Friday, November 7, 2008

Third Quarter Coming

Enernoc (ENOC) will announce third quarter results in early November. 

This should be the 'inflection point' quarter for the company. Enernoc increased their investment (and expense line) to grab share as they saw the demand response market really develop. They knew that barriers to entry were not that high, so they wanted to create barriers to success for their competition by building brand and market position.

The third quarter will have three months of PJM revenues in it.  PJM has some of the'juciest' demand response revenues right now, however there is a significant time lag between when you invest in sales/marketing and when the revenues flow.  Q3 is the catchup quarter and will allow people to more accurately model forward seasonality and revenue.

Furthermore, ENOC has placed a few strategic bets for 'beyond demand response'.  The DR market will penetrate relatively quickly (i.e. within a decade).  However the customer relationships will allow for the continuous flow of new energy cost efficiency and environmental offerings such as procurement, and cap-and-trade management.

But back to Q3.  It should demonstrate that:

a)  the company has more than enough cash on hand to execute on their vision
b)  the company will generate cash from operations for the second half of this year
c)  the company continues to distance itself from its competitors
d) the company has a very realistic chance of being profitable for the full year 2009
e)  the company is not a 'spend at all costs' risk -- true it has made some youthfully bold bets with over 170Million invested to date, but the #1 market position in DR with a strategic foothold in the larger industrial/commercial energy management market will prove to be worth it.

Not sure how the stock will react in these markets, but investors should be heartened by the results.

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