The cloud of secrecy around Opower's move to go public has finally lifted. The Virginia-based efficiency company filed its S-1 today -- and the document provides some valuable insight into how and where it plans to grow.
Here are some of the most important revelations about the company, which is seeking a $100 million raise through its IPO.
Opower's revenue has grown from $28.7 million in 2011 to $88.7 million in 2013. More than 90 percent of revenue last year came from utility subscriptions. With 93 utility customers, Opower served 32.1 million individual electricity consumers in 2013.
Opower says its efforts to "significantly expand our growth" have resulted in net losses of $21.3 million in 2011, $12.3 million in 2012 and $14.2 million in 2013. The company expects those losses to continue as it scales up staff, reaches out to new utilities, expands internationally and builds up its platform.
The company is reporting a strong need to continue hiring new employees as growth has put "a significant strain on our managerial, customer operations, research and development, sales and marketing, manufacturing, administrative, financial and other resources."
Current customer makeup
The nation's top utilities make up the majority of Opower's revenue. In 2012, the company's ten largest customers made up 61 percent of all revenue. National Grid accounted for 15 percent of revenue and Pacific Gas and Electric accounted for 14 percent of revenue that year. In 2013, that number rose slightly, with 62 percent of revenue coming from the ten largest customers. National Grid, Pacific Gas and Electric, and Exelon made up 15 percent, 13 percent and 11 percent of earnings, respectively.
Addressable market potential
Opower says it can feasibly reach 1,300 utilities around the world, pulling in nearly 650 million residential consumers and 60 million commercial consumers to the service. If that's the case, the company hasn't even reached one-tenth of its market potential.
Opower's sales cycles can take as little as six months and as long as twenty-four months. The company reported spending $30.5 million on sales and marketing in 2013 -- its largest expense, just ahead of R&D.
"Sales cycles for our products tend to be long and unpredictable," reported the company. Budgeting, bidding, regulatory requirements and performance reviews "can slow down the sales process by months or even years."
Many of Opower's largest customers will see their contracts expire in 2014 or 2015, making sales and marketing needs even more important.
Potential for new ventures
As we pointed out recently, Opower has expanded well beyond its initial roots. As a private company, Opower was naturally optimistic about that expansion. But now that the company is on its way to going public, it is must be more cautious about the "uncertain" success of expansion plans.
A few years ago, Opower partnered with Honeywell to offer smart thermostats to customers. But Opower has "yet to see a significant return" on that offering. The company reported "slowed" development and sales growth in the smart thermostat area.
With a handful of new customers being closed for its behavioral demand response program, that area may bring significant expansion potential for Opower. But it expressed caution about that offering as well: "While the early results have been promising, it is possible that the market could be smaller than we have expected or that our product will not function as intended."
Last year, Opower expanded its products to small and medium-sized businesses, but said in the S-1 that the "market for this offering is unproven."
"In the past, we have experienced delays delivering products, and while we have taken steps to improve the predictability of our research and development efforts, those efforts may not be successful. If we continue to experience delays in our ability to deliver new products and functionality, our business and growth rates would suffer."
All of these problems are expected for a company attempting to grow within the highly regulated utility sector. But rather than slow down, Opower will likely use its IPO to expand further and prove to investors that it can solidify its leadership position as a dynamic efficiency provider to power companies.
When shares are issued, Opower's will be listed as "OPWR" on the New York Stock Exchange. Morgan Stanley and Goldman Sachs are the lead underwriters.