Five years ago, EnerNOC CEO Tim Healy said that the company hoped to get 20 percent of revenue from energy management, moving beyond a sole focus on demand response, by 2013. The challenge of growing beyond its core business has been a significant one, but EnerNOC is now poised to get there.
During its investor day on Thursday, EnerNOC that its software brought in $72 million in 2015, accounting for 18 percent of its $399 million revenue for the year. “We have a high-growth business in our energy intelligence business,” said Healy. By 2018, EnerNOC expects to be cash-flow positive.
As the SaaS business gains speed, its core business of capacity demand response contracted last year as expected, mostly because of changes in PJM, EnerNOC’s largest market. The company had a strong fourth quarter in 2015, with revenue of $59 million, compared to $46 million for 2014.
Annual revenue was down considerably from its record revenue of $471.9 million in 2014, falling to $399.5 million. The 2015 revenue was in line with adjusted guidance from November, which had been adjusted down from earlier in the year. GAAP losses were $185 million and non-GAAP losses were $56 million for 2015.
The push beyond capacity demand response has been slow and steady for EnerNOC. Five years ago, the Boston-based company did not even have an enterprise-wide energy procurement and efficiency product to sell to its demand response customers.
That product, Energy Intelligence Software, was ultimately launched in 2014 and brought together not only energy efficiency, but also power procurement and risk management. The following year, a version was launched that was geared to help utilities engage their C&I customers.
Now, EnerNOC claims more than 1,000 subscribers to its software business, with substantial momentum picking up in 2015.
A confluence of factors has made energy management software more appealing now than even a few years ago, according to Micah Remley, SVP of product strategy for EnerNOC.
Some of the most critical trends, he said, include tracking sustainability metrics, not only for investors, but also to communicate sustainability to potential hires, especially millennials. An increasing focus on climate change, driven by the Paris COP21 agreement, has also accelerated that trend in 2015. There is also an ongoing evolution in understanding energy use -- from companies procuring more solar and considering storage to a need to manage the data coming from increasingly intelligent buildings.
Lastly, there has been an increase in the complexity of energy pricing, such as increased demand charges and dynamic pricing, that is compelling companies to seek out more holistic energy solutions.
EnerNOC is not alone in trying to capture the growing market for energy management services. Relative newcomers like Opower and FirstFuel also want to help utilities and energy retailers better serve their commercial customers. There is also competition from Schneider Electric, Constellation and Ecova, which are all seeking to address the growing energy service needs of commercial customers. Last year, Ecova acquired Retroficiency.
EnerNOC expresses confidence about its place in the market, given that 70 percent of its recurring revenue from software is from expanding business with existing clients. The revenue is also split amongst a variety of sectors, such as manufacturing, commercial real estate and government contracts.
Even with a growing software business and a huge Supreme Court win that upheld FERC Order 745, EnerNOC expects total revenue for 2016 at $365 million to $395 million, far lower than the high in 2014. “We begin 2016 with the clarity and focus needed to drive significant growth in our software business and maximize the cash flow generation of our demand response business,” said Healy. EnerNOC was trading at about $6 at midday Thursday.