PowerSecure Reports Third Quarter Results

http://www.businesswire.com/news/home/20091105006427/en

Results Strengthen Sequentially with Revenues Increasing 10%, E.P.S. Increasing
125%, and Gross Margin Reaching an All-Time High 37%
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:

Revenue Backlog to be recognized after September 30, 2009
Anticipated Estimated Primary
Description Revenue Recognition Period

Project-based Revenue -- Near term $35 Million 4Q09 through 2Q10
Project-based Revenue -- Long term $19 Million 3Q10 through 2011
Recurring Revenue $37 Million 4Q09 through 2016
Revenue Backlog to be recognized after September 30, 2009 $90 Million

Note: Revenue and primary recognition periods are subject to risks and uncertainties as indicated in the

Company's safe harbor statement, below. Consistent with past practice, these figures are not intended to
constitute the Company's total revenue over the indicated time periods, as the Company has additional,
regular on-going revenues. Examples of additional, regular recurring revenues include revenues from the
Company's Southern Flow business, engineering fees, and certain monitoring and maintenance revenue,
among others. Numbers may not add due to rounding.

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.

PowerSecure International, Inc.
Consolidated Statements of Operations (unaudited)
($000's except per share data)

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

Revenue 27,721 33,557 72,576 109,084
Cost of sales 17,469 22,646 48,195 74,353
Gross Profit 10,252 10,911 24,381 34,731

Operating expenses
General and administrative 6,399 7,142 18,511 22,003
Selling, marketing, and service 997 1,252 2,797 4,465
Depreciation and amortization 657 544 1,762 1,528
Total operating expenses 8,053 8,938 23,070 27,996

Operating income (loss) 2,199 1,973 1,311 6,735

Other income (expense)
Equity income 429 840 1,307 3,030
Management fees 106 137 309 450
Interest and other income 36 89 127 434
Interest and finance charges (144 ) (55 ) (463 ) (158 )

Income (loss) before income taxes 2,626 2,984 2,591 10,491
Income tax benefit (provision) (423 ) (70 ) (473 ) (684 )

Income (loss) from continuing operations 2,203 2,914 2,118 9,807

Discontinued operations
Loss on Disposal 0 0 0 (42 )
Income (loss) from operations 0 0 0 (35 )
Income (loss) on discontinued operations 0 0 0 (77 )

Net income (loss) 2,203 2,914 2,118 9,730
Less: Net income attributable to noncontrolling interest (549 ) 0 (914 ) 0
Net income (loss) attributable to PowerSecure International, Inc. 1,654 2,914 1,204 9,730

EARNINGS PER SHARE AMOUNTS ("E.P.S") ATTRIBUTABLE TO
POWERSECURE INTERNATIONAL, INC. SHAREHOLDERS:
Income (loss) from continuing operations:
Basic 0.10 0.17 0.07 0.58
Diluted 0.09 0.17 0.07 0.56

Net Income (loss):
Basic 0.10 0.17 0.07 0.57
Diluted 0.09 0.17 0.07 0.56

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 17,218 17,027 17,158 16,951
Diluted 17,467 17,185 17,174 17,377

PowerSecure International, Inc.
Condensed Consolidated Balance Sheets (unaudited)
($000's)

September 30, December 31,
ASSETS 2009 2008
CURRENT ASSETS:
Cash and cash equivalents 11,892 24,316
Trade receivables, net of allowance for doubtful accounts 30,057 25,215
Inventories 25,274 19,713
Deferred income taxes 2,919 2,919
Prepaid expenses and other current assets 917 1,680
Total Current Assets 71,059 73,843

PROPERTY, PLANT, AND EQUIPMENT:
Equipment 22,665 20,297
Furniture and fixtures 669 650
Land, building, and improvements 4,794 4,674
Total property, plant, and equipment at cost 28,128 25,621
Less accumulated depreciation and amortization 4,928 3,739
Property, plant, and equipment, net 23,200 21,882

OTHER ASSETS:
Goodwill 7,256 7,256
Restricted annuity contract 2,198 2,133
Intangible rights and capitalized software, net of accum amort 1,325 1,276
Investment in unconsolidated affiliate 3,739 4,106
Other assets 285 338
Total other assets 14,803 15,109

TOTAL ASSETS 109,062 110,834

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable 5,278 5,817
Accrued and other liabilities 19,620 23,147
Restructuring charges payable 608 1,349
Current income taxes payable 50 181
Current unrecognized tax benefit 243 79
Capital lease obligations 746 716
Total current liabilities 26,545 31,289

LONG-TERM LIABILITIES
Capital lease obligations 4,638 5,201
Unrecognized tax benefit 812 790
Deferred Compensation 637 388
Restructuring Charges 0 355
Total long-term liabilities 6,087 6,734

STOCKHOLDERS' EQUITY
Preferred stock - undesignated 0 0
Preferred stock - Series C 0 0
Common stock 172 171
Additional paid-in-capital 109,884 108,384
Accumulated deficit (34,540 ) (35,744 )
Total PowerSecure International, Inc. stockholders' equity 75,516 72,811
Noncontrolling Interest 914 0
Total stockholders' equity 76,430 72,811

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 109,062 110,834

PowerSecure International, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
($000's)

Nine Months Ended
September 30, September 30,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 1,204 9,730
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,762 1,528
Noncontrolling interest 914 0
Deferred income taxes 0 65
Loss on disposal of miscellaneous assets 32 162
Equity in income of unconsolidated affiliate (1,307 ) (3,030 )
Distributions from unconsolidated affiliate 1,618 3,375
Stock compensation expense 1,202 1,576
Changes in operating assets and liabilities, net of
effect of acquisitions:
Trade receivables, net (4,842 ) (2,538 )
Inventories (5,234 ) 1,670
Other current assets and liabilities 631 (52 )
Assets of discontinued operations held for sale 0 2,400
Other noncurrent assets 53 62
Accounts payable (539 ) (2,834 )
Restructuring charges (1,096 ) (3,610 )
Accrued and other liabilities (3,526 ) (14,328 )
Liabilities of discontinued operations held for sale 0 (755 )
Unrecognized Tax Benefits 188 78
Deferred compensation obligation 249 249
Restricted annuity contract (65 ) (105 )
Net cash provided by (used in) operating activities (8,756 ) (6,357 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,202 ) (15,857 )
Additions to intangible rights and software development (442 ) (200 )
Acquisitions, net of cash acquired (800 ) (710 )
Proceeds from sale of property, plant and equipment 12 6
Net cash provided by (used in) investing activities (3,432 ) (16,761 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan 0 2,584
Proceeds from stock option/warrant exercises, net of shares tendered 298 236
Principal payments on long-term notes payable 0 (97 )
Net borrowings (payments) on revolving line of credit 0 0
Payments on capital lease obligations (534 ) (1 )
Net cash provided by (used in) financing activities (236 ) 2,722
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (12,424 ) (20,396 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 24,316 28,710

CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,892 8,314

PowerSecure International, Inc.
Non-GAAP Financial Measure Reconciliation
($ 000's)

Revenue Excluding Publix Project Revenues
Three Months Ended Variance
September 30, September 30,
2009 2008 $ %

Revenue -- As Reported GAAP Measure 27,721 33,557 (5,836 ) -17.4 %
Publix Project Revenue 3,454 9,002 (5,548 ) -61.6 %
Revenue Excluding Publix Project Revenues (non-GAAP Measure) 24,267 24,555 (288 ) -1.2 %

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.

PowerSecure International, Inc.
Chris Hutter, Chief Financial Officer, 919-453-1760

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