %
Selling, general and administrative expenses 10,210 9,414 796 8.5 %
Acquisition costs 188 244 (56 ) -23.0 % Amortization of intangibles
335 278 57 20.5 % Operating income (loss) (4,489 ) 936 (5,425 )
-579.6 % Other income (expense) 1,118 (1,688 ) 2,806 -166.2
% Loss from continuing operations before income taxes (3,371
) (752 ) (2,619 ) 348.3 % Income tax expense (2 ) (75 ) 73
-97.3 % Loss from continuing operations (3,373 ) (827 )
(2,546 ) 307.9 % Loss from operation of discontinued
business (35 ) (158 ) 123 -77.8 % Net loss $ (3,408 ) $ (985
) $ (2,423 ) 246.0 % Preferred stock dividends (354 ) (312 )
(42 ) 13.5 % Net loss available to common stockholders $
(3,762 ) $ (1,297 ) $ (2,465 ) 190.1 % Basic and Diluted
Loss Per Common Share From Continuing operations $ (0.39 ) $ (0.12
) $ (0.27 ) 225.0 % Discontinued operations — (0.02 ) 0.02 -100.0 %
Basic and Diluted Loss Per Common Share $ (0.39 ) $ (0.14 ) (0.25 )
178.6 % Weighted Average Common Shares Outstanding 9,632
9,548
Six Months Ended June
30, Change 2016 2015 $
% Revenue $ 44,163 $ 50,249 $ (6,086 ) -12.1 % Cost
of sales 30,981 33,878 (2,897 ) -8.6 % Gross profit 13,182 16,371
(3,189 ) -19.5 % Selling, general and administrative
expenses 20,207 15,220 4,987 32.8 % Acquisition costs 407 937 (530
) -56.6 % Amortization of intangibles 670 309 361 116.8 % Operating
loss (8,102 ) (95 ) (8,007 ) 8428.4 % Other expense (2,589 )
(3,938 ) 1,349 -34.3 % Loss from continuing operations
before income taxes (10,691 ) (4,033 ) (6,658 ) 165.1 %
Income tax (expense) benefit (8 ) 1,169 (1,177 ) -100.7 %
Loss from continuing operations (10,699 ) (2,864 ) (7,835 ) 273.6 %
Loss from operation of discontinued business (47 ) (221 )
174 -78.7 % Net loss $ (10,746 ) $ (3,085 ) $ (7,661 ) 248.3
% Preferred stock dividends (705 ) (620 ) (85 ) 13.7 %
Net loss available to common stockholders $ (11,451 ) $
(3,705 ) $ (7,746 ) 209.1 % Basic and Diluted Loss Per
Common Share From Continuing operations $ (1.19 ) $ (0.37 ) $ (0.82
) 221.6 % Discontinued operations — (0.02 ) 0.02 -100.0 % Basic and
Diluted Loss Per Common Share $ (1.19 ) $ (0.39 ) (0.80 ) 205.1 %
Weighted Average Common Shares Outstanding 9,628 9,526
Reconciliation of GAAP Net Income to Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that represents
our earnings before interest, taxes, depreciation and amortization,
share based compensation, (Gain) loss from change in derivative
liability, loss from the operation of discontinued operations,
other one-time costs, acquisition costs and the extinguishment of
debt. This non-GAAP financial measure has certain limitations,
including that it does not have a standardized meaning and,
therefore, our definition may be different from similar non-GAAP
financial measures used by other companies and/or analysts. Thus,
it may be more difficult to compare our financial performance to
that of other companies. We believe our reporting of adjusted
EBITDA assists investors in evaluating our operating performance.
However, because adjusted EBITDA is not a measure of financial
performance calculated in accordance with GAAP, such measure should
be considered in addition to, but not as a substitute for, other
measures of our financial performance reported in accordance with
GAAP, such as net income.
Three Months Ended Six Months Ended
June 30, June 30, 2016 2015
2016 2015 Net loss $ (3,408 ) $ (985 )
$ (10,746 ) $ (3,085 ) Interest expense, net 1,012 408 1,911
433 Depreciation & amortization 642 499 1,259 707 Provision for
income tax (benefit) 2 75 8 (1,169 ) Share based compensation 260
220 541 445 (Gain) loss from change in derivative liability (3,130
) 1,280 (2,374 ) 2,085 Loss from operation of discontinued business
35 158 47 221 Other one time costs 1,324 95 1,454 222 Acquisition
costs 188 244 407 937 Extinguishment of debt — — 2,052 1,420
Adjusted EBITDA $ (3,075 ) $ 1,994 $ (5,441 ) $ 2,216
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version on businesswire.com: http://www.businesswire.com/news/home/20160815006102/en/
Lime Energy Investor RelationsBruce Torkelson,
201-416-2589investorrelations@lime-energy.com